1. REITs Real Estate Investment Trusts James Hurt Cincinnati Model Club April 2004 (from material provided by Herb Barnett, Director, NAIC Computer Group)

2. Definition of REIT Corporation or business trust Must pay out 90% of its net income to shareholders Exempt from Federal Taxes

3. REITs Business is to buy (and sell), manage, and maintain real estate for rent or lease May specialize in one kind of real estate or diversify with different kinds of property May be in one region of the country or in various parts of country

4. Categories of REITs Apartments office buildings industrial properties shopping malls outlet malls storage facilities

5. Investment Characteristics Moderate growth potential Income stocks –Dividend is a large portion of the Total Return Low correlation between REITs and the broader market High debt levels - 50 to 70% not uncommon

6. Kimco Realty Corp. Moderate Growth

7. Kimco Realty Corp. High Payout Ratio and High Yield

8. Investment Characteristics We are investing in the real estate property and in management capabilities of the REIT Self-managed REITs tend to provide better total return and liquidity with less risk

9. Potential Problems Sensitive to outside economic forces –Interest rate changes –Health of the economy –Demographic changes Sensitive to the Real Estate Cycle –Each segment has its own cyclical pattern

10. Slide produced by Herb Barnett, NAIC Computer Group Tight R.E. Market Rent Increases Increased Profits Over-building Excess Capacity Renter’s Market Pressure on Rents Reduced Profits Less Construction Reduced Capacity Demand Supply Real Estate Cycle

11. Data Entry using V. L. For Total Revenue (Sales) add Rental Income and Other Income Instead of EPS use Funds from Operations (FFO) per share For the Tax Rate enter 0. Do not use the V. L. Quarterly Data.

12. Value Line Data you should use

13. FFO per share Rental Income + Other Income 0% Tax Rate

14. OPS Data For Revenues OPS uses Interest Income + Non-Interest Income. OPS uses EPS instead of FFO for Per Share Data. OPS does provide Quarterly Data (Revenues and EPS) for PERT.

15. Next Month Will discuss –More about Investment Concerns –Quarterly Data –FFO vs. EPS