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The Economist: The REIT Stuff

According to The Economist: THEY did not know it, but when a group of merchants raised money for the Boston Pier in 1772, they were early pioneers of a vehicle known today as a REIT (real-estate investment trust).

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The REIT-creation frenzy, however, may already have passed its zenith. In June the Internal Revenue Service, America’s tax bureau, issued regulations banning companies outside the property industry from abusing the tax-free REIT structure. So far this year only one REIT has listed its shares, compared with seven last year and 19 in 2013. Another looming risk is an interest-rate rise. When the Federal Reserve hinted at tighter monetary policy in 2013, REITs prices dropped by 13.5% in five weeks. And the rental market is coming to a peak as supply picks up and demand weakens. “The days of 6% rent growth in lots of markets are probably over,” says Mike Kirby, the chairman and co-founder of Green Street Advisors, a property-advisory firm.

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To view the full article from The Economist, click here.