Ownership & finance
REIT
Also written: real estate investment trust
What REIT means
A publicly traded or private company that owns, operates, or finances income-producing real estate. In hospitality, hotel REITs pool investor capital to acquire lodging properties, benefiting from tax advantages by distributing at least 90% of taxable income to shareholders as dividends.
How it is used
REITs separate property ownership from hotel operations to maintain tax-exempt status, typically leasing assets to a taxable REIT subsidiary (TRS) that hires third-party management companies. Asset managers and revenue teams at REIT-owned properties focus heavily on maximizing Net Operating Income (NOI) and EBITDA, as these metrics directly drive share prices, dividend payouts, and capital deployment decisions for property renovations or acquisitions.
Worked example
A lodging REIT acquires a 300-key upscale hotel for $90 million. The property generates $15 million in gross revenue and $6 million in NOI annually. After accounting for corporate debt service and operating expenses, the REIT returns $4.5 million of that profit directly to its equity investors to satisfy its 90% statutory dividend distribution requirement.
Common mistake
Hotel REITs cannot directly operate their own properties due to strict tax regulations and must utilize a Taxable REIT Subsidiary (TRS) structure with third-party hotel operators.
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REIT in our reporting
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