By David E. Simon

This issue of Portfolio magazine recognizes and celebrates the 45th anniversary of REITs. During the past 45 years our industry has experienced tremendous growth, generated exceptional long-term performance, gained acceptance by the investment community and financial press, and demonstrated that it belongs in every investor's diversified portfolio. To borrow an often-used slogan, "We've come a long way, baby."

Since its inception, the REIT industry has experienced remarkable growth, especially during the last decade. It has grown from a fledgling industry in the 1960s to a sector of nearly 200 publicly traded REITs with assets totaling more than $627 billion, with companies represented in all of S&P major indices.

Today's REITs own more than 24,000 properties nationwide—in all major property sectors—and the growth continues. Approximately 15 percent to 20 percent of investment-grade commercial real estate in the U.S. is currently owned by REITs. REITs operate commercial properties in nearly every metropolitan market in the U.S. and in numerous international locations.

Real estate stocks have proven that they are sound investments, outperforming most other major market benchmarks over the past three decades with significantly less volatility. Recent shareholder returns have been particularly impressive. The NAREIT Composite REIT Index increased 30.4 percent in 2004 and was up 11.8 percent through July 3l of this year, again outperforming all other stock market benchmarks.

The REIT industry is a leader in other ways as well. As I have discussed previously in this column, corporate governance is a priority for our industry, as evidenced by high ratings from Institutional Shareholder Services' Corporate Governance Quotient (CGQ) data.

Over the past 45 years REITs have gained significant credibility in the investment community. One of the key events in the transformation of REITs to mainstream investment option occurred in 2001, when Standard & Poor's added REITs to its major indices. Today there are nine REITs included in the S&P 500, 12 REITs in the S&P Mid Cap 400 and 16 REITs in the S&P Small Cap 600.

Dramatic improvements have been made in seeing that every 401(k) participant has the opportunity to invest in a real estate option. The Profit Sharing/401(k) Council of America reports that the number of plans offering a real estate option has tripled over the past four years, thanks to the recent actions of plan sponsors such as Barclays Global Investors.

The past 45 years have been an exciting period of growth and maturation for our industry, but it doesn't stop here. I look forward to the years ahead and the continued expansion of REITs in the U.S. and abroad.

It does not seem possible that a year has passed since I became NAREIT chair. My close involvement with this organization over the past 12 months has reinforced my view that NAREIT President and CEO Steve Wechsler and his team continue to do a terrific job of identifying and addressing the many issues facing our industry. I wish to extend my thanks also to the board of governors and the executive committee for their guidance and assistance throughout my term.

In closing, I must say that it has been a great honor to serve as NAREIT chair and that I look forward to continuing my involvement with this organization that is so vital to our industry.

David E. Simon
NAREIT CHAIR
CEO, SIMON PROPERTY GROUP