Real Estate Operating Company (REOC)

What is ‘Real Estate Operating Company – REOC’

A company that invests in real estate and whose shares trade on a public exchange. A real estate operating company (REOC) is similar to a real estate investment trust (REIT), except that an REOC will reinvest its earnings into the business, rather than distributing them to unit holders like REITs do. Also, REOCs are more flexible than REITs in terms of what types of real estate investments they can makes.

Explaining ‘Real Estate Operating Company – REOC’

Because real estate operating companies reinvest earnings rather than distribute dividends to unit holders, they do not get the same benefits of lower corporate taxation that are a common characteristic of REITs.

Investors in real estate operating companies seek capital gains rather than passive cash flows. When analyzing a potential REOC investment, an investor should look for relatively high return on investment capital, return on equity and return on assets, as well as a respectable valuation. These are all measures of how well a company has been using its invested capital, equity and assets to generate profits. The higher these returns, the more likely it is that the company will continue to be profitable.

Real Estate Operating Company (reoc) FAQ

What are real estate operating companies?

The term real estate operating company (REOC) is a company involved in investing in real estate (generally commercial real estate) and its shares are traded on a public exchange. Unlike real estate investment trusts (REITs), the money earned is recycled into the business and it’s subject to higher corporate taxes than REITs. REITs tend to invest and purchase properties that limit the amount of risk associated with certain commercial properties because of the special tax status they enjoy.

How much does it cost to start a real estate investment company?

The standard fees to start a company is different for each state, range is $40-$500, with extra to use a licensed professional.

What is a private real estate investor?

Private equity real estate is made up of pooled private and public investments in the property markets. Investing here involves using a pooled vehicle to acquire, finance, and own (either direct or indirect) property or properties.

what is real estate investment trust

Real estate investment trusts, or REITs, are companies that own and operate income-producing real estate. This can include shopping malls, office buildings, apartment complexes, hotels, and even infrastructure such as cell towers and storage facilities. REITs generate revenue through rental income and the sale of properties.

Investors can purchase shares in REITs in much the same way they would with any other publicly traded company. However, REITs are required by law to distribute at least 90% of their taxable income to shareholders in the form of dividends. This structure can provide investors with a steady stream of income and the potential for long-term growth.

Additionally, REITs offer diversification within a portfolio as they often perform differently than stocks or bonds. As with any investment, it is important to do your research before investing in a REIT to ensure it aligns with your individual financial goals and risk tolerance.

Which country is best for real estate business?

Countries with the best opportunities for real estate investment and capital appreciation are: Ranking Country 1.US 2.Brazil 3.China 4.Spain

What are the top real estate companies?

Forbes Global 2000 list for 2020 recognizes Brookfield as the biggest public real estate investment company on the planet for the third year consecutively.

What is a core property?

Core properties are characteristized by stabilized occupancy, investment grade tenants, long lease terms, high quality construction with little to no urgent need for capital, and locations in highly desirable areas (relative to property type) in major markets.

Further Reading

  • REIT and REOC systematic risk sensitivity – [PDF]
  • Liquidity of European real estate equities: REITs and REOCs – [PDF]
  • European listed real estate: the capital structure perspective – [PDF]
  • REITs and REOCs and their initial stock market performance: a European perspective – [PDF]
  • A comparative analysis of REITs, REOCs and PREOCs using a stochastic frontier approach – [PDF]
  • The performance of Italian real estate mutual funds – [PDF]
  • European Real Estate Investment Trusts-Articles on Their Characteristics and Properties – [PDF]
  • European real estate equities: ownership structure and value of the firm – [PDF]
  • Underpricing and market timing in SEOs of European REITs and REOCs – [PDF]