The REIT Glossary

Below you'll find a glossary of terms and principles. For a complete glossary, visit the glossary of REIT terms.

Adjusted funds from operations

This term refers to a computation made by analysts and investors to measure a real estate company’s cash flow generated by operations. AFFO is usually calculated by subtracting from Funds from Operations (FFO) both (1) normalized recurring expenditures that are capitalized by the REIT and then amortized, but which are necessary to maintain a REIT’s properties and its revenue stream (e.g., new carpeting and drapes in apartment units, leasing expenses and tenant improvement allowances) and (2) “straight-lining” of rents. This calculation also is called Cash Available for Distribution (CAD) or Funds Available for Distribution (FAD).


A downREIT is structured much like an upREIT, but the REIT owns and operates properties other than its interest in a controlled partnership that owns and operates separate properties.


Earnings before interest, taxes, depreciation and amortization. This measure is sometimes referred to as Net Operating Income (NOI).


Earnings Before Interest, Taxes, Depreciation and Amortization for Real Estate EBITDAre is calculated as follows:

GAAP net income

  • Plus
    • Interest expense
    • Income tax expense
    • Depreciation and amortization
  • Plus, or minus losses and gains on the disposition of depreciable property, including losses/gains on change of control
  • Plus, impairment write-downs of depreciable property and of investments in unconsolidated affiliates caused by a decrease in value of depreciable property in the affiliate
  • Adjustments to reflect the entity’s share of EBITDAre of unconsolidated affiliates and consolidated affiliates with non-controlling interests

Elective stock dividend

Elective stock dividends are dividends comprised of a combination of cash and stock.

Equity REIT

A REIT which owns, or has an “equity interest” in, rental real estate (rather than making loans secured by real estate collateral).


The Global Industry Classification Standard (GICS) is a standardized classification system for equities developed jointly by MSCI and S&P Dow Jones Indices. GICS® is the industry classification methodology that both companies rely on for their proprietary stock market indices, and it serves as one of the primary classification systems for equities for investors around the world.


A REIT that makes or owns loans and other obligations that are secured by real estate mortgages or mortgage-backed securities.

Positive Spread Investing (PSI)

The ability to raise funds (both equity and debt) at a cost significantly less than the initial returns that can be obtained in real estate transactions.

Private REITs

Private REITs, sometimes referred to as private-placement REITs, are neither traded on a national stock exchange nor registered with the SEC. As a result, private REITs are not subject to the same disclosure requirements as stock exchange-listed or public non-listed REITs.

Private REITs issue shares that are neither traded on national exchanges nor registered with the SEC, but rather issued pursuant to one or more of several exemptions to the securities laws set forth in regulations promulgated and enforced by the SEC. These exemptions include rules set forth under Regulation D, permitting an issuer to sell securities to “accredited investors,” and Rule 144A, which exempts securities issued to qualified institutional buyers (QIBs).

Real Estate Investment Trust Act of 1960

The federal law that authorized REITs. Its purpose was to allow small investors to pool their investments in real estate in order to get the same benefits as might be obtained by direct ownership, while also diversifying their risks and obtaining professional management.

REITs (Real Estate Investment Trusts)

A REIT is a company that owns or finances income-producing real estate. Modeled after mutual funds, REITs have provided investors of all types regular income streams, diversification and potential long-term capital appreciation. REITs typically pay out all of their taxable income as dividends to shareholders. In turn, shareholders pay the income taxes on those dividends.

REIT Modernization Act of 1999

Federal tax law change whose provisions allow a REIT to own up to 100 percent of stock of a taxable REIT subsidiary that can provide services to REIT tenants and others up to 25 percent (20 percent after 2017). of the REITs gross assets.

Same store sales

A figure used to determine what amount of sales growth is attributable to new store openings, based on sales made by stores that have been open more than one year.


Securitization is the process of financing an asset or pool of assets by issuing to investors security interests representing ownership or claims against the cash flow and other economic benefits generated by the assets.


Real estate companies such as REITs “straight line” rents because generally accepted accounting principles require it. Straight lining averages the tenant’s rent payments over the life of the lease.

Tax Reform Act of 1986

Federal law that substantially altered the real estate investment landscape by permitting REITs not only to own, but also to operate and manage, most types of income-producing commercial properties. It also stopped real estate “tax shelters” that had attracted capital from investors based on the amount of losses that could be created.

Umbrella Partnership REIT (UPREIT)

In the typical umbrella partnership REIT, the partners of the existing partnerships and a newly formed REIT become partners in a new partnership termed the operating partnership. For their respective interests in the operating partnership, the partners contribute the properties from the existing partnership and the REIT contributes the cash proceeds from its public offering. The REIT typically is the general partner and the majority owner of the operating partnership units. The owner of the units can exchange their units in a taxable transaction on a one-for-one basis for REIT stock.