Strategic Investment Group

REAL ESTATE INVESTMENT TRUSTS

June 2000

In the first 30 years of existence, the market capitalization of the REIT industry grew to only $5.6 billion (including only equity REITs). This relatively small industry attracted little attention from institutional investors, while individual investors were more focused on the tax advantages of investing in real estate through syndication. It was not until the early 1990s, after tax law changes had effectively wiped out the syndication business and the real estate market had gone through a severe recession, that retail investors began to seriously consider REITs. The story was quite simple. Real estate was cheap, trading significantly below replacement cost, and was generating strong yields in an improving economy. Furthermore, some of the best real estate assets and management in the country had gone public in a REIT format in order to recapitalize.

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