Title: What
1Whats Next for REITs? American Association of
Individual Investors Washington, DC Chapter
Meeting Alexandria, Virginia March 21, 2009
2All Information Included in this Presentation is
Based on Publicly-Traded Securities Only
National Association of
Real Estate Investment Trusts
3Summary
- What is a REIT?
- Why Invest in REITs?
- REITs and the Current Economic Crisis
- How to Invest in REITs
4What is a REIT?
- REITs are publicly traded companies that own and
manage investment-grade commercial real estate - Like Verizon in the telecommunications business
or Merck in the pharmaceutical business, REITs
are companies in the real estate business - REITs are not mutual funds, closed-end funds or
partnerships - REITs provide a simple and inexpensive way to
invest in commercial real estate without buying
property directly
5Requirements of the REIT Election
- Company must be in the real estate business
- At least 75 percent of assets must be real
property - At least 75 percent of revenue must come from
real estate - Stock must be widely held
- At least 90 percent of taxable income must be
distributed annually to shareholders - Company receives a dividends paid deduction
- Taxes are paid at the shareholder level
6What is a REIT?
- Full-time professional management teams
- Business plans designed to maximize shareholder
value - SEC financial reporting and transparency
- Stock values backed by real assets
- Tax transparency
- Traditional corporate governance and
accountability
7The REIT Industry in 2009
- Approximately 600 billion of commercial real
estate properties owned - 10-15 percent of investment-grade commercial real
estate - More than 29,000 properties nationwide
- All major property sectors
- All major geographic regions
- 160 billion equity market capitalization
- 135 publicly traded REITs in the FTSE NAREIT All
REIT Index - 120 companies trade on the NYSE
8Equity Market Capitalization of Listed U.S. REITs
Billions of dollars
Trend (14.5 Compound Annual Rate)
KIMCO Realty IPO November 1991
Note Does not include operating partnership
units.
Taubman Centers IPO December 1992 (First UPREIT)
Data as of February 28, 2009. Source NAREIT
9Types of REITs Today
89.3 EQUITY REITs Provide equity capital for
commercial real estate by owning real estate
assets. Derive revenues primarily from rents.
10.0 MORTGAGE REITs Provide debt capital for
housing and commercial real estate by investing
in mortgages and mortgage-backed securities.
Derive revenues primarily from interest
payments.
0.7 HYBRID REITs Combine the investment
strategies of both equity and mortgage REITs
Data as of February 28, 2009. Source NAREIT
10U.S. REITs Invest in All Property Types
Data as of February 28, 2009. Source NAREIT
11Summary
- What is a REIT?
- Why Invest in REITs?
- REITs and the Current Economic Crisis
- How to Invest in REITs
12Why Invest in REITs?
- Long-term performance
- Reliable and significant current income which
grows over time - Capital preservation and protection from
inflation - Diversification
13PerformanceREITs Outperform Leading U.S.
Benchmarks
Compound annual total returns in percent January
1979 January 2009
Russell 2000
NASDAQ Composite1
FTSE NAREIT Equity REIT Index
SP 500
1Price only returns
14DividendsU.S. REITs Deliver Reliable Current
Income
Average annual total return 11.1 percent
Average annual income return 7.3 percentage
points or 66 percent of total return
Percent
Average annual income return 7.3
Data for 20-year period ranging 1989-2008.
Source NAREIT
15Summary
- What is a REIT?
- Why Invest in REITs?
- REITs and the Current Economic Crisis
- How to Invest in REITs
16REITs and the Current Economic Crisis
- REIT share prices have been battered during the
current economic crisis - Down 38 in 2008 (worst year in history all
losses in 4th Quarter) - Volatility soared
- MA and IPOs dried up
- Only three prior years with total share price
declines in the modern REIT era - SP declined 38.5 DOW down 33.8 NASDAQ
plunged 40.5 last year
17Comparison of FTSE NAREIT Equity REIT Index
Downturns
Strong real estate fundamentals tech stock boom
(97-01)
Real estate depression (89-91)
-23.9
-23.7
-37.0
General domestic economic depression (72-76)
Credit crisis beginning in residential mortgages
(07-?)
-70.7
Months after start of downturn
Data as of February 28, 2009. Source NAREIT
18REITs and the Current Economic Crisis
- Stock picking beat sector allocation every
sector had outperformers - 7 REITs had positive total returns
- 76 REITs lost more than 20 percent
- Large cap REITs underperformed
- Companies that increased dividends did better
19REITs and the Current Economic Crisis
- REITs trading at levels not seen since the
1998-1999 REIT bear market - REITs are trading at an average discount of 45
percent - Average Price/FFO multiple is 8X
- Average market-cap weighted dividend yield is 10
20REITs and the Current Economic CrisisShare
Price Premium to NAV
12.4
Average since 1993 2.4
- 45.3
Data as of February 28, 2009. Source Green
Street Advisors, Inc., based on NAV estimates for
U.S. REITs under coverage
21REITs and the Current Economic Crisis
- REITs are facing the following issues
- Rapidly accelerating recession
- Lack of available capital
- Investor headwinds
- Hedge fund and leveraged ETF activity
22REITs and the Economic Crisis Sector Outlook
- Apartments mortgage difficulties helping in
short term supply increasing due to condo
conversions - Retail (Andy will provide overview)
- Office (Rand will discuss)
- Hotels slowdown in travel, short-term leases
hurt - Industrial rising inventories and global
recession - Storage rising vacancies as people give up
units - Health Care considered most resilient
favorable demographics
23Summary
- What is a REIT?
- Why Invest in REITs?
- REITs and the Current Economic Crisis
- How to Invest in REITs
24How to Invest in REITs
- REIT stocks can be bought and sold in a number of
ways - Most stocks trade on major stock exchanges
- Dividend reinvestment programs (DRIPs)
- REIT and real estate security open-end mutual
funds - Closed-end funds (CEFs)
- Exchange traded funds (ETFs)
25Information on REIT Investing
- REIT.com
- Source for information on REIT investing
- Direct links to NAREIT member web sites
- Performance information and stock tickers
- List of REIT mutual funds
- List of REITs with DRIPs
- Wall Street analyst coverage
- Independent research coverage
- Corporate investor relations
26Disclaimer
NAREIT does not intend this presentation to be a
solicitation related to any particular company,
nor does it intend to provide investment, legal
or tax advice. Investors should consult with
their own investment, legal or tax advisers
regarding the appropriateness of investing in any
of the securities or investment strategies
discussed in this presentation. Nothing herein
should be construed to be an endorsement by
NAREIT of any specific company or products or as
an offer to sell or a solicitation to buy any
security or other financial instrument or to
participate in any trading strategy. NAREIT
expressly disclaims any liability for the
accuracy, timeliness or completeness of data in
this presentation. Unless otherwise indicated,
all data are derived from, and apply only to,
publicly traded securities. Any investment
returns or performance data (past, hypothetical,
or otherwise) are not necessarily indicative of
future returns or performance.