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CS Professional · Strategic Management and Corporate Finance · Real Estate Investment Trusts

Which classification of REITs is based on the nature of their underlying holdings, with equity REITs owning and operating income-producing properties and mortgage REITs holding real estate debt?

The equity versus mortgage split is a classification by asset-holding or investment type. Equity REITs own and operate income-producing properties and earn rent, whereas mortgage REITs hold real estate loans or mortgages and earn interest, so the distinction depends on what the REIT actually holds.

  1. AClassification by asset-holding or investment typeCorrect
  2. BClassification by mode of listing
  3. CClassification by tax status of unit holders
  4. DClassification by size of the sponsor group

Explanation

Equity REITs own and operate properties and earn rental income, while mortgage REITs invest in mortgages or real estate loans and earn interest. This split is based on what the REIT holds, i.e. its asset or investment type. Listing mode, unit holder tax status and sponsor size are not the basis of this equity versus mortgage distinction.

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