Commercial Real Estate Ownership by Public Companies Continued to Grow for Fourth Year in Row, According to Prudential Study.

Business and Real Estate Editors

PARSIPPANY, N.J.--(BUSINESS WIRE)--Aug. 16, 2000

The penetration of commercial real estate ownership by public companies continued to grow across nearly every major property type in 1999, according to a study released by Prudential Real Estate Investors (PREI). The fourth annual study examines public ownership growth from 1995-1999 for six property types -- office buildings, hotels, warehouses, regional malls, non-mall retail centers, and apartments.

Despite the second year in a row of unfavorable conditions in the REIT market, net buying continued in all property types except apartments, albeit at a slower pace than in years past.

                PUBLIC MARKET PENETRATION: 1998 - 1999

                                 1998        1999       Change

Non-Mall Retail                  12.9%       13.7%       0.8%
Hotels                           18.4%       18.9%       0.5%
Warehouses                        6.9%        7.1%       0.2%
Mall Retail                      32.3%       32.4%       0.1%
Offices                           7.3%        7.4%       0.1%
Apartments                        8.3%        7.9%      -0.4%

"While the pace slowed, the data shows that the long term trend of increasing public ownership in real estate is very much alive," said Youguo Liang, managing director and head of Investment Research at PREI. "The fact that penetration continued to grow during such a difficult period in the public capital markets demonstrates remarkable resilience."

Liang said the study examines the number of properties involved in sales, purchases and mergers, which illustrates the slowing, but continuing penetration by REITS in 1999.

NUMBER OF PROPERTIES INVOLVED IN TRANSACTIONS, 1998 AND 1999

                    Sales             Purchases         Mergers
                    1998     1999     1998     1999     1998     1999

Offices               36      226      758      184       13      146
Hotels                37       31      677      103       93       59
Apartments            99      243      608      160      615      617
Warehouses            24       60      253      128        0      290
Non-Mall Retail       51      136      910      455        7       18
Retail Centers        19       18      115       36        8        0

Sales activity increased by a factor of 2.7. Office and apartment REITs in particular drastically accelerated their dispositions. Property purchases dropped by 68%, and declines were large in relative terms for all six property types. Properties changing hands among REITs due to mergers increased by over 50%. Merger activity among office and industrial REITs surged, and remained strong for the second consecutive year among apartment REITs.

"While the numbers between 1998 and 1999 show significant differences, the bias toward purchases still existed, with about 1.5 purchases per sale last year," said Liang.

Liang observed that REIT stock prices have shown strong appreciation during the first half of 2000, with prices now at levels close to underlying net asset values. He said if these improving prices can be sustained it may bolster growth rates in acquisitions by year-end.

The study, "Tracking Public market Commercial Real Estate penetration from 1995 to 1998," is available in its entirety on Prudential's website, www.prudential.com, as are dozens of other studies and research papers prepared by PREI's Investment Research team.

PREI provides global real estate money management services to clients in the United States, Europe and Asia. It manages more that $14.6 billion in assets on behalf of 325 institutional clients as of March 31, 2000.

The Prudential Insurance Company of America, with more than $366 billion in assets under management as of December 31, 1999, is one of the largest life insurance companies in the United States and is among the largest financial institutions in the world. Prudential serves more than 17 million individual and institutional customers in over 30 foreign countries, offering a variety of products and services, including life insurance, automobile and homeowner insurance, securities brokerage and financial planning, mutual funds and annuities, asset management, retirement services, retail banking, real estate and relocation services.