Where is your REIT’s income coming from?

The pressure to produce higher earnings has driven many real estate investment trusts to diversify their portfolios. Instead of deriving all their income from operating real estate, REITs are now generating more income from other sources, and this trend worries some analysts.

For example, some REITs report profits from building sales, while others include parking-garage fees.

Experts warn that these other sources of income can misrepresent the funds’ actual performances and may be more sensitive to an economic slowdown.

According to Banc of America Securities’ research as reported in The Wall Street Journal, this "other income" represents a significant factor in some REITs:

• Sixteen percent of retail REITs in 2000, up from 12% in 1999
• Twelve percent of industrial REITs in 2000, up from 9% in 1999

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REALTORS®, visit www.tar.org.