REIT Purchases on Pace for a Record Year

Real estate investment trusts bought a record $11.3 billion of commercial properties amid a strong economy in the third quarter, up from $6.6 billion a year earlier, according to a study released Wednesday.

REITs are on pace to scoop up $35 billion of real estate this year, topping the $20-billion mark set in 1996, according to the joint study by Los Angeles-based broker CB Commercial Real Estate Services Inc. and money manager Alliance Capital Management.

The buying spree comes as a strong economy boosts rent and occupancy rates on all types of properties, from office buildings to apartment complexes to shopping malls.

Through the first nine months of 1997, REITs raised $28 billion through the sale of stocks and bonds, with much of the proceeds used for acquisitions.

REITs, companies that own and manage commercial real estate, are exempt from corporate income taxes if, among other things, they distribute at least 95% of their net income to shareholders as a dividend.

The heaviest REIT-buying activity was in Houston, where REITs bought $888 million of real estate during the quarter. Billionaire investor Richard Rainwater’s Crescent Real Estate Equities Inc. accounted for most of the buying, spending more than $300 million to acquire the Houston Center office complex and the US Home Building complex.

After Houston, REITs targeted New York, investing $755 million in the Big Apple. Los Angeles was third at $688 million, followed by Chicago at $508 million and Philadelphia at $357 million.

The most acquisitive REIT was Indianapolis-based mall developer Simon DeBartolo Group Inc., which bought $1.43 billion of real estate.

Following Simon was Crescent, at $772 million; Starwood Lodging Trust, at $702 million; Highwoods Properties Inc., at $653 million; and Boston Properties Inc., at $552 million.

Office buildings were the most popular property type, with REITs investing $3.7 billion in this part of the market.