A REIT that owns and operates physical property, earning rent from tenants across sectors such as offices, industrial, retail, residential, healthcare and data centres.
Returns come from rental income plus changes in property value, levered by whatever debt sits on the balance sheet. Sector matters enormously: warehouse and data centre landlords have faced very different demand from office and mall owners over the past decade.
Key metrics differ from ordinary equities. Net income is distorted by depreciation on assets that may not be losing value, so analysts use funds-from-operations and its adjusted variant, along with occupancy, lease expiry schedules, and net asset value per share.
The main risks are leverage maturing into a weak financing market, tenant concentration, and long leases that lag inflation in either direction. Listed REITs also trade with equity market beta in the short run even though the underlying assets are property.
Original diagrams for the ideas on this page. Illustrative, not real market data.
Margin and leverage. A $5,000 deposit can control a $100,000 position, which is 20:1 leverage. Because the loss is measured on the full $100,000, a 2.5% move against you halves the deposit and brings a margin call, and a 5% move uses all of it.
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