Advisors have heard quite a bit about the stellar performance of real estate investment trusts last year; they’ve also been hit with a slew of facts and figures meant to increase the acceptance of REITs as a mainstream investment option. So perhaps it’s appropriate to learn that just last month a REIT was involved in one of the biggest real estate deals of the decade.
Westfield America Inc. (WFA) entered into a 99-year lease with the Port Authority of New York & New Jersey for the retail portion of Manhattan’s World Trade Center. The portion includes 427,448 square feet and will be renamed “Westfield Shoppingtown World Trade Center.”
The deal will close in early August, according to company officials, with financial terms of the deal remaining undisclosed until then. It was part of a larger $3.2 billion lease deal between the Port Authority and private real estate firm Silverstein Properties for the office portion of the complex.
Yet it’s not really Westfield America’s decision that advisors should take note of, according to Jay Hyde, senior director of communications for the National Association of Real Estate Investment Trusts. Hyde suggests that the deal is indicative of the increasing visibility of REITs in the general real estate market and of their growing acceptance as an alternative asset class. “Most people involved in the business have been trying to get the word out about REITS,” he says, “and having one involved with such a high-profile property has to help.”
As late as 1990, there were only about 40 or 50 REITs with an average market capitalization of $95.7 million, according to a report published by diversified real estate company Lend Lease Corp. Today, there are 158 REITs with an average market cap of $850.8 million that control some $250 billion worth of real estate throughout the country.
There are a number of legislative and market forces behind this trend, chief among them the government’s decision in 1992 to allow REITs to manage their own properties. In the past, a REIT could only own the properties and had to outsource the management.