NAREIT Best Financial Practices Council Chairman's Letter


June 22, 1999


Dear NAREIT Member:


In recent years many of you have heard me say - repeatedly - that our industry, REITs and publicly traded real estate companies, must operate more and more as if we've all donned open kimonos. No secrets! No kidding! In short, our industry's financial reporting must be transparent, not opaque. Our industry's supplemental measure of financial performance must be clear, consistent and credible - especially if we are to attract the overwhelming majority of investors who haven't heard of REITs or who are confused by our industry and its practices and, as a result, haven't invested with us.


With these criteria in mind, last year NAREIT's leadership convened the Best Financial Practices Council to consider how our industry's financial practices and standards should be improved, as well as how our industry's supplemental performance measure could be made more accessible and understandable to the broader, non-REIT-dedicated investment community. Earlier this month, the Council outlined its emerging views to NAREIT's leadership.


I'm very pleased to let you know that NAREIT's leadership concluded that the Council's initial work is consistent with its mandate and ready for discussion and comment within the REIT and publicly traded real estate community. As you will see, the Council seeks to substantially improve the public's understanding of REITs and publicly traded real estate, mainly by making our industry's supplemental performance benchmark more like GAAP "net income," the measure used by the rest of corporate America.


Your leadership believes that maintenance of a meaningful supplemental performance measure requires ongoing examination by NAREIT - and that the debate to follow release of the Council's views is an important and healthy part of building our industry's long-term credibility. This process underscores the integrity in accounting we consistently and collectively strive to provide our industry's shareholders and other stakeholders.


Once you have had a chance to carefully review the accompanying material, explaining the Council's current thinking, it is vitally important that you make your views known to us. Then, the Council will provide its more fully developed perspective to NAREIT's leadership to determine how we should proceed. As you review the Council's work and answer the questions it raises, I ask that you carefully consider the importance of continually bringing greater clarity, integrity and reach to our industry's supplemental financial reporting.


Samuel Zell
Samuel Zell


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