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Real Estate's Remarkable Revolution

1960
Real estate investment trusts created by Congress to let individuals invest in real estate. REITs must distribute at least 95% of taxable income to shareholders but avoid corporate taxes. REITs begin to flourish.

Mid-1970s
REIT market collapses because of high interest rates, excess leverage, and short-term financing. Many REITs go bust. REIT assets slump from $20 billion in 1974 to $7 billion in 1979.

1980s
New breed of REIT emerges, with lower leverage, stronger financing, and, after 1986, liberalized powers, thanks to tax changes. Rockefeller Center syndicated as a REIT.

1990
Commercial real estate market, hurt by thrift fiasco, collapses. Many empires like the Reichmanns' Olympia & York, go bankrupt. Rockefeller Center files for Chapter 11.

1991-1992
Banks and other traditional sources cut off lending. Real estate execs seek alternate financing. ''Opportunity'' or ''vulture'' funds raise cash to buy distressed properties. Mall developer Kimco raises $135 million in biggest REIT IPO, reviving interest in the REIT vehicles. Taubman Centers, the holder of shopping centers and malls, pioneers ''umbrella'' REIT structure, called the UPREIT, which allows private owners to go public without having to pay capital-gains tax. Nomura's Penner begins first commercial mortgage-backed issues.

1993-1995
Real estate market recovers. In 1993, a record 50 firms, including many old-line families bring REITs public. REITs proliferate, move rapidly into malls and apartments. Billions of dollars of capital flow into industry.

1996
Consolidation phase begins. Simon Property Group and DeBartolo Realty merge, forming biggest REIT with $3.1 billion market cap. Zell launches first hostile REIT bid. REIT stocks soar.

1997
REIT equity market hits $120 billion market cap. Commercial mortgage-backed market reaches $144 billion. Mortimer Zuckerman's Boston Properties launches $900 million IPO, the biggest REIT ever. First prison REIT, CCA Prison Realty Trust, goes public. REITs start buying up many old-line private real estate companies: Vornado Realty Trust acquires Mendik & Co.'s Manhattan office portfolio, while Cali Realty Corp. purchases the Mack family's office properties.

DATA: BUSINESS WEEK


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Updated Sept. 11, 1997 by bwwebmaster
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