What is a primary characteristic of REITs?

Real Estate Investment Trusts (REITs) are primarily characterized by their operation in owning and managing income-producing real estate. This means that their main activity revolves around acquiring, developing, managing, and leasing out properties such as residential buildings, offices, shopping centers, and hotels, which generate rental income. This focus on income-generating properties is what sets REITs apart from other investment vehicles.

REITs typically structure themselves to provide investors with a way to invest in real estate without directly buying property. By pooling capital from multiple investors, they can acquire large-scale real estate assets, providing diversification and access to income-generating real estate that individual investors might find difficult to attain on their own.

The other options represent characteristics that do not define the core purpose of REITs. For example, while tax treatment can vary for REITs, many benefit from special tax considerations that require them to distribute a significant portion of their income to shareholders, and thus they may not be subjected to corporate income tax in the same way as typical corporations. Maintaining a fixed asset base is not a primary characteristic as REITs often aim to grow their holdings and adapt their portfolios over time. Finally, investing only in publicly traded companies is not relevant to REIT