REIT Pioneer Pooh-Poohs Dividend Tax Issue

Sam Zell, chairman of Equity Office Properties Trust and Equity Residential Properties Trust, has characterized reports the Bush administration's dividend tax cut proposal would hurt real estate investment trusts as nothing more than "a red herring."Delivering the keynote address at the New York University Real Estate Institute's eighth annual REIT symposium, Mr. Zell noted that the S&P 500 has a dividend yield of 1.7%, compared with the REIT world's 7.3%. To match the REIT sector's dividend yield, an S&P 500 company would have to increase its dividend and also increase the tax it paid through the extra income it would have to generate to do so. "General Electric would have to up its tax to 35% to deliver," Mr. Zell said. Mr. Zell said he doesn't expect the current low interest rate environment to continue for very long. "Anyone who plans based on that is likely to have a comeuppance," he said. The REIT industry pioneer sees a lot more consolidation in the sector, with the present REIT industry ranks of about 215 REITs being winnowed down to about 30 REITs. He compared this process to the evolution in the car manufacturing sector, which has gone from 200 companies in 1920 to the current "two-and-a-half."