The real estate investment trust (REIT) structure has come under increasing scrutiny given the problems the structure poses for finns wishing to retain earnings in depressed real estate equity and debt markets. We estimate the net benefits of the structure to be no more than 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 clients on the benefits of the REIT structure is an important goal for REIT management.
The REIT Vehicle: Its Value Today and the Future with Joseph Gyourko, Journal of Real Estate Research vol 18, number 2 (September/October), pp. 355-376 [Reprinted in Properties, number 2 (Winter 2000), pp 35-56] (PDF)