- Residential REITs
- Retail REITs
- Office and Industrial REITs
- Health care REITs
- Self storage REITs
- Hotels and resort REITs
Residential REITs
This type of REIT specializes in apartment buildings and / or other residential properties leased to individuals. The biggest danger for residential REITs is over construction within a particular geographic area during a declining economic environment. In such cases where supply is increasing as demand is decreasing, the management team is forced to reduce rents to keep occupancy rates stable.
Example of Residential REIT - Avalon Bay Communities
According to Reuters, Avalon Bay Communities (AVB), known for its luxury apartment communities, “is a real estate investment trust that focuses on the development, redevelopment, acquisition, ownership and operation of apartment communities in high barrier-to-entry markets of the United States. At February 27, 2004, the Company owned or held a direct or indirect ownership interest in 131 operating apartment communities containing 38,504 apartment homes in 10 states and the District of Columbia, of which two communities containing 1,089 apartment homes were under reconstruction. In addition, at that date, AvalonBay owned or held a direct or indirect ownership interest in 11 communities under construction that are expected to contain an aggregate of 3,493 apartment homes when completed. It also owned a direct or indirect ownership interest in rights to develop an additional 40 communities that, if developed in the manner expected, will contain an estimated 10,070 apartment homes.
Retail REITs
There are a number of specialties in the field of retail REITs, including malls and shopping centers. The particular benefit for the former is that construction costs are significant; measured in the tens or hundreds of millions of dollars. This high barrier-of-entry cost helps keep control expansion, making excess supply a lesser concern.
Example of Retail REIT - Regency Realty Corp.
“Regency Centers Corporation is a real estate investment trust that owns and operates grocery-anchored shopping centers in the United States. As of December 31, 2003, the Company's portfolio of real estate investments included 265 shopping centers in 22 states with 30.3 million square feet of gross leasable area (GLA), and was 92.2% leased. Geographically, 19.6% of its GLA is located in Florida, 19.5% in California, 16.8% in Texas, 6.6% in Georgia, 6.3% in Ohio and 31.2% spread throughout 17 other states. Regency owns and operates its shopping centers through its operating partnership, Regency Centers, L.P. (RCLP), in which the Company owns 98% of the operating partnership units. Regency's operating, investing and financing activities are generally performed by RCLP.” – Reuter’s Business Summary
Office and Industrial REITs
The office sector of the real estate investment trust market has historically been the largest. The primary drawback is the fact that office rents normally have much longer lease terms meaning that in times of declining rent and lower occupancy, those tenants that do sign leases will have lower, less-profitable rates locked in for many years. This can also be a blessing, however, if a property is filled during a time of short supply and high demand. Office REITs are, as can be imagined, highly cyclical. Industrial REITs, on the other hand, tend to generate steady, predictable cash flow thanks to high lease renewal rates and low capital expenditure and maintenance requirements.
Example of Office and Industrial REIT - CenterPoint Properties Trust
“CenterPoint Properties Trust is a real estate investment trust that owns and operates primarily warehouse and other industrial properties in the metropolitan Chicago, Illinois area. CenterPoint seeks to create share value through customer-driven management, investment, development, and redevelopment of warehouse, distribution, light manufacturing, airfreight and rail-related facilities. The Company also develops multi-facility industrial parks that are strategically located near highways, airports and railroads. At December 31, 2003, the Company's investment portfolio of operating warehouse and other industrial properties consisted of 187 properties, totaling approximately 34.4 million square feet, with a diverse base of approximately 284 tenants engaged in a variety of businesses. At December 31, 2003, CenterPoint had accumulated control of a large land portfolio exceeding 3000 acres upon which 50.1 million square feet of warehouse and other industrial properties can be developed.” – Reuter’s Business Summary
