CEOs Say Downturn Has Demonstrated REITs' Strength

As the global economy begins to slowly emerge from the recession, the REIT model for commercial real estate investment has proven its strength, according to executives speaking on a panel at REITWorld 2009 in Phoenix.

"The REIT model has held up incredibly well," said Ric Campo, chairman and CEO of Camden Property Trust (NYSE: CPT). "I think it validates the REIT model in a big way."

Walter Rakowich, CEO of ProLogis (NYSE: PLD), singled out the performance of REITs' management teams during the last 18 months as a major factor in the industry's survival. "We've proved that there are great people in this industry," he said.

Art Coppola, chairman and CEO of Macerich (NYSE: MAC), maintained that the transparency of REITs relative to non-public forms of real estate investment had provided the industry with a key advantage in managing through the downturn.

When the conversation moved to leverage, the consensus was that REITs had learned a valuable lesson about maintaining prudent balance sheets.

"Leverage is risky," noted Mike Fascitelli, president and CEO of Vornado Realty Trust (NYSE: VNO). "We found that the debt maturity schedule really matters."

Campo echoed Fascitelli's sentiments. He noted, though, that the ability to tap the public equity markets had provided REITs with a prudent way to re-capitalize their balance sheets.

Debra Cafaro, chairman, president and CEO of Ventas Inc. (NYSE: VTR), said she had observed that an "extreme dichotomy" had arisen between public and private commercial real estate companies.

"REITs have gone through the wars, but private companies are just starting to feel the pain" of the recession, she said.