Definition of Real Estate Operating Company (REOC)

a publicly traded real estate company that has opted out of the tax status afforded REITs. Although a REOC does not enjoy exemption from federal taxation at the entity level, it may reinvest earnings and is not restricted in the type of real estate business it conducts.

Example: Sally wanted to invest in real estate passively but did not like the restrictions placed on REITs. She preferred that the company reinvest all income rather than pay her regular dividends. When she found out about real estate operating companies, she felt they were the perfect solution.