NewsBrief (April 22, 2013)

Message from the President

Last week, NAREIT had the opportunity to brief the leaders of the Real Estate Tax Reform Working Group, which was set up earlier this year by the House Committee on Ways and Means, about REITs and REIT-based real estate investment.

The Real Estate Working Group is led by Rep. Sam Johnson (R-TX) who serves as chair and Rep. Bill Pascrell, Jr. (D-NJ) who serves as vice chair. Both were in attendance.

Accompanying me were NAREIT executive vice president and general counsel Tony Edwards and NAREIT senior vice president Robert Dibblee. We used the time to follow up on the letter we submitted earlier this month to the Real Estate Working Group as well as to several of the other 10 working groups set up by the committee.

Our presentation covered the purpose of REITs, the rules under which REITs operate, the attributes of REIT-based real estate investment and the performance of REITs over the decades.

In the course of our conversation, NAREIT emphasized the essential role that the REIT approach to real estate investment plays today, not only in the United States, but increasingly around the world. We also highlighted the benefits REITs provide to the public, the real estate marketplace, the economy at-large and our nation.

All in all, we sought to underline a simple fact: that the REIT industry today has delivered and is delivering on the promise made to Congress more than 50 years ago to make diversified real estate investment easily and efficiently available to the public.

NAREIT is pleased to help support the House Committee on Ways and Means' efforts to complete a thorough study of potential tax reform. We look forward to constructively continuing the dialogue with the committee as it proceeds with its work.





Steven A. Wechsler
President and CEO
 

NAREIT Officer Update

Last week, a number of changes were made to NAREIT's line-up of officers.

Michael Fascitelli, former president and CEO of Vornado Realty Trust (NYSE: VNO), stepped down as NAREIT second vice chair in connection with his change of status at Vornado Realty Trust. NAREIT warmly thanks Fascitelli for his extraordinary commitment to NAREIT over many years as well as for his outstanding representation of REITs and real estate investment during the course of his career.

Consequently, consistent with NAREIT's bylaws, NAREIT Treasurer David Neithercut, president and CEO of Equity Residential (NYSE: EQR), last week assumed the role of NAREIT second vice chair and he will serve in this capacity through the remainder of Fascitelli's one-year term.

In accordance with NAREIT's bylaws, NAREIT Chair Ed Walter, president and CEO of Host Hotels & Resorts (NYSE: HST), last week named David Henry, president and CEO of Kimco Realty Corporation (NYSE: KIM), to serve out Neithercut's remaining term as treasurer.

Under NAREIT's bylaws, officers at NAREIT are elected to one-year terms. Later this year, NAREIT's Governance Committee, chaired by NAREIT Chair Ed Walter, will seek input from NAREIT members to develop a recommended slate of officers for 2014.

(Contact: Tony Edwards at tedwards@nareit.com)

NAREIT Briefs Congressional Real Estate Caucus

On April 18, Brad Case, NAREIT's senior vice president, research and industry information, made a presentation about REITs and REIT-based real estate investment at an informational event hosted and sponsored by the Congressional Real Estate Caucus. The caucus is led by Reps. Richard Neal (D-MA) and Michael Turner (R-OH), who serve as co-chairs.

NAREIT's 45-minute presentation first described the salient characteristics of REITs, including the ownership, asset, income and distribution tests; and it then connected these attributes to the public policy objective that originally motivated the creation of REITs by Congress in 1960: to enable all Americans access to the returns of the real estate asset class.

The presentation concluded by focusing on the benefits of REITs to individuals, pension beneficiaries and the country as a whole.

The Congressional Real Estate Caucus routinely invites assorted real estate groups like NAREIT which are members of the National Real Estate Organizations based in Washington, D.C. to provide background information about the real estate industry.

(Contact: Robert Dibblee at rdibblee@nareit.com)

Dingell Receives Small Investor Empowerment Award

April 16, 2013: Rep. John Dingell (D-MI), right, receives NAREIT's 2013 Small Investor Empowerment Award from Steven Wechsler, NAREIT president and CEO.

Dingell has served Michigan in the House of Representatives since 1957. He is the longest-serving member of Congress and is the only remaining member from 1960 when Congress passed the original legislation that created REITs.

The Small Investor Empowerment Award was established on behalf of those people who invest in, are employed by, or derive other benefits from REITs and publicly traded real estate companies. The award recognizes public servants who have demonstrated exceptional commitment to the ideals of free enterprise, economic growth, personal freedom and unlimited opportunity for all Americans.

(Contact: Kirk Freeman at kfreeman@nareit.com)

FINRA Proposes Amendments to NASD Rule 2340 and FINRA Rule 2310

FINRA's board of governors last week authorized FINRA to file with the SEC proposed amendments to NASD Rule 2340 (Customer Account Statements) and FINRA Rule 2310 (Direct Participation Programs) to modify the requirements relating to the per-share estimated values for unlisted DPP and REIT securities included in customer account statements.

The amendments to Rule 2340 generally would provide that no member firm is required to include a per-share estimated value of an unlisted DPP or REIT security in a customer account statement. However, a firm could do so, provided that the per-share estimated value has been developed in a manner reasonably designed to ensure that such estimate is reliable and the firm does not have a reason to believe that it is unreliable.

FINRA identified three such methods:

1. For two years after breaking escrow, "net investment," consisting of gross offering price less any cash distributions to investors and "organization and offering expenses" (as defined by Rule 2310) that are funded through borrowing or offering proceeds (a firm may rely on the issuer's periodic reports for this information);

2. At any time, a valuation performed by an independent valuation service, which (under a proposed amendment to Rule 2310) the issuer must commit to provide and must perform at least once every three years; and

3. A periodic valuation by any program that provides them according to a methodology disclosed in the prospectus.

(Contact: Victoria Rostow at vrostow@nareit.com)

Marketplace Fairness Coalition Responds to eBay CEO's Opposition of Bill

NAREIT and its partners in the Marketplace Fairness Coalition wrote to the members of the U.S. Senate on April 21 in response to the CEO of eBay's opposition to the Marketplace Fairness Act.

John Donahoe, president and CEO of eBay, recently wrote to the company's business-to-consumer sellers expressing his concerns over the bill.

"Mr. Donahoe suggests that leveling the playing field and treating all sellers equitably is bad policy," the coalition wrote. "We could not disagree more. The current system can no longer be justified, and it is time to modernize how sales taxes are collected, level the playing field for all sellers and protect the states' right to make their own policy choices."

(Contact: Dara Bernstein at dbernstein@nareit.com)

REIT.com Video: Calvin Schnure, NAREIT

In the latest edition of Fundamentally Speaking, Calvin Schnure, NAREIT's vice president of research and industry information, discussed some positive news in the latest manufacturing statistics. Schnure contrasted the manufacturing numbers with the underwhelming employment report released earlier this month.

"The March employment report was very disappointing, including a drop in manufacturing payrolls," he said. "The latest news in manufacturing actually offset some of the weakness that we saw in the employment report earlier."

Schnure noted that manufacturing output dipped slightly in March, but the drop came after significant gains in February. Overall, manufacturing output increased 5.2 percent in the first quarter of 2013.

Schnure said the strongest sectors in the latest manufacturing report were tied to improvements in the housing market.

"Wood products and non-metallic minerals posted very good growth, and they're up over the past year," he said. "This is part of the rebound in housing construction. As home sales and housing starts rebound, they're having an impact on a lot of other manufacturing industries."

Schnure said the latest production results represent good news for the commercial real estate market, especially the industrial sector.

"Manufacturers are increasing their capacity," said Schnure, including adding more plants to meet growing demand. "REITs have spaces that, in many ways, support the industrial output. This is indicating that there is increasing demand for those as well. This is one more piece in the puzzle of how the long-run economic recovery helps support commercial property. It looks reasonably good going forward."

(Contact: Calvin Schnure at cschnure@nareit.com)

PureProperty Index Discussed at the American Real Estate Association Meeting

Michael Grupe, NAREIT's executive vice president for research and investor outreach, discussed the development of the FTSE NAREIT PureProperty® Index at the annual meeting of the American Real Estate Association (ARES) earlier this month. NAREIT is a sponsor of ARES, a worldwide association of real estate research and investment professionals from the academic, investment and practitioner-related communities.

Grupe addressed conference attendees during a panel focused on new real estate indexes. He discussed NAREIT's work with FTSE Group and the Center for Real Estate at the Massachusetts Institute of Technology to develop the FTSE NAREIT PureProperty Index. Owing to the increased level of transparency and monitoring provided by listed REITs and real estate companies worldwide, real estate indexes in both public and private markets are rapidly seeking to tap into such high-frequency, market-based sources of information. The FTSE NAREIT PureProperty Index is at the leading edge of this trend, with a particular focus on the commercial development of liquid real estate derivatives for both public and private real estate investors, Grupe said.

Grupe was also a featured guest at a half-day critical issues seminar. The seminar was organized to provide guidance to real estate academics with respect to research topics of greatest interest and value to industry sponsors and practitioners, particularly real estate investors. He explained the nature and purpose of NAREIT's sponsored research program and how the program supports academic research tailored to specific issues of interest and importance for REIT-based real estate investment.

(Contact: Michael Grupe at mgrupe@nareit.com)

REIT.com Videos: Sustainability and Environmental Isues

Marla Thalheimer, director of sustainability with Liberty Property Trust (NYSE: LRY), spoke about Liberty Property’s increased body of knowledge regarding sustainability and involvement in sustainability initiatives.

“I think it’s really terrific that we’re seeing more and more REITs get involved,” she said. “It’s showing how important it is to our stakeholders, in addition to the climate. Tenants are starting to ask for it, and investors are starting to ask for it.”

David Farer, chairman of the environmental department with Greenbaum Rowe Smith & Davis LLP, discussed upcoming environmental legislation pertinent to REITs.

“There’s been a lot of activity on the state and local level in the aftermath of Hurricane Sandy,” he said. “This leads not only to issues of residential rebuilding, but of rebuilding and new development in the commercial area. I think REITs will be seeing some new restrictions on the ability to commence development and also some potential significant increases in cost for coping with the new rules in developments that are already in the works.”

Richard Bachia, senior vice president of operations technology with Brookfield Office Properties (NYSE: BPO), shared his thoughts on the keys to building a successful sustainability program.

“One of the first things to learn as an operating engineer was to save energy and look at your usage as far as whether its steam or electric use. Sustainability just grew after 2005 and 2006. Then, we started looking at Energy Star and LEED and what it does in the environment,” he said. “We started getting questions from investors, and it became a more important part of our prospectus.”

(Contact: Matt Bechard at mbechard@nareit.com)

Member Discounts Available in Career Center

While there is much debate about how and when we get there, there is little disagreement that job growth and job creation are the keys to securing long-term economic growth and stability. And at least according to one metric, there are positive signs in the commercial real estate space. According to the Cornell University/SelectLeaders Job Barometer, job postings in the commercial real estate industry increased 27 percent in 2012, reaching their highest total since the Great Recession.

NAREIT Corporate Members should be aware that NAREIT partners with SelectLeaders in creating NAREIT’s Career Center. And in the interest of rewarding those companies that are hiring again, through Sept. 1, NAREIT members will receive a 50 percent discount on their next job posting on the Career Center. All you have to do is visit the Career Center, identify yourself as a NAREIT member and input the code “fifty off.” All purchases are good for one year and all jobs are posted for 60 days.

Package discounts are also currently being offered to NAREIT members. Members can save $500 on a five-job posting package, more than $1,200 on a 10-job posting package, or even more than $5,000 on a 30-job posting package.

If you are hiring again, we encourage you to take advantage of the discounts available to you with your NAREIT membership.

(Contact: Matt Bechard at mbechard@nareit.com)

Conference to Highlight Latest in REIT Research

NAREIT is co-hosting a complimentary, one-day REIT Research Conference to discuss results of leading REIT research papers submitted to AREUEA, publisher of Real Estate Economics, the premier academic journal for real estate investment related topics. This event takes place on June 4 at the Hilton Chicago, one day before REITWeek 2013 begins.

Important real estate investment related topics include:

• Valuation of REITs, listed property companies (LPCs), and other real estate assets.


• Investment characteristics of REITs and LPCs, both within real estate portfolios and in mixed-asset portfolios.


• Organizational and Operational issues for REITs and non-REIT LPCs, e.g., financing, capital structure, executive compensation, operating expenses, economies of scale, property type or geographic focus/diversification, ownership structure, etc.

This event is complimentary and open to anyone interested in the latest research related to REITs. Ventas Inc. (NYSE: VTR) Chairman and CEO Debra Cafaro and Green Street Advisors Chairman and Director of Research Mike Kirby are program directors for the event. To attend the REIT Research Conference, a separate registration form from REITWeek must be completed.

(Contact: Megan Peichel at mpeichel@nareit.com)