Introduction to Real Estate Investment Trusts

In addition to teaching real estate finance at Columbia for about a decade, I’ve also taught real estate capital markets a couple of times.

It’s a nice change for me; sometimes it’s good to stop thinking about real estate, and think about thinking about real estate. In other words, when you invest in a REIT, you’re not really investing in real estate. You’re investing in a thing that invests in real estate. That extra level of abstraction can drive a typical real estate professional to frustration. Most real estate professionals don’t understand operating companies. They think in terms of direct investing. In a similar fashion, most securities professionals become very uncomfortable when they try and speak “real estate”; it’s just not their thing.

I’ve used a number of books in my classes and a range of academic articles, but the only text I’ve ever found useful for students is Investing in REITs: Real Estate Investment Trusts. The author, Ralph Block, does a really good job of explaining how REITs work in non-technical language. While there are other books (Real Estate Investment Trusts: Structure, Performance, and Investment Opportunities and Real Estate Investment Trusts: Structure, Analysis and Strategy come to mind), they were published in 2002 and 1997 respectively. In the land of real estate finance, and especially when talking about REITs, these books are seriously out of date. Block’s latest version is from 2011. REITs have evolved a lot since their initial creation in 1960, and if you’re not reading recently published material, you almost shouldn’t even spend the time.

Finally, if you’re looking for general online resources, you should check out the NAREIT web site. They have a lot of good data and information on the REIT industry.

– Josh