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More About This Title Investing in REITs, Fourth Edition: Real Estate Investment Trusts
English
Real Estate Investment Trusts (REITs), which provide some of the best total returns in the investment world, along with above-average dividend yields and stable earnings, have become increasingly popular with both individual and institutional investors. Investing in REITs, Fourth Edition has established itself as the definitive guide to understanding this attractive asset class. The book is invaluable for investors, financial planners, and investment advisers interested in understanding REITs and REIT investment opportunities.
As their earnings and dividends are beginning to grow again after the Great Recession—and as they are in a unique position to take advantage of distressed sale opportunities—now is an excellent time for investors to consider REITs for both diversification and strong total returns. The new edition covers:
- A comprehensive history of the REIT industry
- How REITs compare with other competitive investments
- How to spot blue-chip REITs and control investment risk
- How to value individual REIT stocks, and REIT shares generally
- How to build a diversified REIT portfolio, directly or with REIT mutual funds
- Understanding the risk-and-reward dynamics of commercial real estate
- Assessing non-US REITs and how to invest in them
- Important new developments and strategies in the REIT industry
Author Ralph L. Block, who has been investing in REIT stocks for 40 years and is widely considered a leading authority on REITs, brings the historical success of Investing in REITs right up to date. This book is an essential read for both individuals and institutions who desire to invest in commercial real estate through REIT stocks.
English
Ralph L. Block, has been an active participant in the REIT industry for four decades, as an individual investor, investment advisor, professional money manager, author, publisher, and consultant. Mr. Block is currently the owner and proprietor of Essential REIT Publishing Co. For his many contributions to the REIT industry, Block received the 2004 Industry Achievement Award from the National Association of Real Estate Investment Trusts (NAREIT).
English
Introduction xi
Acknowledgments xv
Part I Meet the REIT
Chapter 1 REITs: What They Are and How They Work 3
Types of REITs 5
General Investment Characteristics 6
Higher Current Returns 11
Summary 17
Chapter 2 REITs versus Competitive Investments 19
Bonds 20
Convertible Bonds 22
Preferred Stocks 23
Other High- Yielding Equities 24
Other Real Estate Investment Vehicles 26
Summary 31
Chapter 3 Today’s REITs 33
The First REIT 33
The Tax Reform Act of 1986 34
UPREITs and DownREITs 35
REIT Modernization Act and RIDEA 37
Lending REITs versus Ownership REITs 39
Expansion of REIT Property Sector Offerings 40
Summary 41
Chapter 4 Property Sectors and Their Cycles 43
Ups and Downs 45
Property Sectors 49
Summary 87
Part II History and Mythology
Chapter 5 REITs: Mysteries and Myths 91
Changing Attitudes toward REITs 91
Myths about REITs 97
Summary 108
Chapter 6 A History of REITs and REIT Performance 109
The 1960s: Infancy 109
The 1970s: Adolescence and Turbulence 111
The 1980s: Overbuilding—The Troll Under the Bridge 113
The 1990s: The Modern REIT Era—Plus More Growing Pains 115
2000 to 2007: Credibility and Market Acceptance 124
2007 through 2010: REITs Survive the Great Recession 127
Recent Trends 134
Summary 139
Part III Investing Intelligently in REITs
Chapter 7 REITs: Growth and Value Creation 143
The Signifi cance of FFO and AFFO 144
The Dynamics of FFO/AFFO Growth 149
Internal Growth 152
How to Build Internal Growth into a Lease 157
Other Ways to Generate Internal Growth and to Create Shareholder Value 158
External Growth 163
More External Growth Avenues 172
Summary 173
Chapter 8 Searching for Blue Chips 175
Investment Styles 175
Growth REITs 176
Value or “Turnaround” REITs 178
Bond- Proxy REITs 179
The Virtues of Blue- Chip REITs 180
The Importance of Allocating Capital Wisely 190
Summary 212
Chapter 9 The Quest for Investment Value 215
The Investor’s Dilemma: Buy-and-Hold versus Trading 215
The Buy- and- Hold Strategy 217
REIT Stock Valuation 218
Valuing REITs as a Group 231
Summary 237
Chapter 10 Building a REIT Portfolio 239
How Much of a Good Thing Do You Want? 239
Diversifi cation among REITs 245
Toward a Well- Balanced Portfolio 248
How to Get Started 251
Summary 259
Chapter 11 Investing in Global REITs and Property Companies 261
How the U.S. REIT Revolution Spread around the Globe 264
Mapping the Size of Global Property Stock Markets 274
Managing a Global Real Estate Securities Portfolio 284
The Practicalities of Investing Overseas for the Individual Investor 287
A Summary: Stocks for All Investment Seasons 298
The Long- Term Evidence Supporting Investments in
Global Real Estate Securities 300
Part IV Risks and Future Prospects
Chapter 12 What Can Go Wrong? 309
Issues Affecting All REITs 309
Problems Affecting Individual REITs 323
Summary 333
Chapter 13 Tea Leaves: Some Thoughts about the Future 335
Additional Real Estate Owners Will “REITize” 337
Increasing Investor Demand for REITs 344
Larger REITs: Is Bigger Really Better? 353
Additional New Trends 360
So Much More to Come 366
Summary 367
Appendix A Death and Taxes 369
Appendix B Case Study: FFO, AFFO, FAD, and CAD 373
Appendix C Cost of Equity Capital 377
Appendix D REIT Portfolio Management 381
Appendix E Largest Global Real Estate Companies as of December 2010 391
Glossary 413
About the Author 423
About the Contributors 425
Steven D. Burton 425
Kenneth D. Campbell 425
Index 427
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“I have enjoyed reading Ralph’s insightful and refreshing commentary on the REIT industry for years, and his REIT guide is an invaluable resource for those of us who work in the industry and also invest in REIT stocks. His extensive knowledge comes through clearly in an easy-to-follow guide for both the novice and real estate expert.”
—Robert Elms, Head of Debt & Equity Placement, Cushman & Wakefield, Inc.
Praise for Previous Editions of Investing in REITs
“For over thirty years, Ralph Block has observed and studied Real Estate Investment Trusts and has accumulated a storehouse and reservoir of knowledge and insights, which in this book he dispenses to the reader—simply, lucidly and logically. It is a must-read for anyone interested in the growing market of REITs.”
—Milton Cooper, Chairman & CEO, Kimco Realty Corporation
“Ralph Block has long advocated the merits of investing in REITs, and investors who have heeded his advice have profited handsomely. By making complicated issues accessible for investors of all types, Investing in REITs provides a great introduction to an investment vehicle that offers solid returns, moderate risk, and good diversification benefits.”
—Mike Kirby, Cofounder, Green Street Advisors
“In a clear, direct, and authoritative manner, Ralph Block provides and opens an extensive and illuminating window on investing in real estate investment stocks. He fully explains the story of REITs, flags their investment attributes, and underlines their role in a diversified portfolio. I highly recommend it to the investor considering REITs for the first time, as well as the investor with some knowledge about and experience with real estate stocks.”
—Steven A. Wechsler, President and CEO, The National Association of Real Estate Investment Trusts
“REIT investing has always been something of a ‘no-man’s land’ in the investment world. Common stock investors often look at REITs as real estate while real estate investors consider REITs to be stocks. Ralph Block has written a wonderful book that sheds light on an asset class that is becoming an increasingly important building block for the well-diversified portfolio.”
—Roger C. Gibson, CFA, Author of Asset Allocation: Balancing Financial Risk
“The well-informed author has written the most complete and easy-to-read book about real estate investment trusts yet. The stunning graphics are matched by excellent detailed information concisely arranged.”—The Los Angeles Times
“Ralph Block has made the world of REITs accessible to all. This is a superb book for every investor.”
—Tom Gardner, cofounder of The Motley Fool
“Finally, a book that demystifies REIT s for both armchair investors and seasoned professionals. Investing in REITs by Ralph Block is a balanced, clearly written guide that fills a major void in today’s investment literature.”
—Jonathan Litt, Senior Real Estate Analyst, Salomon Smith Barney
“Whether you’re an individual or institutional investor, you won’t find a better primer on REIT investing. Ralph Block takes the complex issues that must be addressed to produce above-average results when investing in REITland, and makes them simple and easy to understand. A must for every serious REIT investor’s library, and a fun read, to boot.”
—Geoffrey Dohrmann, Publisher and Editor in Chief, Institutional Real Estate Securities
“Investing in REITs is a must-read for anyone wishing to gain a better understanding of this thriving sector of the capital markets. Given the continued transformation of private real estate to the public markets, this book is an essential resource for students, individual and institutional investors, and anyone else interested in understanding the REIT market.”
—David J. Hartzell, Distinguished Professor of Finance and Real Estate and Director of the Real Estate Program, The Kenan-Flager Business School, The University of North Carolina at Chapel Hill
