DEFINITION of 'Infrastructure Trust'

Infrastructure trust is a type of income trust that exists to finance, construct, own, operate and maintain different infrastructure projects in a given region or operating area. The infrastructure trust will also provide distribution payments to units holders on a periodic basis.

BREAKING DOWN 'Infrastructure Trust'

When evaluating an infrastructure trust, it is important to consider the trust's underlying holdings before making a purchasing decision. As with any trust, it is useful to determine the trust's intrinsic value by using any number of valuation techniques, including a discounted cash flow, or price/EBIT and price/EBITDA multiple.

Infrastructure REITs

A real estate investment trust, or REIT, is a company that owns, operates or finances income-producing real estate. For a company to qualify as a REIT, it must meet certain regulatory guidelines. REITs often trades on major exchanges like other securities and provide investors with a liquid stake in real estate. 

Infrastructure REITS own and manage infrastructure real estate while collecting rent from tenants that occupy or use that property. Infrastructure REITs property types include fiber cables, wireless infrastructure, telecommunications towers and energy pipelines.

For example, American Tower Corporation (AMT), one of the largest global REITs, owns, develops and operates over 160,000 communications sites. It leases space on communications towers, operates outdoor distributed antenna systems and managed rooftops and services that speed network deployment. The REIT shares are listed on the NYSE.

Individuals can invest in REITs either by purchasing their shares directly on an open exchange or by investing in a mutual fund that specializes in public real estate. Some REITs are SEC-registered and public, but not listed on an exchange; others are private.

Infrastructure trusts that are traded on major exchanges are relatively rare - only a handful are available in the U.S. One reason may be the complexity of their operations. AMT, for example, has over 160,000 properties that it manages across an array of different types of communication sites. Capital needs for such companies are high and operations may be subject to weather-related events such as hurricanes and other natural disasters.

In general, when evaluating REITs, earnings per share and P/E ratios aren't helpful. One must look at funds from operations (FFO) rather than net income. Prospective investors should also calculate adjusted funds from operations (AFFO), which deducts the likely expenditures necessary to maintain the real estate portfolio. AFFO provides an excellent tool to measure the REIT's dividend-paying capacity and growth prospects. More information can be found here.

  1. Energy Trust

    An energy trust is a type of corporation that exists solely to ...
  2. Captive Real Estate Investment ...

    A captive real estate investment trust is a REIT that is controlled ...
  3. Funds From Operations - FFO

    Funds from operations, or FFO, refers to the figure used by real ...
  4. Adjusted Funds From Operations ...

    Adjusted funds from operations is a financial performance measure ...
  5. Funds from Operations per Share ...

    Funds from operations per share (FFOPS) captures the earnings ...
  6. Qualified Trust

    A qualified trust is a tax-advantaged fiduciary relationship ...
Related Articles
  1. Investing

    REITs As an Alternative to Real Estate Investment

    Does investing in real estate seem like too much maintenance? Consider the many advantages of REITs, or real estate investment trusts.
  2. Investing

    REITs vs. REIT ETFs: How They Compare

    Learn about the difference in investing in a REIT for a single real estate company versus investing in a REIT ETF that tracks a larger REIT index.
  3. Investing

    How To Analyze Real Estate Investment Trusts

    REITs are much like dividend-paying companies, but analyzing them requires consideration of the accounting treatment of property.
  4. Financial Advisor

    REITs: Why They're So Hot Right Now

    They've been substantially outperforming both stocks and bonds for the past several months.
  5. Investing

    What To Expect From REITs In 2014

    While REITs will face a number of challenges in 2014, one particular issue will be the focus of investors: rising interest rates.
  6. Investing

    Are REITs Beneficial During A High-Interest Era?

    Historically, REITs have remained independent of interest rates, making them a good alternative to more sensitive stocks and bonds.
  7. Investing

    Why REITs Remain A Great Place To Put Your Money

    REITs have been a good investment over the long haul. Here's Why.
  8. Investing

    REITs 101: How They're Regulated

    Here's everything you need to know about REITs in less than five minutes.
  9. Investing

    Real Estate Investing in a High-Interest-Rate Environment

    Learn how private real estate investing and public real estate investing (or investing in REITs) is affected by a high-interest rate environment.
  1. What is the difference between an Equity REIT and a Mortgage REIT?

    Find out more about real estate investment trusts and the main differences between equity and mortgage real estate investment ... Read Answer >>
Trading Center