Companies’ REIT Love Affairs May Break Investors' Hearts

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Jan. 16 — Forest City Enterprises Inc., Windstream Holdings Inc. and Sears Holdings Corp. shares surged and trading volume jumped on the days they announced plans to create real estate investment trusts.

Such investor enthusiasm for REITs is helping persuade more companies to convert, or spin off their property into trusts, including some that have little in common with traditional types of real estate. In the past two years, nine companies have converted or spun off assets to create REITs, more than double the previous three years combined, and at least six are considering or planning to make the change, according to Green Street Advisors LLC.

While shares of some companies announcing REIT plans have surged on the news, success for newly minted trusts isn't guaranteed, especially if they are outside the established core of offices, apartments, shopping centers and warehouses. Newer REIT groups such as casino landlords may have trouble growing and luring investors, partly because they are little-known entities with a tenant base that isn't diverse.