Real Estate Operating Company (REOC)
Term of the week
What: Real estate operating companies (REOCs) are primarily in the business of purchasing, developing, managing, leasing and selling real estate.
Why: REOCs generally reinvest (the majority of) their profits into existing and new real estate properties to maximize growth.
How: While the main business of REOCs is related to real estate, they are permitted to (and often do) have other business segments. They typically focus on specific property types, geographic regions or investment styles.
Conclusion: Since REOCs are not mandated (as eREITs are) to distribute their profits to shareholders, they appeal to investors aiming at generating capital gains rather than current income.