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DESK ETF: Question & Answer

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In this blog, we address frequently asked questions about investing in the real estate market and specifically the VanEck Office and Commercial REIT ETF (DESK).

In today's investment landscape, investors are constantly seeking opportunities to generate income beyond traditional corporate or government debt. Real estate investment trusts, or REITs, have long attracted the attention of those looking to gain exposure to the real estate market without the challenges of owning property directly. This blog aims to address frequently asked questions about REITs and provide insights into the VanEck Office and Commercial REIT ETF (DESK).

What are Real Estate Investment Trusts?

A real estate investment trust, or REIT, is a type of security that invests in real estate or real estate-related assets and typically trades on major market exchanges similar to stocks. REITs provide a way for investors to gain exposure to the real estate sector, benefiting from potential dividends and property appreciation, without the need to directly purchase, manage, or finance properties. There are two primary types of REITs: Equity REITs and Mortgage REITs.

Equity REITs are the most common type of REIT. They own and manage income-producing real estate properties, such as apartment buildings, office buildings, shopping centers, hotels, and warehouses. Income is mainly derived from the rent received from these properties. They might also generate income from the appreciation of properties when they are sold.

Mortgage REITs, or mREITs, generally do not own real estate properties. Instead, they finance real estate, meaning they provide capital to real estate owners and operators either directly through mortgages and loans or indirectly through the acquisition of mortgage-backed securities (MBS). Their income is generated primarily from the interest on these loans or securities.

What area of the REIT market does DESK provide exposure to?

The VanEck Office and Commercial REIT ETF (DESK) provides concentrated exposure to U.S. office property REITs by seeking to replicate the MarketVector US Listed Office and Commercial REITs Index, which tracks the overall performance of U.S. exchange-listed REITs operating in the office and commercial real estate markets. To be eligible for inclusion in the Index, a REIT must generate at least 50% of its revenues from the office, industrial, or retail real estate sectors.

Office REITs are those real estate investment trusts that specialize in owning and operating office properties. These properties can range from skyscrapers to office parks, allowing individual investors to tap into large-scale office real estate markets without direct property ownership. Other commercial property segments, specifically the industrial and retail segments, are also eligible for inclusion in DESK’s underlying Index. Industrial REITs specialize in owning and managing industrial facilities, such as warehouses, distribution centers, and manufacturing plants. Retail REITs own and manage retail properties like shopping malls, strip centers, and standalone stores.

The rules of the MarketVector US Listed Office and Commercial REITs Index prioritize exposure to office REITs, with exposure to Industrial and Retail REITs limited to a maximum of 20%.

Do REITs pay dividends to investors?

Yes, REITs are specifically designed to provide income. REITs are required to distribute at least 90% of their taxable income to shareholders annually in the form of dividends. This structure ensures that a significant portion of the profits generated by REITs, whether from rental incomes in the case of equity REITs or interest incomes for mortgage REITs, is passed on to the investors. This income-generating feature makes REITs especially popular among income-focused investors. However, as with any investment, the level of income or dividend yield varies depending on the REIT's performance, property occupancy rates, and market conditions.

Learn more about the yield potential of DESK here.

How often does DESK distribute dividends?

The VanEck Office and Commercial REIT ETF (DESK) distributes dividends on a quarterly frequency.

Does DESK distribute return of capital?

Return of capital (ROC) is a payment received from an investment that is not considered taxable income, but instead reduces a shareholder's cost basis and may be recognized as a capital gain at the final sale of the investment. Real estate investment trusts (REITs) are one type of investment that typically have distributions containing a component of ROC. This is due to special tax treatments for REITs, like depreciation adjustments, that reduce taxable income without reducing the amount of cash available for distribution. Due to DESK’s underlying exposure to REITs, a portion of the fund’s distribution may be considered ROC as the fund distributes all of its net cash received from investments (including ROC) to investors. Investors may receive a “Section 19 notice” accompanying a distribution that estimates the portion of DESK’s current and fiscal year-to-date distribution comprising return of capital. Please view DESK’s Tax Documents and visit VanEck’s Tax Center for more information on the portion of return of capital paid by DESK.

How can DESK fit within a portfolio?

The VanEck Office and Commercial REIT ETF (DESK) provides concentrated exposure to U.S. office REITs and offers investors an efficient way to express a view on this area of the market. DESK can be used by investors tactically to place a short-term targeted bet or strategically as a long-term exposure. DESK can also fit as an allocation within an income portfolio as REITs can offer an attractive source of dividend income.

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Important Disclosures

This is not an offer to buy or sell, or a recommendation to buy or sell any of the securities, financial instruments or digital assets mentioned herein. The information presented does not involve the rendering of personalized investment, financial, legal, tax advice, or any call to action. Certain statements contained herein may constitute projections, forecasts and other forward-looking statements, which do not reflect actual results, are for illustrative purposes only, are valid as of the date of this communication, and are subject to change without notice. Actual future performance of any assets or industries mentioned are unknown. Information provided by third party sources are believed to be reliable and have not been independently verified for accuracy or completeness and cannot be guaranteed. VanEck does not guarantee the accuracy of third party data. The information herein represents the opinion of the author(s), but not necessarily those of VanEck or its other employees.

MarketVector US Listed Office and Commercial REITs Index is the exclusive property of MarketVector Indexes GmbH (a wholly owned subsidiary of the Adviser), which has contracted with Solactive AG to maintain and calculate the Index. Solactive AG uses its best efforts to ensure that the Index is calculated correctly. Irrespective of its obligations towards MarketVector Indexes GmbH, Solactive AG has no obligation to point out errors in the Index to third parties. The VanEck Office and Commercial REIT ETF is not sponsored, endorsed, sold or promoted by MarketVector Indexes GmbH and MarketVector Indexes GmbH makes no representation regarding the advisability of investing in the Fund.

An investment in the Fund may be subject to risks which include, among others, risks related to equity securities, real estate sector, REITs, return of capital, small- and medium-capitalization companies, market, operational, index tracking, authorized participant concentration, new fund, no guarantee of active trading market, trading issues, passive management, fund shares trading, premium/discount risk and liquidity of fund shares, non-diversified, and index-related concentration risks, all of which may adversely affect the Fund. Small- and medium-capitalization companies may be subject to elevated risks. Real estate investments may be subject to additional potential risks, such as volatility of real estate values, overbuilding, competition, local or general economic conditions, operating costs, property taxes, zoning laws, casualty or condemnation losses, environmental liabilities, regulatory limitations on rent, lack of availability of mortgage financing, market saturation, fluctuations in rental income and the value of underlying properties, extended vacancies of properties, limited diversification, and borrower or tenant default risks. REITs expose investors to the risks of owning real estate directly, as well as to risks that relate specifically to the way in which REITs are organized and operated; heavy cash flow dependency, default by borrowers, self-liquidation, as well as potentially-reduced Fund returns due to companies failing to meet Internal Revenue Code requirements to quality for tax-free pass-through income. REITs also have expenses such as management and administration fees which are paid by shareholders, and as a result, shareholders will pay a proportionate share of duplicate fees when the Fund invests in REITs.

Investing involves substantial risk and high volatility, including possible loss of principal. An investor should consider the investment objective, risks, charges and expenses of a Fund carefully before investing. To obtain a prospectus and summary prospectus, which contain this and other information, call 800.826.2333 or visit vaneck.com. Please read the prospectus and summary prospectus carefully before investing.

©️ Van Eck Securities Corporation, Distributor, a wholly owned subsidiary of Van Eck Associates Corporation.

Important Disclosures

This is not an offer to buy or sell, or a recommendation to buy or sell any of the securities, financial instruments or digital assets mentioned herein. The information presented does not involve the rendering of personalized investment, financial, legal, tax advice, or any call to action. Certain statements contained herein may constitute projections, forecasts and other forward-looking statements, which do not reflect actual results, are for illustrative purposes only, are valid as of the date of this communication, and are subject to change without notice. Actual future performance of any assets or industries mentioned are unknown. Information provided by third party sources are believed to be reliable and have not been independently verified for accuracy or completeness and cannot be guaranteed. VanEck does not guarantee the accuracy of third party data. The information herein represents the opinion of the author(s), but not necessarily those of VanEck or its other employees.

MarketVector US Listed Office and Commercial REITs Index is the exclusive property of MarketVector Indexes GmbH (a wholly owned subsidiary of the Adviser), which has contracted with Solactive AG to maintain and calculate the Index. Solactive AG uses its best efforts to ensure that the Index is calculated correctly. Irrespective of its obligations towards MarketVector Indexes GmbH, Solactive AG has no obligation to point out errors in the Index to third parties. The VanEck Office and Commercial REIT ETF is not sponsored, endorsed, sold or promoted by MarketVector Indexes GmbH and MarketVector Indexes GmbH makes no representation regarding the advisability of investing in the Fund.

An investment in the Fund may be subject to risks which include, among others, risks related to equity securities, real estate sector, REITs, return of capital, small- and medium-capitalization companies, market, operational, index tracking, authorized participant concentration, new fund, no guarantee of active trading market, trading issues, passive management, fund shares trading, premium/discount risk and liquidity of fund shares, non-diversified, and index-related concentration risks, all of which may adversely affect the Fund. Small- and medium-capitalization companies may be subject to elevated risks. Real estate investments may be subject to additional potential risks, such as volatility of real estate values, overbuilding, competition, local or general economic conditions, operating costs, property taxes, zoning laws, casualty or condemnation losses, environmental liabilities, regulatory limitations on rent, lack of availability of mortgage financing, market saturation, fluctuations in rental income and the value of underlying properties, extended vacancies of properties, limited diversification, and borrower or tenant default risks. REITs expose investors to the risks of owning real estate directly, as well as to risks that relate specifically to the way in which REITs are organized and operated; heavy cash flow dependency, default by borrowers, self-liquidation, as well as potentially-reduced Fund returns due to companies failing to meet Internal Revenue Code requirements to quality for tax-free pass-through income. REITs also have expenses such as management and administration fees which are paid by shareholders, and as a result, shareholders will pay a proportionate share of duplicate fees when the Fund invests in REITs.

Investing involves substantial risk and high volatility, including possible loss of principal. An investor should consider the investment objective, risks, charges and expenses of a Fund carefully before investing. To obtain a prospectus and summary prospectus, which contain this and other information, call 800.826.2333 or visit vaneck.com. Please read the prospectus and summary prospectus carefully before investing.

©️ Van Eck Securities Corporation, Distributor, a wholly owned subsidiary of Van Eck Associates Corporation.