Body:  For decades now, the banner achievement for a municipality has often been welcoming a mall to the town center.   It would seem, from this article, that the times are indeed a-changin’.

This is an interesting article, though, rather bleak for a Generation X baby like myself.    The “thing to do” when you were looking to go out on Friday or Saturday, and you were not of age, the mall was usually your destination.   But, I promise, the nostalgia of that ends here.

To construct a mall, adding all of the infrastructure needed, all of the internal systems, parking lots and the like, is very expensive.   Thus, the people who had the vision of “the mall” knew that they were going to need financial contributions from many investors to raise the financial resources needed.   Enter the real estate investment trust, often known as the REIT.  Simon Property Group is one of the largest REITs within the U.S., and focuses upon retail real-estate, and in the Mid-Atlantic, they own numerous malls.    Though there are other types of REITs, (some focus upon warehouse space, some, on mixed-use developments or other types of real estate development), malls have long been the one REIT people are most familiar with.

What is a REIT?

Per Investopedia, a real estate investment trust (REIT) is a business entity that owns or operates revenue-producing real estate. REITs operate akin to a mutual fund, and aggregate the investments of many individuals.  In this manner, the individuals can financially benefit from investment in realty without the administrative headaches that can accompany that ownership.  REITs can trace their heritage back to the  Cigar Excise Tax Extension of 1960, where Congress wanted to give retail investors the opportunity to invest in these vehicles.

Why is it attractive to start one?

It is attractive to start a REIT mainly due to tax concerns.   A REIT is governed by the IRS under the Internal Revenue Code Sections 856 and 857.   In plain English, in most other circumstances, the REIT would be considered a corporation and be subject to double taxation.   But, because REIT organization applies (as long as all circumstances are met) there is no entity-level taxation, and the dividends are only taxed at the individual level.  But, there are restrictions, chiefly:

  1.  The REIT needs to obtain 75% of its’ revenue from retail real estate activities.
  2. The REIT must pass on at least 90% of its’ revenue through to its’ shareholders, in the form of dividends.

Why should I care?

The REIT concept can be rather difficult at the outset to understand, but, because it is required to pay so much in dividends (and because it is forced to have obtained its’ revenue from its’ principal business purpose) it can form one part of a very secure portfolio that can last a person through a long retirement.  Given how unpredictable the stock market is, and how low interest rates are (and are likely to stay there for a while, per Jerome Powell) this could be a very attractive area to invest in.

As a matter of interest, there is a National Association of Real Estate Investment Trusts (NAREIT) and this association maintains an excellent website that provides a lot of good information, including many examples of REITs, with basic information about each, and links to the individual websites.  Many investment magazines often have articles that suggest REITs to think about investing in.  As a result, research is usually quite simple.

The future of REITs?

Agreed, the future of the shopping mall type of REIT seems to be near “smoking ruin” status.   But, the REIT structure is so advantageous to all parties, and it is so flexible in its’ function, it seems unlikely to go anywhere in the near future.  Some of the most interesting REITs in my estimation are the ones focusing upon the construction of medical doctors’ offices or  other medical-related purposes.  My reasoning is simple: with the combination of the pandemic (in the short term) and the aging of the Baby Boomers (in the longer term) this seems probable to be a vital and growing portion of the economy.


Real Estate Investment Trust (REIT) Definition (

The Basics of Investing in REITs | Millionacres (

Real Estate Investment Trusts (REITs) |

Editor’s Note: Please note that the information contained herein is meant only for general education: This should not be construed as Tax Advice.   Personal attributes could make a material difference in the advice given, so, before taking action, please consult your tax advisor or CPA.

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