Internet Information About Real Estate Stocks & Mutual Funds:

Implications for Research, Investments & Career Enhancement

Abstract

Information about real estate stocks and mutual funds abounds on the Internet. However, major financial Web sites do not organize stocks related to real estate in a very consistent or even logical manner. Limiting real estate stocks to only REITs, or simply commingling REITs with other groups (e.g. developers, brokerage firms, real estate operating companies or REOCs, etc.), negates the unique dynamics and opportunities provided among different segments of real estate securities. It also misrepresents performance, ignores differences, and hides common relationships among different real estate property groups and related industries.

This study proposes a method for organizing and classifying real estate stocks to improve the understanding and availability of information pertaining to most publicly traded real estate securities. It is incorporated in an actual working Web site called RealtyStocks at www.realtystocks.com. In so doing, the author has assembled over 300 stocks into nearly two-dozen property groups and industries along with relevant topics and data from multiple Internet sources. This allows ready access to stock prices, ratings, indicators, performance, news, reports, books, publications, related associations and more for each stock group.

As the capabilities of the Internet expand, the absence of a defined or recognized set of real estate stock segments may limit opportunities and interest involving real estate stocks. Also, the absence of a central source or dedicated niche portals for commercial real estate and realty stocks that draws upon multiple disciplines and sources may limit public awareness and interactivity among companies and individuals with common real estate interests.

Still, there are tremendous resources available on the Internet, and many more are expected with improved and different capabilities. The implications real estate stock resources via the Internet have upon such topics as research, investments and career enhancement are numerous. They are briefly examined in this paper.

I. INTRODUCTION

The Internet contains an enormous amount of information, and it is constantly growing and evolving. Major portals such as Yahoo, Excite, Infoseek and other similar services provide search engines and listings that help individuals navigate the Web and other Internet resources. They also cover major topics such as sports, business, computers, books, hobbies, shopping, news and weather, to name a few. However, these portals do not cover certain niche areas very well. There is simply too much information to organize listings of all topics. Further, it is not feasible for these portals to develop a great deal of specialized content. Consequently, the major portals usually establish exclusive relationships with content providers that provide in depth information or products on specialized areas. In turn, these specialized content providers are often expanding to become niche portals by offering related topics and services, also frequently providing listings on an exclusive basis.

The problem these exclusive relationships pose, with either a major or niche portal, is that it may be difficult to find what you want, and there may be much better coverage or prices for the topics or products in which you are interested from another provider. Shopping agents help resolve this problem by finding the best prices for certain products. However, it can be difficult to find the best information or services about certain specialized topics, such as commercial real estate and realty stocks.

Although there are many Web sites with specialized real estate content, the major portals may have sold the rights for a certain topic to be listed, such as apartment locators, residential mortgages, house listings, commercial listings, etc. Finding a site that covers all the sites for residential mortgages or commercial listings, for example, may be more difficult. The main objective of the portals is to keep you on their site as long as possible and expose you to as much advertising, products, or fee based services as possible.

Real estate, especially commercial real estate, is a fairly difficult field to on which to obtain information because it involves multiple disciplines, differs by location and requires numerous property types to serve various needs. If the real estate information you seek is provided by companies or associations in a unique disciple (such as law, accounting, engineering and planning), it may be most difficult to obtain the particular information you need. Likewise, finding information by location, such as an office market study in Cincinnati, may be a daunting task by using search engines from large portals because there is too much clutter for meaningful results. If you need information from general vendors (including books publishers, news agencies, and demographic companies) or even associations, you may achieve better results by using a portal with categories, such as Yahoo. It is doubtful. however, that your search will be easy or even successful.

As it relates to real estate stocks, and the focus of this paper, there is relative difficulty in finding pertinent stocks and information. One reason is because most financial sites do not organize nor understand real estate stocks very well. For instance, on most financial sites the real estate category contains over 100 companies. On a few financial sites there is attempt to distinguish real estate stocks among REITs, developers and operating companies, but it is not accomplished very well or very accurately. Furthermore, at the present time, no major financial site accurately breaks down REITs by property types by any recognized or logical method.

The following briefly discusses the scope of real estate stocks and mutual funds that invest in these stocks. Subsequent discussion briefly explores the power of Internet upon real estate stocks and funds, and the implications this will have upon research, investments and career enhancement.

II. Real Estate Stocks & Mutual Funds

What are real estate stocks and real estate mutual funds? Most references to public real estate securities consists of REITs. This study proposes a broader perspective of such securities and recognizes a specific area of mutual funds as described below.

Going Beyond REITs

Securitization of the mid and late 1990s has not only created over 100 new REITs, it has also created more publicly traded non-REITs, including real estate operating companies (REOCs), property brokerage and service firms, developers and others. It is believed that financial service Web sites have not properly digested this proliferation of new companies as previously mentioned.

Although the association that covers REITs, the National Association of Real Estate Investment Trusts or NAREIT, provides sub-groups of REITs established decades ago and periodically updated, no major provider of financial information has adopted NAREITs classification of REITs. Of equal importance, NAREIT does not cover non-REIT stocks such as real estate operating companies (REOCs), or companies in other real estate and housing industries. This author believes it is important to recognize the diversity of stocks involved in real estate beyond simply REITs, or just one grouping for all real estate stocks. He has therefore proposed a classification of real estate stocks described below.

Real Estate Stocks

Within this paper, real estate stocks (realty stocks) consist of not only REITs and real estate operating companies (REOCs), but also housing and other realty companies (Realty Co’s.). These Realty Co’s. (numbering about 100) include stocks in such other industries as property brokerage and services, development, construction and engineering, home building, manufactured housing, timberland and timeshares / resorts. In addition, because of the large number of REITs (approximately 200), and the unique character of certain property groups, REITs are best viewed by property types besides the equity and debt sectors. (Since there are few truly hybrid companies today, those that exist are classified as either debt or equity.) Further, there are numerous related industries to real estate stocks such as operators (involved with hotels, health care, restaurants and retail), lending companies, contract services, building materials and leisure properties. Since the objectives of such companies are usually ancillary to real estate, despite some being real estate rich, they are not considered to be real estate stocks within this study. Nevertheless, the relationships among the stocks owning real estate (REITs) and those related to real estate may influence one another and should not be ignored.

In order to determine the respective group for each of some 300 stocks contained in RealtyStocks. the activities and holdings of each stock are reviewed and certain criteria are established. Stocks that are inactive or sell under $3 per share are currently excluded from classification; however, they are still followed separately in case they eventually qualify for inclusion. (For a list of REIT property groups, realty and housing companies and related realty industries, please see Exhibit 1.)

Real Estate Mutual Funds (REMFs)

The strong performance of REITs in the early and late 1990’s spawned a large number of real estate mutual funds (REMFs). The number of REMFs began with a few in the early 1990’s and has grown to over 80 in approximately five years. There are usually two or three mirrored REMFs offered by a fund family to reflect different fee structures, such as front and back loads. Therefore, the actually number of unique REMFs number approximately 40. (For a list of most of these please see Exhibit 2.)

REMFs primarily invest in REITs, and many even require a minimum investment of REITs of 50% to over 65%. The average percentage of REITs for REMFs, however, is probably around 90 perecent, give or take a few percent. (For a list of major stock holdings by mutual funds please see Exhibit 3.)

III. THE CURRENT & CHANGING INTERNET

How is the Internet presently being used? The 10 most popular features of the Internet, by percentage of households, are to send email (88.4%), browse the Web (84.5%), use search-engine sites (76.9%), visit company / product sites (51.1%), research products (46.6%), look up weather info. (46.1%), visit reference sites (39.9%), read news publications (33.3%), view stock quotes (27.4%) and make purchases (26.1%). Features near the bottom of the 25 feature list are to receive financial advice (9%), do financial transactions (9.4%) and visit financial sites (12.8%). As it relates to this paper, the financial features just mentioned, although not the most popular ones with a usage of approximately 10% of households, still represents a significant number. And, the 27% usage for viewing stocks quotes is strong. Therefore, the general topics discussed in this paper are of interest to many Internet users.

Undoubtedly, the popularity of the Internet features previously discussed will vary and there will be new features in the future. What is around the corner that will impact the Internet? Some of the most anticipated developments to the Internet is greater bandwidth, or broadband service, and much more affordable wireless communications.

A faster Internet, for both sending and receiving, will enable greater multimedia capabilities, especially streaming video along with audio. With regards to real estate, it will make virtual real estate tours more viable for people selling, buying and leasing all types of real estate. It can allow a homebuilder, architect or decorator to have a customer take a 3D tour of their home and make changes before it is built or finished. Any one of numerous home repair projects will be as accessible as a short video clip with relevant links and information. Broadband will also allow deliveries of larger files making it more feasible to download larger software programs, music, aerial photographs and even entire books, magazines or directories. Publications will be able to be quickly transferred to palm computers, like personal display assistants (PDAs) or book readers, as easy as contact lists and to do lists are today. These mobile and handheld devices are expected to provide greater access to the Internet through wireless communications, or from information downloaded from the Internet.

The implications of improved Internet technologies upon different facets of real estate are far reaching. Real estate professionals may be able to make more critical decisions at their office instead of on-site by just looking at the property and related material online. Investments can be made even more frequently out of the office. A PDA can alert an investor of fast breaking news, changes in analyst recommendations, and a stock reaching a certain price level. Access can be almost anywhere with wireless communications; from an auto to a restroom. Collaboration among experts with different skills may become easier online than in meetings and may increase new solutions. Learning online rather than in the classroom also has numerous implications, not only with formal education programs, but also for licensing and certification of real estate professionals and trades. (Please see Career Enhancement, Section VI.)

Despite the convenience and better decision making capabilities the future offers via the Internet and other related technologies, there will also be issues to resolve. Spam mail is a current nuisance online, but how much more inconvenient will it become if you are beeped every minute in your car for an ad or solicitation. This issue of receiving only what you want involves the concept of permission marketing. Its four rules are that permission must be granted – not presumed, permission is selfish – it must be something you want, permission can be revoked as easily as it’s granted, and permission cannot be transferred. This entire concept of receiving what you want, when you want it, and nothing else but that, and the increasing use of PDAs, may also affect banner advertising and alter the Web site business models applicable today.

IV. Research

This section explores how Internet information suggests better ways to use information within an improved organization of real estate stocks and funds than was previously possible. This reorganization, required because of the proliferation of new realty stocks and REMFs within the last few years, has numerous implications regarding the analysis, measurement and performance of the real estate industry, both past and future.

There are several basic types of research presented in this study and accessible to varying degrees on the Internet. They include: the academic study of real estate (especially publicly traded real estate securities), the broad investment analysis of the real estate stocks often divided into certain groups (such as REITs by equity, mortgage and hybrid sectors or property types, other real estate industries, indices and REMFs), individual stocks or funds, macro and micro economics, property markets, specific property types, and specific real estate services and subjects. These types of research are useful to academics, students, stock analysts, mutual fund managers, institutional investors, individual investors, real estate professionals and trades (appraisers, brokers, lawyers, managers, etc.), and others involved directly or indirectly with real estate.

Academic Research

There have been 55 articles contained in the Journal of Real Estate between 1990 and 1999 about REITs; however, no articles were found covering non-REIT stocks such as home building, construction, development or brokerage. Therefore, numerous opportunities exist for academics to explore other real estate stock segments, or to view REITs in different and possibly more appropriate property groupings. Free data for academic research is available from the Internet, especially for historical price data. Many other variables are not in appropriate formats for academic analysis directly from the Internet; however, this is expected to improve. Specialized services can usually deliver almost any pertinent information via email or through downloads on a secure server.

Industry / Group Research

The characteristics and performance of real estate stocks differ by property types and industries. If the real estate market is viewed in general, it is difficult to understand realty stocks and identify trends among industries / groups. It is even more difficult to select individual opportunities from approximately 300 issues that RealtyStocks identifies as real estate stocks. This group is considered to be the universe of publicly traded real estate stocks with reasonable liquidity.

Within RealtyStocks. separate monthly performances for each segment are monitored, as are the major positions of real estate mutual funds or REMFs. (See Exhibit 3.) A free monthly email newsletter is available that summarizes the most volatile stocks and the performance of real estate stocks by groups and REMFs overall. (See Exhibit 4.)

Individual Stock and Fund Research

There is a great deal of individual stock and fund research available. Please see Investments, Section V, for more information.

Macro — and Micro – Economics

One of the best regional economic sites is the Dismal Scientist (www.dismal.com). Its parent, Regional Forecast Associates (RFA), also provides information by metro area. This information can be paid for in advance and downloaded via the Internet. Other companies also provide regional economic information which is expected to be more readily available via the Net.

Property Markets (Metro & Submarkets)

Most major brokerage firms provide information about the metro markets and major property types. There are also other firms that provide property market reports on a regular basis. A site that summarizes most of the companies that provide such reports by Metro area and property type, along with general, demographic, and economic, data, is RealtyResearch (www.realtyresearch.com). (See Exhibit 5.) This summary of property market reports is available only to InRealty members for a nominal annual fee.

Specific Property Types

Two of the best sites to obtain information about specific properties are PikeNet and RealtySources (www.realtysources.com). In addition, if your interest is in books about certain property types, a well organized site is RealtyBooks ( www.inrealty.com/books/c&i.html ).

V. INVESTMENTS

For Securities

Information for investors available from the Internet is available to both individuals and institutional people including analysts, fund managers, investment officers, advisors and consultants, and others. It is available both for free and also for a fee. The information advantage many institutions may have obtained by being able to access expensive proprietary services is dwindling. Certain fee information is free, and individual investors can access much information by reasonable rates per stock or by reasonably priced information services instead of expensive subscription services. This may allow individuals to perform as well, or better than, institutions.

Specific stock data available for free on the Internet contains the following: company overviews, news, SEC registrations, financial statements, balance sheets, comparison ratios, insider trading, ratings, changes in ratings, splits, earnings forecasts and growth, annual reports, access to the company web site, message boards, basic stock data (such as dividends, yields, 52 week high and low, average volume, P/E) and more. Such fundamental information is available on many financial sites. However, a member services that selects the best sources of this information and makes it readily available for a reasonable fee is RealtyStocks. (See Exhibit 6.)

Numerous charts are also available for free, or at reasonable fees, to enable technical analysis of individual stocks. This enables the identification of resistance levels and the use of such techniques as stochastics, moving averages, candlesticks, bollinger bands, etc. (See Exhibit 7.)

Still, to obtain such specialized information, proprietary and more expensive services are required for fees that may exclude many individual investors. Specialized information on REITs, presently available only for a fee, includes Funds From Operation (FFO), Net Asset Values (NAVs), specific properties (owned, recently purchased and sold), officer data (salaries, options, shares owned and qualifications), public debt (corporate, convertible and other bond issues), specialized charting and technical features, special articles, etc. For a reasonable fee, an investor can also be notified of changes in analysts’ ratings and the latest news for specified companies and industries via email.

However, as the services supplying such specialized information become more technically advanced, information may be available in smaller pieces, making it accessible to even the small investor. An example is the Multex service that allows reports from over 200 brokerage firms, S&P and SNL to be purchased for only a few dollars a piece, now available on RealtyStocks. (See Exhibit 8.)

An opportunity that may soon arise on the Internet for small investors interested in real estate stocks is the ability to directly purchase stock from a public company online. This may initially occur through direct purchase plans (DPPs), or if you already own the stock, through dividend reinvestment plans or DRIPs. Eventually, secondary offerings and initial public offerings (IPOs) may also be more accessible directly from a company. With the small commissions available with online brokerage firms, it may not be as compelling for individuals to purchase stock in this manner. But regulations and incentives could be made to make online stock purchases directly from a company more practical and viable in the future. This opportunity may be increasingly applicable to registered advisors and qualified institutions.

For Properties

There are many sites available to find commercial property listings via the Internet. One of the largest sites is LoopNet (www.loopnet.com), mostly covering non-institutional quality properties, both for sale and lease. Comps (www.comps.com) recently acquired RealBid which provides more institutional quality assets for purchase. Such sites have raised speculation that the Net may allow buyers and sellers to conduct transactions without a broker. Major brokerage firms are aware of the need to be visible on the Internet and most brokerage firms have property listings accessible via Web sites. Many brokerage firms also provide in-house research that add value to existing and potential clients, also frequently available, at least in part, on the Web.

There are also sites for auctions, and larger companies, including REITs, that occasionally list properties they want to sell. In addition, such companies may also include the criteria required for properties they are seeking to purchase on their Web site. A listing of contact data for all publicly traded companies is available through RealtyStocks. (See Exhibit 9 for an example.) This type of information makes it easier for companies to deal directly with one another, and may create greater pressure upon commercial brokerage rates.

If you or a client is looking for office or industrial property to lease, the Realty Information Group (www.rigx.com ) has a product called CoStar that has comprehensive information on selected major cities. This information is expected to be more accessible via the Internet. Instead of multiple firms compiling labor extensive information, the CoStar product eliminates this duplication of effort and may save firms certain research costs. However, some firms no longer have a competitive research and greater competition may result. This could lead to more efficient markets.

www.inrealty.com/pt/apart.html .) Apartment locator services, with the use of 360 degree photos and detailed information about complexes, make it easy for people to narrow or even make their selection, especially those people from out of town. Finding an apartment can therefore be easier and may produce a better place at a better price. It also makes the appraiser’s job of finding comparable rentals easier.

VI. CAREER ENHANCEMENT

For anyone involved in the real estate industry, the Internet provides opportunities for career enhancement. This not only includes the ability to find a better job, but also allows the procurement of information relative to one’s area of interest or profession, assisting their career development with their company. Ways in which students and real estate professionals are using and are expected to use the Internet to enhance their careers are briefly explored in the following.

Education

Formal degree granting programs are becoming very sensitive to servicing needs via the Internet. Online course information today may include a course syllabus, required textbooks, student email addresses, a chat room specific to that course, links to relevant material, Web site links, and even pre-scheduled discussion forums with the instructor or industry experts. A project announced in 1998 envisions a central Web site that would list the information noted by similar real estate courses for all accredited colleges in this country. Students from different geographical areas would be able to communicate to one another about common course issues, and share their knowledge from different backgrounds as well as related but different reference material, thereby increasing their educational experience.

Formal universities are feeling the threat of virtual universities. some being offered by some of the nation’s most elite colleges, such as Columbia University. If someone can receive online credits or a degree from a prestigious university versus a relatively unknown university, they may opt for the prestigious program, even if it might be more expensive. If an online course is eventually perceived as being essentially the same as a course requiring attendance, there may be declining enrollments with many universities and changes in traditional educational curriculums.

Although there are numerous obstacles with providing formal degree programs via the Internet, there may be fewer problems offering Certificate Programs on a wide variety of real estate topics. Continuing education programs have become extremely popular at major institutions such as New York University and UCLA, attracting more students than their traditional programs. Whether these courses lead to a certificate or not, they can become geared to the Internet either to supplement or replace existing classroom attendance.

Numerous real estate associations provide designation or accreditation programs that require the successful completion of certain courses and tests. These associations may be able to conduct courses and especially seminars effectively online for these programs. Some associations and certain professions involved with real estate, such as accounting and law, often require continuing education (CE) credits, usually through seminars. Online seminar credit via the Internet may also be possible for CE.

Many states require the Licensing or Certification for such occupations as real estate brokers, contractors, appraisers, home inspectors and others. This licensing may be processed online and may accept online courses and seminars taken from formal university programs, college certification programs, associations or accredited schools. The licensing agency may also offer a test or exam online.

One of the main obstacles to online courses and degree programs is assuring that there is no cheating or misrepresentation with online course work and exams. However, there are emerging identification processes through fingerprints and cameras, focussing on an eye or a face, which may circumvent such problems. Also, attendance and testing supervision could be available through local computer schools, colleges or even individuals.

Resources

Instead of a formal course, certificate, license or credential, often all an individual needs is some information to make a timely decision. With regards to real estate, securities and stocks, there are numerous resources available through the Internet. Such resources include books, periodicals, articles, manuals, directories, employment sites, financial sites, discussion groups, chat rooms and online data (from associations, universities, government agencies and other sources). The major portals and search engines can be useful, but specialized real estate sites such as PikeNet (www.pikenet.com ) or InRealty ( www.inrealty.com ) can be even more friendly to real estate specific needs. As previously discussed in the Introduction, specialized real estate needs can often provide more specialized information.

Facilitation

Much can be accomplished with just email. You can set up appointments, send all types of information via email attachments to business colleagues and clients, resolve problems and expedite projects much faster than with conventional (snail) mail and even overnight delivery. White Boards allow group net meetings and photos, audio and even video can be used to help make virtual decisions without a physical presence. Programs allow fairly acceptable voice recognition, and handheld devices are starting to appear that not only capture dictation in the field, but convert it to text or as a voice file which can be forwarded over the Net. To keep track of your schedule and others you work with, Internet sites can help store and coordinate this information. If you use different computers, you can store your to do lists, contact lists and other data via the Internet and access it from any connected device. If you run out of room on your hard drive or need backup storage, Internet sites are providing such assistance. The Internet is providing more than information; it is allowing convenience, control, efficiency, security, multimedia, video conferencing, virtual inspections, and more.

Much of this is so new that it is difficult to know what you should use to really make your life easier and your work more productive. Again, online and even classroom training can help people use new technology to their benefit. Yet there is another issue with all of this technology that goes back to more fundamental and basic teachings. For instance, if you want to use speech recognition, it is important to be able to have the speaking skills and thought processes. After all, can dictation be taught in a course, or is good dictation just the by-product of a good education? With speech recognition eventually becoming more commonplace, future job requirements and the ladder to success may not only demand computer and dictation skills, but may also be more discerning of basic knowledge skills.

Jobs

www.real-jobs.com/ ), RealBank (www.realbank.com ) and JobSite (www.jobsite.com) are also helpful sites. PikeNet also has an employment area. Various associations such as the Appraisal Institute (www.appraisalinstitute.com ) and the Real Estate Investment Advisory Council or REIAC (www.reiac.org ) provide job opportunities as well.

The ability to obtain jobs directly from companies or from non-employment company sites may make it easier to find the dream job. It also may allow companies to find better employees at lower costs.

VII. CONCLUSIONS & RECOMMENDATIONS

Most financial sites and brokerage firms do not have the resources or the interest to create a classification of real estate stocks by property type groups and industries, along with corresponding information and resources. The adoption of a real estate stock classification, such as the one proposed in this paper, can aid in research, investment and work related aspects. Suggestions for the improvement of the proposed stock classification and a reaffirmation of this classification system are desired.

Many academic studies pertaining to REITs and real estate securities may have relied upon property type or equity debt hybrid breakdowns that were not accurate or appropriate. They may also have included stocks with excessive volatility because of low capitalized market values or infrequent trading that may also be inappropriate. This may indicate improper conclusions from prior research reports and may necessitate revisions, if possible.

The major Internet portals do not provide search engines or listings that adequately cover either real estate stocks or commercial real estate. The InRealty family of Web sites, including RealtyStocks. provides a wide range of information coverage. What are the shortcomings of these sites that may prevent them from better serving the commercial real estate and investment communities?

VIII. The BACK ground

In the process of developing various real estate and related sites, the author has become very familiar with numerous resources available on REITs and other related stocks on financial sites. The information provided in the following is largely from the author’s research.

www.realtystocks.com). The aggregation of various industries into real estate stocks creates the potential for more academic research, improved investment performance and greater career opportunities for professionals involved in real estate.

Companies can be easily found by headquarter locations or alphabetically with property type or industry grouping. A search engine covers not only all of RealtyStocks. but also other similar topics within all InRealty family of sites, such as RealtyBooks. RealtyResearch. RealtyResources and RealtyTour providing comprehensive information pertaining primarily to commercial real estate.