By David E. Simon

Now that the dust has settled from the reporting of 2004 results and the completion of SEC filings and annual reports, I want to take a moment to reflect upon the state of our industry.

At the end of 2000, the combined equity market capitalization for all REITs was approximately $139 billion. At the end of 2004, the combined equity market capitalization had more than doubled to $305 billion. REITs now represent 15 percent to 20 percent of all U.S. institutional-quality real estate.

Shareholder returns during this period were also impressive. The NAREIT Composite Index was up 30.4 percent for the year and nearly 22 percent since December 2000 on a compound annual total return basis. No other stock market benchmark comes close to matching that performance.

The REIT industry today invests in all major property types and geographic regions in the U.S. and is in the early stages of international expansion.

REIT liquidity has improved significantly over the years due to the growth of the industry and consolidations, and today investors large and small can own high-quality real estate through the public markets.

While uncertainty about interest rates continues to impact stock prices and real estate values, I believe the industry is on more solid footing than ever before. REITs have performed well and gained significant credibility in the investment community. Moreover, REITs have been accepted as a core asset class providing portfolio diversification as well as dividends.

NAREIT continues to build on this acceptance and is reaching out to individual and institutional investors with the message that REIT stocks belong in every diversified portfolio. It is a message delivered in person, on Web sites, in dealings with the financial media, and through Portfolio magazine and other publications.

I am involved in that outreach, and in particular, the ongoing initiative to boost the presence of REITs in the nation’s 401(k) plans. The proportion of plans with a REIT option remains at about 12 percent, but we are making inroads.

With so many financial experts recommending a REIT allocation of at least 5 percent, we are committed to opening the doors of more defined contribution plans to such a choice. To accelerate the pace of REIT inclusion in 401(k) plans, industry leaders continue to meet with decision-makers at leading defined contribution plan providers, sponsors and consultants. We have made meaningful progress to date, and I am confident that we will continue to do so in the months ahead.

In addition, NAREIT is working to establish greater acceptance of REITs as part of institutional real estate allocations. Today, many pension plans, endowments and foundations routinely use REIT equities as part, or all, of their real estate allocation and we want to expand that universe.

Our industry experienced astounding growth over the past decade and demonstrated the ability to perform in both up and down economic cycles. Many REITs have earned investment grade status, and our increased liquidity and dividend policies have made us accessible to large and small investors alike.

I am pleased to have witnessed all of the positive changes within our industry over the past 11 years, and am excited about the many opportunities that lie ahead.

I look forward to seeing you at NAREIT’s annual Institutional Investor Forum in New York in June, yet another opportunity to demonstrate the attractiveness of REITs as an investment vehicle.

David E. Simon
NAREIT CHAIR
CEO, SIMON PROPERTY GROUP