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March 12, 2012
Message from the President
 Explaining the REIT approach to real estate investment to investors is one of NAREIT’s most important undertakings. A significant part of our investor outreach is targeted to decision makers in the traditional pension and endowment communities. However, as the stories in this issue illustrate, NAREIT increasingly is focused also on the self-directed retirement savings world.
Although pension and endowment plans collectively manage approximately $5.5 trillion in investments, their size is dwarfed by the $10.5 trillion defined contribution community, which consists of defined contribution plans ($5.2 trillion) and IRAs ($5.3 trillion).
Within the defined contribution plan community, target date funds are rapidly becoming the leading investment choice. These funds take the burden of investment decision making off individual investors’ shoulders through managed investment portfolios that pursue evolving strategies based on the year in which an investor plans to retire. In recent weeks, NAREIT conducted meetings to outline the REIT investment proposition for nine of the largest target date fund providers.
The primary gateway to the individual retirement plan market is the financial advisor community, and NAREIT’s sponsorship last week of the Financial Advisor/Private Wealth Magazine Innovative Real Estate Strategies Conference is just one example of how our outreach program takes the REIT story to this key constituency.
For both target date fund providers and financial advisors, the benefits of REIT investment that we present are the same: portfolio diversification; consistent income; long-term growth; and inflation protection. And, there are strong indications that this message is beginning to sink in.
Some target date fund providers, such as UBS, J.P. Morgan, PIMCO and Alliance Bernstein, have adopted real estate allocations of up to 15 percent. Among financial advisors, NAREIT’s own research shows 57 percent now recommend REITs to their clients, and two-thirds of those favor an allocation between 5 and 10 percent. That is real progress, and we look forward to boosting these numbers in the years ahead.
Steven A. Wechsler
President and CEO
Investor Outreach Team Active in February
 NAREIT’s Investor Outreach team was on the road in February, making separate trips to Boston and New York and visiting with a diverse range of 42 institutional investors that control more than a combined $6 trillion in assets. The 42 meetings were held with organizations across all targeted investment cohorts, including: eight with prominent domestic and international pension, retirement and sovereign wealth fund plan sponsors representing more than $248 billion in assets; six with investment consultants with assets under advisement of more than $3 trillion; and 26 with investment managers that sponsor global and domestic products for the institutional and retail investor markets and represent close to $3 trillion in assets under management.
Two important pieces of new research were highlighted during the February meetings. The first, prepared by NAREIT, demonstrates that the correlation of REIT returns with returns from the broader stock market decrease as the investment horizon lengthens, whereas the correlation of returns from non-real estate industries with returns from the broader stock market increase as the investment horizon lengthens. These divergent patterns demonstrate that real estate equities are a better source of diversification in the equity allocation of long-term retirement portfolios than are equities from other industries.
The second was research NAREIT sponsored with Wilshire Associates on the role of U.S. REITs and global listed real estate securities within target date funds, the most rapidly growing investment products in most 401(k) accounts and other tax-deferred savings plans. According to the Wilshire analysis, target date funds should include REIT allocations of between 5 percent and 15 percent. Both the internal and Wilshire research generated great interest, particularly among organizations offering asset allocation products, such as target date and target risk funds.
Since the beginning of 2012, NAREIT has conducted 64 meetings with many of the largest and most influential investment organizations within the institutional investment marketplace. Collectively, these entities represent close to $22 trillion in assets under management or advisement.
In conjunction with our efforts to increase the level of investment in REITs by public sector pension plans, NAREIT has expanded its conference agenda to include membership and participation in a number of national and state associations representing the interests of public sector pension and retirement plans.
Last week, Meredith Despins, NAREIT’s vice president of investment affairs and investor education, participated in the California Association of Public Retirement Systems (CALAPRS) 2012 General Assembly. Delegates to the event included trustees and pension staffs from 34 of California's state, county and municipal retirement systems.
(Contact: Kurt Walten at kwalten@nareit.com)
REIT.com Video: Mike Fascitelli, Vornado Realty Trust
 In the aftermath of the Great Recession and the Great Financial Crisis, Michael D. Fascitelli, president and CEO of Vornado Realty Trust (NYSE: VNO), said his company has emphasized paying down its debt and maintaining flexibility.
After the financial markets went into a tailspin in 2008, Vornado paid down more than $2 billion in debt. The company also extended its maturity schedules.
“That obviously gives you a lot more operating leeway and flexibility,” Fascitelli said in an interview with REIT.com. “We made the financial side of our business reflect the fact that it was an uncertain time.”
Regarding Vornado’s $800 million real estate investment fund, Vornado Capital Partners, its creation came at “a particularly opportune time to expand the kind of capital we attracted,” according to Fascitelli.
(Contact: Matt Bechard at mbechard@nareit.com)
NAREIT Co-Sponsors Financial Advisor/Private Wealth Conference
 Last week, NAREIT co-sponsored the Second Annual Financial Advisor/Private Wealth Innovative Real Estate Strategies Conference in Orlando, Fla. The event brought together approximately 150 readers of Financial Advisor Magazine and Private Wealth Magazine, including financial advisors, registered investment advisors (RIAs), independent and wirehouse representatives, private bankers, wealth advisors, trust officers and family office advisors.
The conference agenda was designed to help attendees identify both public and private real estate investment opportunities. As part of NAREIT’s sponsorship, Michael Grupe, NAREIT’s executive vice president for research and investor outreach, delivered a presentation on the diversification benefits of global real estate investments within a client’s investment portfolio.
(Contact: Abby McCarthy at amccarthy@nareit.com)
REIT.com Video: Philip Charls, EPRA
 The listed real estate sector has been doing well in Europe despite the uncertain economic environment, according Philip Charls, CEO of the European Public Real Estate Association (EPRA).
In a video interview with REIT.com at NAREIT’s Washington Leadership Forum, Charls discussed the challenges and opportunities in the European real estate market.
“It cannot be denied that there is still a certain level of uncertainty in the European economy,” Charls said. “But I think that people place things in perspective every now and then.”
He said that the troubled sectors in places like Portugal, Italy, Greece and Spain do not represent even one percent of the FTSE EPRA/NAREIT Europe Index.
“What’s important is that the listed sector has been doing extremely well, thanks to the quality of management and the quality of assets. The sector is able to recapitalize itself and is in a much better state than the unlisted sector, so that will give us an opportunity to benefit from future happenings,” he said.
(Contact: Matt Bechard at mbechard@nareit.com)
NAREIT Joins U.S. Chamber in Calling for FSOC Hearing
 Last week, NAREIT joined the U.S. Chamber of Commerce and eight trade associations in sending a letter to the Financial Stability and Oversight Council (FSOC). The group called on the FSOC to hold a public hearing on the second proposed rulemaking related to the designation and supervision of certain non-bank financial companies.
The group wrote that a public hearing would allow the public to better understand, and to further comment on, “the significant ambiguity with regard to the threshold factors to determine whether a company is subject to evaluation for potential SIFI (systemically important financial institution) designation, the failure to address intent, legal status and significance of the ‘guidance,’ and the exclusion of any cost/benefit analysis.”
(Contact: Kirk Freeman at kfreeman@nareit.com)
REIT.com Video: Robert Lehman, Ernst & Young
 While analysts and investors focus on job growth as the key indicator of expansion in the commercial real estate market, they should also pay attention to consumer confidence and housing, according to Robert Lehman, REIT practice leader with Ernst & Young LLP.
In an interview with REIT.com at NAREIT’s Washington Leadership Forum, Lehman touched on a variety of pressing issues in the industry. He described employment as “just a small indicator of confidence.” He singled out the residential housing market as one of the biggest factors influencing the economic recovery.
“Businesses will add jobs if they’re confident,” Lehman said. “I wouldn’t be just looking to jobs as a sole measure.”
Lehman also discussed the prospects for growth in commercial development. Relatively high vacancy rates at the moment, particularly in secondary and tertiary markets, aren’t conducive to expansion, Lehman noted. Until more empty space is filled, new construction won’t start.
(Contact: Matt Bechard at mbechard@nareit.com)
March/April REIT Magazine Now Available
 The March/April 2012 issue of REIT magazine is now available. This issue's cover story looks at the importance of succession planning and how many companies in the REIT industry have benefitted from having a well thought out, strategic succession plan. Companies such as AvalonBay Communities and Corporate Office Properties Trust share insights into their recent executive transitions.
This issue also features a profile of Camden Properties Trust and explores how the company excels at making both tenants and employees happy. In this issue's One-on-One interview, DDR's Dan Hurwitz shares his thoughts on the prospects for the retail sector. Also, we speak with leading real estate fund managers to get their take on where the markets are headed the rest of this year.
Read these stories and many more in this issue of REIT, available now online and in print.
(Contact: Matt Bechard at mbechard@nareit.com)
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