In the midst of this liquidity, the real estate industry has emerged as a favorite investment focus for institutional investors. The Yale Endowment now has 25 percent of its capital invested in real assets, with the largest percentage of this being in real estate. During a dinner at the recently concluded World Economic Forum, the founder of one of the largest private equity firms told attendees that real estate offered the best, most consistent returns of all types of opportunities they consider.

An ever-increasing number of investors are realizing what those of us in the business have known for a long time—real estate is a fantastic vehicle through which to create long-term wealth.

Moreover, the previous perception was that real estate was a very risky asset class. This perception existed for two principal reasons. First, there was almost no transparency of information in our business. Second, transactions were highly leveraged, so the cash flow, after debt service, was very volatile.

As we all know, the emergence of today’s professionally managed public real estate companies has changed all of that. As a result, the risk premiums for our business have declined dramatically, which has moved cap rates for U.S. real estate more in line with those for other large international markets. Of course, this revaluation of U.S. real estate has dramatically improved the multiples for real estate stocks, which has been an enjoyable process for all of us.

The great news is that the fundamentals for our respective businesses are beginning 2006 with the greatest level of strength we have seen during the last five years. The outlook for strong core growth is excellent, which should further strengthen the reputation of our industry during the coming year.

As industry members, our responsibilities are to continue to enhance the strength of our businesses and management teams, and to further increase the transparency of information. Running our businesses in this manner will allow us to further elevate our status as a preferred investment choice in the global capital markets.

Another trend gaining momentum is the movement away from defined benefit pension plans to defined contribution plans. The rapid rise of real estate funds in the nations’ 401(k) plans will play an increasingly important role in retirement funding. It is essential that participants in these plans have access to real estate options to invest their hard-earned savings. Unfortunately, fewer than 20 percent of these plans offer a real estate option today. NAREIT’s team continues to work hard to increase this percentage. The more data 401(k) gatekeepers have, the more obvious the decision to add a real estate option becomes.

As we look to the future of our industry, public companies are increasingly being selected as partners for real estate investment by large corporations, pension funds and private equity funds. The talent, professionalism and creativity available among publicly traded real estate companies have become a powerful force in the industry.

As we continue to innovate, serve our customers, and build strong, deep management teams we further establish the public real estate industry as the dominant force in the real estate industry, and the logical way for the substantial pool of global liquidity to invest in real estate.

Thanks to all of you for the fantastic job you have done in taking us this far, the future looks even better.

R. Scot Sellers
NAREIT CHAIR
CHAIRMAN & CEO, Archstone-Smith