REIT woes. (Investments & Finance).

Downtown developer Robert Maguire is picking a curious time to go public as a REIT.

A survey by Bloomberg News finds that earnings at real estate investment trusts fell 2.6 percent in the third quarter, the largest decline in at least nine years.

The decline follows a 1 percent drop in the second quarter, the first slip in profits since at least 1993, considered the beginning of the modern REIT era when more than 150 real estate companies started to go public. Analysts expect earnings to decline again next year, pushing a recovery into 2004. Salomon Smith Barney predicts a 0.1 percent drop in earnings in 2003.

Office REITs may be among those that will take the longest to recover, while apartment REITS may be among those to rebound first, because leases typically last 6 months to a year, said Raymond Mathis, a REIF analyst at Standard & Poor's.

Even with the drop in funds from operations, REIT shares have bested the broader market this year as dividend yields averaging about 7 percent attracted investors (perhaps explaining Maguire's decision to propose an $890 million initial public offering). The Morgan Stanley REIT Index has climbed almost 1 percent year to date, compared with a 21 percent decline for the Standard & Poor's 500 Index.

Some of the largest real estate companies in the U.S. are REITs. About 177 REITs are publicly traded, with a stock market value of $163.5 billion, according to the National Association of Real Estate Investment Trusts.

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