The REIT Vehicle: Its Value Today and in the Future
Posted: 22 Oct 1999
The real estate investment trust (REIT) structure has come under increasing scrutiny given the problems the structure poses for firms wishing to retain earnings in depressed real estate equity and debt markets. We estimate the net benefits of the structure to be from 2%-5% of industry equity market capitalization, although the benefits are larger for firms with lower payout ratios. In addition, the value of the format doubles as the share of tax exempt/deferred investment in REITs increases to 40%, the fraction obtaining in the broader equity market. Educating this investor clientele on the benefits of the REIT structure is important to REIT management.
JEL Classification: G12, R29, R39
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