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TheStreet Open House

Investors Have Many Sweet REIT Flavors

Stocks in this article: ARCP O KIM

NEW YORK ( TheStreet) -- As a child, I loved sampling the different ice creams at Baskin-Robbins, which over the decades has introduced more than 1,000 different flavors.

I still love ice cream, but these days I'm more interested in REIT dividends. I guess that's a good thing, because it's healthier, and given my busy schedule, it can be difficult to find time to exercise.

Just as I once waited with mouth-watering anticipation to try the new ice cream of the month at Baskin-Robbins, now I find myself eager to sample the latest REIT alternatives.

More REIT Flavors to Choose From

For REIT investors the menu options are getting bigger. The growing list includes 143 U.S. equity REITs, of which 133 are included in the FTSE NAREIT All Equity REIT Index. With an overall market capitalization of around $634 billion, the equity REIT sector is becoming more diverse as investors are experiencing many new flavors and even some unusual new specialty sectors.


I wrote about the recent wave of REITs listing in this article:

"More and more companies have been looking at the REIT structure as a way to unlock value in traditional shares. In what was previously more of a trickle of REIT conversions and spinoffs, the more recent activity has been viewed as more of a wave."

Some have argued that non-REITs are hoping to utilize the REIT structure as a way to avoid taxation or perhaps create a "loophole" of sorts. However, my argument is centered on the notion that companies are exploiting the high demand for income, not trying to avoid taxes. As I wrote:

"It's clear that the increased demand is not driven by the corporate tax exemption -- because the IRS is going to get their money regardless -- either at the corporate-tax level or at the individual level (taxes paid by investors.) Instead, it seems that the strong demand is being driven by Mr. Market. REITs today are trading at very high multiples and that has created an environment fueled by low cost debt and equity."


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