Typically, investments behave in such a way that higher rates of return are achieved when the investor assumes greater risk. However, over a 31-year period, REIT stocks have generated higher returns than most leading U.S. benchmarks, while experiencing lower volatility as a measure of risk. The chart illustrates that for the three decades ending Dec. 31, 2002, Equity REITs generated a compound total return of 12.35 percent while assuming 13.46 percent risk. Over the same 31-year period, the S&P 500, Nasdaq Composite and Dow Jones Industrial Average generated lower compound annual total returns while demonstrating much greater volatility, and therefore, more risk.

Talking Tax Cut

“We see a real opportunity to sip lemonade while others see lemons. In our mind, the big upside from the Bush proposal is that it furthers the focus on the merits of dividends. Over the past two years, we have seen an increased interest in REITs from investors who in the past dismissed REITs as flawed because their high dividend payout (which meant they ‘couldn’t grow’), and who now recognize that dividends keep companies from squandering retained cash.”

—Banc of America Securities real estate analyst Lee Schalop discussing the potential silver lining for REITs in the President’s plan in his Jan. 10, 2003 Real Estate Weekender.

“We believe that the REIT structure, as it has developed over the last 40 years is sound and sensible and will to continue to bring rewards to shareholders in the future irrespective of whatever plan Congress adopts.

“We generally support the aims of the President’s overall growth and jobs plan, and believe that any initiative Congress adopts to get the economy moving strongly again will benefit the real estate economy generally and REITs in particular.”