By Art Coppola

January is a time for looking back at the past year and taking a moment to consider our priorities for the year ahead. Last year was a momentous time for our industry, as REITs outperformed the broader market for the seventh straight year. It also was, as a feature in our last issue aptly named it, "the year of the deal."

Last year produced four times the number of mergers we saw in 2005, and six times the number in 2004. With nearly $120 billion of transactions completed or announced, 2006 was the biggest year for deals in our history. Many were large deals, including Blackstone's $36 billion acquisition of Equity Office Properties Trust.

As it did in many industries, private equity played a major role in these REIT deals, to the extent that some observers began to question our future as an industry of publicly held companies. I don't think that concern is warranted. Investors seek value, and in 2006, they found value in REITs. Those investors included private capital firms and their clients, REITs that acquired other REITs (which accounted for much of the transaction volume in the year) as well as institutions and individuals that bought REIT securities, including the stock of IPOs like Douglas Emmett.

As long as investors continue to find value in REITs, they will continue to invest. That is what the public markets are designed to enable, and 2006 was a demonstration of the market process working.

It also is worth noting that the assets flowing into private hands today may not stay there for the long term. Private capital firms have a track record of reselling assets over time—often through the public markets. That, too, is part of the process working.

The discussion of the M&A trend was prominent at the NAREIT Annual Convention in San Francisco in November. Equally important, however, were broader discussions of the market forces driving capital to the industry, and of the new types of joint-venture and fund-based capital sources to which REITs are increasingly turning. The continuing globalization of our industry also was the topic of important discussions among REIT CEOs, institutional investors, investment bankers and industry representatives from around the world.

All of these trends will be important to watch in 2007. Our most important task, though, will be to focus on continuing to create the value investors are seeking. That is our key priority for 2007 and all the years beyond.

Art Coppola
NAREIT CHAIR
CHAIRMAN & CEO, THE MACERICH COMPANY