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December 3, 2010
Message from the President
 In our industry's 50th year, innovation and the introduction of new ideas are alive and well in the world of REITs.
Texas-based Hunt Consolidated broke new ground in our industry this week with the creation of two REITs - Electric Infrastructure Alliance of America and Gas Infrastructure Alliance of America - that will invest in electrical transmission
and gas delivery infrastructure. Major investors, including John Hancock Life Insurance and TIAA-CREF, have committed more than $2 billion for the REITs.
When REITs were created by Congress in 1960, the REIT mandate included all types of income-producing real estate broadly defined. This meant that the REIT approach to real estate investment always carried with it the potential for
investment in a wide range of underlying uses of real estate. No doubt Congress intended that the REIT industry should adapt and diversify to reflect changes in the overall economy. In the process, REITs have both provided investors with
new opportunities and channeled fresh capital to a range of other industries to support their use of real estate to fuel economic growth, facilitate job creation and build the nation's wealth.
Consequently, REITs today represent a wide range of activities beyond office, retail, apartment and industrial. Our industry now includes lodging, health care, self storage, student housing, timber and data centers, among others. One of
the most important reasons for the success of the REIT approach to real estate investment over the years has been its mix of flexibility and adaptability, in combination with inherent constraints, which have allowed management teams with
vision to utilize REITs with a variety of forms of income-producing real estate. This week's announcement by Hunt that it will use REITs to build capital for much-needed energy infrastructure shows that kind of vision is very much alive
and well.
Steven A. Wechsler
President and CEO
Senators Press for FIRPTA Reform
 Fourteen members of the Senate Finance Committee wrote to Committee Chairman Max Baucus (D-MT) and Ranking Minority Member
Chuck Grassley (R-IA) on Dec. 1 calling for reforms to the Foreign Investment in Real Property Tax Act (FIRPTA).
"These are critical reforms needed to mitigate a looming equity crisis in the commercial real estate industry," the senators said in their
letter to the committee's leadership.
The senators who signed the letter include: Jeff Bingaman (D-NM), Maria Cantwell (D-WA), Kent Conrad (D-ND), Michael Enzi (R-WY), Orrin Hatch (R-UT), John Kerry (D-MA), Jon Kyl (R-AZ), Robert Menendez (D-NJ), Pat Roberts (R-KS), John D.
Rockefeller IV (D-WV), Charles Schumer (D-NY), Olympia Snowe (R-ME), Debbie Stabenow (D-MI) and Ron Wyden (D-OR).
 "Unfortunately, the FIRPTA rules - most of which were drafted 30 years ago, before the current crisis could be foreseen - impose
significant penalties on foreign investments in domestic real estate that do not exist on other types of U.S. investments, including U.S. Treasury securities, or non-real estate corporate stocks and bonds," the senators wrote. "As a
result, overseas investors are discouraged from investing in U.S. real estate at a time when their capital is sorely needed."
NAREIT welcomes the interest of the majority of the Senate Finance Committee in this important issue and hopes that Congress will soon act on their request.
(Contact:
Dara Bernstein at dbernstein@nareit.com)
Coalition Comments on Potential Derivatives Regulations
 The Coalition for Derivatives End-Users, which includes NAREIT, provided the Treasury Department with
comments on Nov. 29 related to the regulation of foreign exchange (FX) swaps and forwards.
The coalition encouraged the Treasury to treat FX swaps and forwards differently from other over-the-counter (OTC) derivatives products, noting that FX swaps and forwards do not contribute to financial systemic risk.
"Indeed, we believe treating these products otherwise would create significant and potentially destabilizing burdens on companies and possibly the economy," the coalition said. "Moreover, increased regulation would be particularly harmful
to the economy at a time when added regulatory burdens and costs could dissuade market participants from hedging their foreign exchange risks, which would trigger cascading negative effects without benefits to economic stability
commensurate with the costs."
(Contact:
Kirk Freeman at kfreeman@nareit.com)
REIT.com Videos: Insights from REITWorld 2010
 REIT.com's video team had the opportunity to sit down with a number of prominent industry leaders during REITWorld 2010:
NAREIT's Annual Convention for All Things REIT®. The interviews provided insight into the real estate investment marketplace as we head into 2011. (Click on a person's name to play the video.)
A number of REIT executives focused on how they will drive their company's growth in 2011 and beyond.
Inland Real Estate Corporation (NYSE: IRC) President and CEO
Mark Zalatoris said addressing space left vacant by bankrupt retailers will serve his company well in 2011. "We've back-filled all those spaces, and we are going to see the economic impact of that re-tenanting coming online in 2011,"
he said.
 Inland also entered into a joint venture with Dutch pension fund PGGM to acquire around 12 shopping centers. Acquisitions are also key
to growth at
Home Properties, Inc., said President and CEO
Ed Pettinella. "We will likely wind up the year around $400 million in acquisitions, and we hope to do another $250 million to $400 million in deals in 2011," he said.
Corporate Office Properties Trust (NYSE: OFC) has ramped up its acquisition efforts so far in 2010, according to CEO
Rand Griffin. He said the company's goal at the beginning of the year was to complete $300 million in acquisitions and they are nearing that total.
 COPT is also one of the REITs once again focusing on growth through new development. While COPT has its biggest development pipeline
in its history right now,
Duke Realty Corporation (NYSE: DRE) Chairman and CEO
Denny Oklak said his company is beginning to see activity pick up.
 While
Developers Diversified Realty Corporation (NYSE: DDR) President and CEO
Dan Hurwitz said he expects development volume to ramp up slowly, he added that the company has an aggressive redevelopment program underway.
 For
Brookfield Office Properties (NYSE: BPO), President and CEO
Ric Clark said the company's key step forward was disposing of its residential assets, making it a pure-play office company and more attractive to investors. Clark added the company is also aggressively expanding its holdings in
Australia.
Annaly Capital Management (NYSE: NLY) Chairman, President and Chief Executive Officer
Michael Farrell discussed the impact the government has had in stabilizing the mortgage-backed securities market.
 REIT.com also spoke with two executives who provided the European property market perspective.
Guillaume Poitrinal, chairman CEO of
Unibail-Rodamco (AEX: ULA) and chairman of the European Public Real Estate Association (EPRA), said he hopes that going forward, "we will have more listed real estate companies on all the stock exchanges in Europe. I hope the
governments and European Commission will understand the importance of having a strong quoted sector for real estate."
Philip Charls, CEO of EPRA, agreed that there needs to be more listed property companies in Europe, and he singled out Germany as presenting the biggest opportunity.
Be sure to visit
REIT.com daily for new videos.
(Contact:
Matt Bechard at mbechard@nareit.com)
NAREIT Comments on Short-Term Borrowing Disclosure Proposal
 On Nov. 29, NAREIT Executive Vice President and General Counsel Tony Edwards
submitted comments to the Securities and Exchange Commission (SEC) regarding proposed rules related to short-term borrowings.
Under the proposed rule changes, public companies would face enhanced disclosure requirements to provide greater information about their short-term borrowings. "Financial companies," including mortgage REITs, would be required to adhere to
more stringent disclosure requirements, according to the proposal.
Edwards noted that unlike financial institutions, REITs generally are not involved "in the business of lending, deposit-taking, insurance underwriting or providing investment advice." Furthermore, REITs do not engage in the types of
business activities that expose them to the same liquidity risks as banks. Additionally, Edwards pointed out that the Internal Revenue Code clearly distinguishes between REITs and financial companies.
As such, Edwards encouraged the SEC to exclude REITs from the provisions for financial companies unless the REIT is "engaged to a significant extent" in one of the covered business activities.
(Contact:
Tony Edwards at tedwards@nareit.com)
REITs Fall Back in November
 The FTSE NAREIT All REIT Total Return Index dipped 1.6 percent in November, bringing REITs' year-to-date total returns to 21.9
percent in 2010. The FTSE NAREIT Equity REIT Total Return Index dropped 2 percent for the month, with a year-to-date total annual return through the end of November of 22.3 percent.
REITs lagged the broader market measures in November. The S&P 500 was flat for the month. So far in 2010, the S&P 500 has gained 7.9 percent.
Health care REITs were hit particularly hard during the month, as the sector posted a 7.3 percent decline. Meanwhile, the retail and residential sectors performed strongest in November, with gains of 0.9 percent and 1.9 percent,
respectively. Regional malls climbed 3.7 percent for the month, the most of any subsector.
Sheila McGrath, senior vice president and REIT analyst with Keefe, Bruyette & Woods Inc., noted that REITs had far outperformed the S&P 500 in 2010, so a pullback in November wasn't "completely surprising." McGrath said concerns over the
European debt markets had helped to push up yields on Treasuries, which also impacted REITs' performance.
McGrath also pointed out that the market had seen $3.4 billion of equity issuances in November, including the re-emergence of General Growth Properties with a $2.2 billion equity raise.
"That was a lot of new issuance for the sector to absorb in the month, particularly in light of the fact that there were increasing concerns on potential global impact to European debt issues," she said.
Looking ahead, McGrath said November's results had reinforced the notion that the industry may suffer when equity issuance is high: "Like the property markets, supply outstripping demand causes weakness in pricing."
Additionally, she noted that REITs are vulnerable when interest rates rise dramatically.
"We view November weakness as a reminder that REITs will be susceptible to any swift pick-up in interest rates, particularly if the rise in rates is driven by global financial concerns and not by an improving U.S. economy," McGrath said.
The FTSE EPRA/NAREIT Global Real Estate Total Return Index was down 4.3 percent in November. The Global Index's performance was driven in part by 12.2 percent decline in Europe. The Americas had the strongest month of all regions, dropping
2.3 percent in November.
(Contact:
John Barwick at jbarwick@nareit.com)
REITs@50 Industry Reflections: Ken Rosen and Doug Crocker
 Throughout our industry's 50th anniversary year, NAREIT will be posting reflections from industry leaders on REIT.com and
bringing them to your attention in this newsletter.
Ken Rosen, chairman of Rosen Real Estate Securities and Rosen Consulting Group, has been involved with real estate research and investment for more than 30 years. Over that time, particularly with the onset of the Modern REIT Era, he
said that listed REITs have had a dramatic impact on the commercial real estate industry.
"Listed REITs have basically changed everything regarding investors' view of real estate," Rosen said. "Normally real estate was an illiquid investment and you didn't have the opportunity to have any transparency." Rosen added that REITs
have added liquidity, transparency and really great management teams.
Douglas Crocker II, former president and CEO of
Equity Residential (NYSE: EQR) and recipient of NAREIT's 2010 Edward H. Linde Industry Leadership Award, said that through the REIT model, real estate has been opened up as an investment vehicle for individuals as well as institutions.
Going forward, Crocker said he sees no reason why the listed REIT industry won't continue to expand. "I think the industry will grow in size. The size of the individual REITs will continue to expand, and the investor base will continue to
expand exponentially from where it is today," Crocker said.
(Contact:
Matt Bechard at mbechard@nareit.com)
NAREIT Representatives Visit Inland
 NAREIT executives visited the headquarters of The Inland Real Estate Group Inc., which includes
Inland Real Estate Corp. (NYSE: IRC), Inland American Real Estate Trust, Inland Diversified Real Estate Trust and Inland Western Real Estate Trust in Oak Brook, Ill., on Nov. 30.
NAREIT's representatives briefed Inland senior executives on ongoing initiatives within NAREIT's Investor Outreach and Policy & Politics divisions. NAREIT also expressed its gratitude for Inland's support of REITPAC and offered an update
on REITPAC's activities.
Pictured above (left to right): Robert Dibblee, NAREIT vice president of government relations; Steve Wechsler, president and CEO of NAREIT; Dan Goodwin, chairman and CEO of The Inland Real Estate Group Inc.; NAREIT Vice President of
Industry & Member Affairs Bonnie Gottlieb; and Michael Grupe, NAREIT executive vice president of Research & Investor Outreach.
(Contact:
Robert Dibblee at rdibblee@nareit.com)
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