In this consumer-driven world, many of us expect a wide variety of options. This is no surprise with more than 300 channels to watch on TV, multiple kinds of produce at the grocery store and an overwhelming number of toothpaste brands at the pharmacy. Even the restaurant where I frequently dine for brunch has more than 15 different types of jam. We have come to expect more choices to more closely tailor to our preferences for what we buy, eat or watch.

In the same vein, the REIT investor base is broader than ever and with that comes a greater variety of wants, needs and risk tolerance, among other items. The market is evolving to meet those needs with the REIT industry providing more options as well. Derivatives, essential financial tools for most other investment markets, are about to become part of the REIT marketplace as another mechanism for managing risk.

Real estate had been the only major asset class in the world that didn't have a supporting derivative market. However, that all changed earlier this year when the Chicago Board of Trade launched its new futures contract based on the Dow Jones U.S. Real Estate Index. To read more about REIT derivatives and how they can help achieve portfolio diversification, turn to "The Dawning of Derivatives."

Additionally, REITs have recently started using a corporate financing mechanism increasingly popular among its peers. Convertible bonds are hybrid securities, offering both debt and equity features. Even though the debt instrument has been in the larger financing community for some time, REITs are just beginning to tap this resource, and it is now yet another option for investors. Turn to "New Piece of the Debt Puzzle" to read more about this debt instrument and how they add financing options for REITs.

Also in This Issue

It is up to industry leaders to keep up with challenges and changes facing the real estate investment world. Portfolio spoke with nine REIT CEOs and discussed the multiple obstacles they face. Turn to "View from the Corner Office" to learn about the outlooks, concerns and challenges of REIT CEOs.

REITs have continued to make headlines internationally this year. With U.K. REIT legislation taking effect on Jan. 1, 2007, U.K. property companies and U.K. financial advisors are new entrants to the real estate investment properties. With ten U.K. companies converted to REITs and more actively considering the transition, this could be the start of a booming U.K. REIT industry. Turn to "Full Speed Ahead" to learn more.

Erin Corcoran
Managing Editor