What defines a "Real Estate Operating Company" (REOC)?

A Real Estate Operating Company (REOC) is defined as a company that manages and operates real estate but does not meet the requirements to be classified as a Real Estate Investment Trust (REIT). One of the key aspects of a REOC is that it actively manages its properties rather than merely holding them for investment income. This difference is significant because REOCs do not benefit from the specific tax advantages that REITs receive by distributing at least 90% of their taxable income to shareholders.

The distinction between a REOC and a REIT lies primarily in their operational strategies and regulatory structures. REOCs may have greater flexibility in terms of property management, financing structures, and business models. For example, a REOC can reinvest its earnings back into the business rather than distributing a majority of them to shareholders, as REITs are required to do.

Understanding this definition helps clarify how REOCs function within the broader real estate market, distinguishing them from other company types that may focus exclusively on commercial or residential properties or have different regulatory frameworks.