An Investment Product for the Times: The Case for Creating a Real Estate Investment Trust that Fosters Sustainable Cities
Mahoney, Kevin P.
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The well-known axiom “location, location, location,” guides real estate investment decisions around the world for developers and owners alike. Yet, investors – particularly retail investors – have relatively limited input into where the primary vehicle for such investments, real estate investment trusts (REITs), invests their funds. REITs generally specialize in a property type (e.g., office or multifamily), and invest in any market whose supply and demand fundamentals suggest a certain minimum return on investment (ROI). While some REITs invest only in individual cities or regions, relatively low-‐risk markets, including New York and Washington, D.C., capture most investor attention. This paper will demonstrate that investor demand exists for real estate investment options that consider factors beyond ROI. Without necessarily sacrificing ROI, investors can and should enjoy access to REITs that invest in various cities across the country. Moreover, within these cities, REITs should invest in properties that promote sustainable communities characterized by walkability, mixed uses, and multiple modes of transit. Over the long term, such REITs will provide retail investors with the opportunity to both earn a competitive return on investment and help to produce sustainable communities. This paper will: 1. Analyze the current environment for real estate investing, highlighting trends that will impact the future; 2. Describe how real estate investment trusts (REIT) and socially responsible investment (SRI) can serve as models for better investment options; 3. Consider a new REIT that addresses retail investor demand for sustainable real estate projects.