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Issuers and investors adopt REIT approach

Real estate investment trusts have helped to drive development of the asset class in countries such as the US and Japan. Now a European-wide market is ready for take off. Helen Avery reports.

Zell: Growth of REITs is being
driven by the desire for income
investments rather than growth

SAM ZELL HAS good reason to be positive about public real estate investment trusts (REITs). They've helped make him a billionaire. Since establishing US opportunity investment company Equity Group Investments in 1968, Zell has built up four REITs that have made him the US's largest landlord, with 125 million square feet of office space and 225,000 apartments in the US. The US adopted REIT legislation back in 1960, but it wasn't until 12 years ago that the market started to take off. "Subsequent to 1993 REITs really began to gain acceptance," says Zell. "When the real estate bubble burst, property prices were falling, but REITs continued to pay out dividends [from the rental income], so people's perceptions changed."

Since 1993 the market capitalization of US REITs has grown from $16 billion to $283 billion. "Each year, the market has a clearer perspective of what REITs can offer," says Zell. "And each year the number of participants diversifying their investments to hold REITs is growing.

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