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Lessons I Have Learned in My Career in the REIT Industry

Working paper #725
Jon Fosheim

Publicly-traded REITs have come a long way from a small backwater of the capital markets. The maturing of the industry began with the real estate recession of the early 1990s, when lenders forced major real estate players to bring in more equity investors or risk foreclosure. Investors, realizing they held the better cards, demanded that the new REIT vehicles be more investor-friendly than what came before. A few issues remain, such as the institutional bias against REITs on the part of the big retirement funds; the excessive pay at some of the REITs; and the expropriation by so-called non-traded REITs of a portion of the goodwill so laboriously developed by the publicly-traded REITS. Nevertheless, publicly-traded REITs have outperformed bonds, the broad stock market, and direct ownership of commercial real estate. The future for publicly-traded REITs does indeed look bright.

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