Table of Contents
Introduction xi Acknowledgments xv
Part I Meet the REIT
Chapter 1 REITs: What They Are and How They Work 3
Types of REITs 5
General Investment Characteristics 6
Higher Current Returns 11
Summary 17
Chapter 2 REITs versus Competitive Investments 19
Bonds 20
Convertible Bonds 22
Preferred Stocks 23
Other High- Yielding Equities 24
Other Real Estate Investment Vehicles 26
Summary 31
Chapter 3 Today’s REITs 33
The First REIT 33
The Tax Reform Act of 1986 34
UPREITs and DownREITs 35
REIT Modernization Act and RIDEA 37
Lending REITs versus Ownership REITs 39
Expansion of REIT Property Sector Offerings 40
Summary 41
Chapter 4 Property Sectors and Their Cycles 43
Ups and Downs 45
Property Sectors 49
Summary 87
Part II History and Mythology
Chapter 5 REITs: Mysteries and Myths 91
Changing Attitudes toward REITs 91
Myths about REITs 97
Summary 108
Chapter 6 A History of REITs and REIT Performance 109
The 1960s: Infancy 109
The 1970s: Adolescence and Turbulence 111
The 1980s: Overbuilding—The Troll Under the Bridge 113
The 1990s: The Modern REIT Era—Plus More Growing Pains 115
2000 to 2007: Credibility and Market Acceptance 124
2007 through 2010: REITs Survive the Great Recession 127
Recent Trends 134
Summary 139
Part III Investing Intelligently in REITs
Chapter 7 REITs: Growth and Value Creation 143
The Significance of FFO and AFFO 144
The Dynamics of FFO/AFFO Growth 149
Internal Growth 152
How to Build Internal Growth into a Lease 157
Other Ways to Generate Internal Growth and to Create Shareholder Value 158
External Growth 163
More External Growth Avenues 172
Summary 173
Chapter 8 Searching for Blue Chips 175
Investment Styles 175
Growth REITs 176
Value or “Turnaround” REITs 178
Bond- Proxy REITs 179
The Virtues of Blue-Chip REITs 180
The Importance of Allocating Capital Wisely 190
Summary 212
Chapter 9 The Quest for Investment Value 215
The Investor’s Dilemma: Buy-and-Hold versus Trading 215
The Buy- and- Hold Strategy 217
REIT Stock Valuation 218
Valuing REITs as a Group 231
Summary 237
Chapter 10 Building a REIT Portfolio 239
How Much of a Good Thing Do You Want? 239
Diversification among REITs 245
Toward a Well- Balanced Portfolio 248
How to Get Started 251
Summary 259
Chapter 11 Investing in Global REITs and Property Companies 261
How the U.S. REIT Revolution Spread around the Globe 264
Mapping the Size of Global Property Stock Markets 274
Managing a Global Real Estate Securities Portfolio 284
The Practicalities of Investing Overseas for the Individual Investor 287
A Summary: Stocks for All Investment Seasons 298
The Long- Term Evidence Supporting Investments in Global Real Estate Securities 300
Part IV Risks and Future Prospects
Chapter 12 What Can Go Wrong? 309
Issues Affecting All REITs 309
Problems Affecting Individual REITs 323
Summary 333
Chapter 13 Tea Leaves: Some Thoughts about the Future 335
Additional Real Estate Owners Will “REITize” 337
Increasing Investor Demand for REITs 344
Larger REITs: Is Bigger Really Better? 353
Additional New Trends 360
So Much More to Come 366
Summary 367
Appendix A Death and Taxes 369
Appendix B Case Study: FFO, AFFO, FAD, and CAD 373
Appendix C Cost of Equity Capital 377
Appendix D REIT Portfolio Management 381
Appendix E Largest Global Real Estate Companies as of December 2010 391
Glossary 413
About the Author 423
About the Contributors 425
Steven D. Burton 425
Kenneth D. Campbell 425
Index 427