CHICAGO-The mood, for a real estate conference, was upbeat atthe National Association of Real Estate Investment Trusts’ REITWeek2010 conference at the Hilton Chicago, an event that started thismorning and will last until Friday. While the general real estatemarket is still down, trusts have raised enough capital to be oneof the few entities around with enough strength to take advantage.With returns generally running at almost 14% since the REITindustry started in 1992, “we’ve really proven that the REIT way isthe right way,” said Deb Cafaro, chair of both NAREIT and VentasInc.

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Even Sam Zell, the popular chairman of many groups including theEquity Residential Trust, was spouting positive about theindustry’s success at weathering the recession storm. “When westarted, the industry was a $6 billion industry. Now it’s at $500billion. That can be attributed to its consistency. Liquidityequals value,” he said during his luncheon presentation.

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However, Zell did point out that the trusts do have theirpitfalls. Investors should remember that a REIT primarily is astock, which brings all the volatility of the trading markets.Also, he said there’s too many REITs today. “If you had 30 to 40strong companies, they could operate effectively. But when you have200, it’s just too much, these small companies just cause noise anddisruption. Every entrepreneur wants their own cart.”

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At the conference, about 100 of the trusts are presenting theircurrent market status and ideas to hundreds of plan sponsors,investment managers, advisors and consultants, as well as variousfunds and analysts.

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One lively debate was about when employment will rise again,during the conference kickoff presentation paneled by twoacademics: Morris Davis, assistant professor, real estate and urbanland economics with the Wisconsin School of Business, and RobertGordon, the Stanley G. Harris professor of the social sciences andprofessor of economics at Northwestern University.

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Davis said he believes, with positive indicators such assustained GDP growth and an expected drop in inventory, that theunemployment rate should fall from about 10% to 6.5% by 2013.Gordon says this is much too optimistic. “I think we’ll only see itdrop to about 8% in three years, it will not likely go beyond a 1%per year drop,” Gordon said.

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Both agreed that there is a definite increase in lending, dealsgetting done and company productivity. However, the unemploymenthas created an uncertainty that has kept many businesses from truegrowth.

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Zell agreed. “How can businesses make decisions with all thisuncertainty?” he said. A known opponent of the currentadministration, Zell said if he had been elected president, hewould have made only one thing his focus. “We should just call atime-out right now, and say that we won’t work on anything else butcreating jobs. We’ve wasted nine months screwing around, withthings such as health care and other distractions.”

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He said he’s not worried about other instability signals in themarket, but said that companies today should have changed theirmodel to be more prepared for catastrophe. “You need about 50%higher liquidity in your business, to create a bigger margin ofsafety for your investors,” he said.

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