By R. Scot Sellers

The real estate business is all about building things. Through the efforts of NAREIT's member companies, neighborhoods are built, skylines are changed, shopping and entertainment venues are created, distribution facilities are put in place, and many other important structures are built. As I reflect on the progress we have made in the publicly traded real estate industry during the past 15 years, it strikes me that we have been building something far more important than physical structures—we have been building a reputation.

It takes a lifetime to build a great reputation, and only a few moments to tear one down. We all know what great reputations do in the corporate world. Great reputations allow companies to trade at higher multiples, give management teams the benefit of the doubt when pursuing new initiatives, confirm credibility in a competitive bidding situation, reduce the cost of capital and attract people who want to be part of a culture with an excellent reputation. Each of us is involved in trying to create this kind of fantastic reputation for our companies, and collectively we are in the process of building an outstanding reputation for our industry.

We just held a highly successful REITWeek, with roughly 1,800 attendees—the highest attendance ever—including a record number of investors. The equity market capitalization of our industry is close to $400 billion, and our average daily trading volume is nearly $2.5 billion. Midway through the year, the industry is outperforming the Standard & Poor's 500 Index for the seventh year in a row—a very impressive record. A record amount of capital is flowing into our industry, dividends are increasing, and companies are building outstanding operating platforms in every key asset class.

We have created a very liquid market, where capital flows freely between public and private platforms. The recent privatizations in our industry are a great thing for investors, as they confirm that management teams will do the right thing, when presented with an attractive offer to purchase the company. If a public company is not trading at "fair value" on Wall Street, private investors will step in to help rationalize the market. Each time a public real estate company has been purchased recently, we have seen the other publicly traded companies in that asset class increase significantly in price. This reflects a properly functioning, liquid market.

The reputation of our industry is expanding beyond the borders of the United States. A number of other countries have either adopted, or are working to adopt, the REIT model pioneered in the U.S. As our industry goes global, continuing to build upon our outstanding reputation becomes even more important. As we do this, we provide an effective road map for other countries to follow in order to inject liquidity, transparency, visibility and access to their respective real estate industries.

For all these reasons, corporate governance is a critically important component of what we all do. I am very pleased to report that the publicly traded real estate industry ranked second among all industries in corporate America according to Institutional Shareholder Services' Corporate Governance Quotient. Thanks to all of our member companies for doing an outstanding job of managing your businesses.

We should all be proud of the excellent reputation we are creating, and the fantastic performance we have produced. As we continue to work hard to enhance our reputation, our industry will get better and better.

R. Scot Sellers
NAREIT CHAIR
CHAIRMAN & CEO, ARCHSTONE-SMITH