It’s taken over a year but the University of Pennsylvania Libraries have used their masterful technological skills to bring into the digital age the raw material behind the book Watch That Rat Hole…and Witness the REIT Revolution.
All 475 issues of Realty Trust Review/Realty Stock Review – published from 1970 and 1990 totaling nearly 4,000 pages of securities analysis, factual research and periodic stock pricing – are now available on-line. Better yet, each issue of RTR/RSR is searchable so scholars, researchers and stock mavens can dive into the material for insights into the events shaping the future as real estate sought a niche in the pantheon of assets available to public investors. RTR/RSR was the only investment advisory service dedicated to REITs during their crucial formative years.
Those formative years in the 1970s and 1980s saw extreme stock market volatility as investors coped with epochal economic events rocking share prices of the fledgling real estate investment trusts, or REITs. The new digitized edition of RTR/RSR gives readers a window onto these events:
• A floating dollar: In August 1971 the U.S. abandoned the gold standard to let the dollar’s price float in value in currency markets, just as Wall Street discovered the high yield potential that mortgage REITs could deliver to investors by making construction and development loans. A wave of over 130 new REITs followed into the market, some tripling in price.
• OPEC oil crash: In October 1973 the Organization of Petroleum Exporting Countries (OPEC) embargoed oil shipments to the U.S. and other supporters of Israel during the Yom Kippur war, effectively quadrupling oil’s price to about $12 a barrel and sending the U.S. and other industrialized nations into an economic tailspin. The crash killed most mortgage REITs as real estate construction stalled and REIT stocks fell to unprecedented lows in December 1974. Only three equity REITs survive from those years: Pennsylvania REIT, founded 1961; Washington REIT, founded 1961, and Federal Realty Investments, founded 1962.
• Workouts and recovery: By the late 1970s non-earning loans topped 75% of assets, forcing mortgage REITs to try to resell foreclosed properties to repay $13 billion debt ($62 billion in current dollars), including $8.5 billion in bank debt that threatened several banks. Ultimately 10% of REITs sought bankruptcy protection and no mortgage REIT survived that onslaught. Their demise opened the way for hardy equity REITs owning the best properties to begin earnings and dividend growth lasting over a decade and establishing equity REITs as the clear survivors for investor favor.
• Raging inflation: By the late 1970s inflation ravaged the U.S. economy, bringing soaring prices and interest rates. Ten-year Treasury bond yields rose to a peak 15.8% by September 1981, while annualized inflation peaked at 8.8% in September 1982. During this frenzied climate, investors began discovering the long-term inflation protection inherent in the emerging equity REITs and priced REIT dividend yields at about a 30% discount 10-year Treasuries. The REIT Revolution had begun and convinced Investors to deem equity REITs a better inflation hedge than government securities.
• New REITs emerge: By 1984 Wall Street underwriters felt they could comfortably offer shares in new REITs to the public. Following a few successful smaller offerings, Weingarten Realty Investors, which survives today, completed a well-received public offering in August 1985. This was followed in September 1985 by the $1.3 billion offering by Rockefeller Center Properties (RCP). While RCP bestowed the cachet of the Rockefeller name on REITs, the enterprise ultimately failed because of its complex financial structure involving zero-coupon bonds.
• Recession and Revolution completed: In the late 1980s a nasty downturn, caused in part by an early 1980s flood of highly leveraged real estate partnership sales, struck and brought more distress to real estate. As in the mid-1980s, troubled real estate companies found they could go public as REITs and Kimco Realty Corp., a shopping center company, completed a landmark public offering in November 1991. Since then nearly 200 real estate companies have followed Kimco’s path and today the REIT Revolution has produced $1 trillion of REIT securities available to public investors.
1. Accessing the database: To see how these events affected individual REITs, the RTR/RSR database may be accessed by typing https://archive.org/details/upennrealtytrustreviewandrealtystockreview?&sort=date into an internet browser and saving this entry code into your Favorites, which will appear as “User Account.” Upon accessing the database, a page from each issue will appear arrayed five across; click the page of a desired issue to access the issue, denoted as a “Book.” Pages turn with a simple mouse click.
2. Search within each Book: Click on the magnifying glass icon in the upper right corner and type the desired item in the search bar and click the magnifying glass icon at right of this bar. This digitization does not permit searches across multiple Books, however.
3. Search across texts in the Internet Archive: This method is a pain but for now the following search returns every issue of RTR/RSR which contains the word “philadelphia”
This search returns every issue of RTR/RSR which contains the word “antitrust”:
You see the pattern (query=SEARCHTERM). It’s clumsy though and Internet Archive is relatively unconcerned with coming up with an easier system, so in the meantime you can use the template above.
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