REITs' Investment Proposition

By Art Coppola

The REIT industry and many of its investors will gather in New York on June 5 through 7 for REIT-Week 2007: NAREIT's Investor Forum. REITWeek is the industry's largest annual investor conference. It showcases the companies, strategies and personalities that make up the publicly traded real estate marketplace. Last year's REITWeek set a new attendance record with more than 1,800 participants, including managers and analysts representing major investment portfolios in the United States and around the world.

The growth in this conference has reflected the growing interest in the REIT marketplace. In recent years, it undoubtedly also has reflected the growing market value of REITs.

This spring, we saw some pull-back in the share prices of some REITs—perhaps, due to market jitters about the cost and availability of credit, or the perception that the companies' share prices might be fully valued. However, the investment proposition that is the foundation of the REIT market is far broader and deeper than the simple story of share price appreciation.

The REIT story is singular in the investment marketplace. REITs deliver the portfolio diversification and continuing income flow of commercial real estate investment, coupled with the liquidity and transparency of publicly traded securities.

REIT performance is measured not just in share price appreciation, but in total return. By that yardstick, the REIT industry has outpaced the S&P 500 and other primary market benchmarks for the past 30 years.

This is the story investors find so compelling, including investors representing major retirement funds whose interests are focused on the benefits of diversification and are decidedly long-term. Earlier this spring, CalPERS announced that 7.5 percent of its $230 billion portfolio now is allocated to real estate. Additionally, a survey by the Pension Real Estate Association showed more than 40 percent of pension funds intend to increase their real estate allocations over the next few years.

NAREIT's own meetings with institutional investment managers point to the same trend and underscore the fact that publicly traded real estate—both in the U.S. and international markets—increasingly is a significant component of the overall real estate allocation.

Many of these same investors will be joining us at this year's REITWeek to hear the latest chapter in the REIT story. As this year's NAREIT chair, I'm privileged to help tell it, and I look forward to seeing you there.