Lending REITs versus Ownership REITs
Earlier, we discussed the statutory requirements for a REIT. The laws applicable to REIT organizations do not require that a REIT own real properties. It is legally permissible for the REIT to merely lend funds on the strength of the collateral value of real estate by originating, acquiring, and holding—and even securitizing—real estate mortgages and related loans. These mortgages might be secured by residential or commercial properties. As of the end of 2010, there were 26 mortgage REITs, split almost evenly between residential and commercial. Hybrid REITs, which both own properties and hold mortgages on others, were popular some years ago, but are not widely prevalent in today's REIT industry.
In the late ...
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