Real Estate Investment Trusts (REITs) This chapter discusses the history and current operations of real estate investment trusts (REITs). The resurgence of REITs in the early 1990s is another indication of the extent that real estate has become "securitized." Compared with traditional methods of investing, real estate–backed securities appear to be gaining in importance because of their marketability, the public accountability of management, and numerous other reasons. REITs, which provide a structure similar to that of mutual funds for common stock investors, allow investors to participate in a portfolio of properties that may be geographically diversified and professionally managed. Further, REITs are usually tax-exempt and must pass through as dividends to investors most of the cash flow produced from managing the portfolio. Accounting practices for depreciation and amortization and the resultant effects on net income may allow a portion of the tax on REIT dividends to be deferred. Today, the market value of REITs exceeds $190 billion, and many of the premier real estate operators in the United States are operating within the REIT format, so market research and analysis for individual REITs and the industry are widely available from investment banks and other investment firms.