With nearly 200 to choose from, real estate investment trusts have become big competitors for investors' dollars.

REITs, despite a spotty history, have become popular investments for yield funds and growth and income mutual funds, says Brad Razook, head of investment banking at Natwest Securities.

"Anyone who used to buy a utility will now buy a REIT," he said. "It's gone from a cottage industry to a real sector."

The number of publicly traded REITs has increased from 119 in 1990 to 198, according to the National Association of Real Estate Investment Trusts. It estimates that there are 300 REITs overall.

The trusts' popularity is a matter of simple economics, said Mr. Razook. The real estate disaster of the late 1980s and early '90s left great assets at "fire-sale prices," he said.

Banks at the time were leery of lending money for commercial real estate. REITs were set up by property developers, who were forced by a lack of bank loans to raise money from investors.

Players in the institutional equity market "woke up and realized that all they had to do was write a check" to pick up properties, Mr. Razook said. REIT investors receive 95% of the taxable income from the properties as dividends.

In 1990 Natwest took five REITs to market; last year the investment banking firm completed 100 deals.

The shares in the REITs are traded like any other stock, and a growing number of analysts-some of them former thrift analysts-follow them.

As banks' appetite for real estate has returned, REITs also have become big users of bank loans. Now, with competition for REIT business heating up, banks are vying to broaden their relationships with the trusts. (See article on page 5.)

History has not been kind to REITs, however.

Industry observers cite Chase Manhattan Bank as one near victim. Chase took heavy losses in the early 1970s almost entirely because of investments in highly leveraged REITs backed by speculative development.

But today's REITs are structured differently, analysts say, making them a much safer vehicle for real estate investing.

"Leverage is the key," said Steven Hash, an analyst for Lehman Brothers. Today's REITs rarely more than 35% leveraged; some in the 1970s had debt as high as 110% of the value of the properties they held.

The REITs of the '90s are not, for the most part, backed by mortgage loans, so they are less vulnerable to rate changes than their predecessors of the '70s.

Publicly traded REITs are good investments primarily because they are public, said PaineWebber analyst Johnathan Lit. They have to perform well to attract shareholders and ensure their own financial health.

"In prior REIT cycles you had an externally managed REIT," Mr. Lit said. "Now the management owns stock."

And the trusts have been fulfilling expectations. Last year's best- performing mutual fund was Cohen & Steers' real estate investment trust, said Lehman's Mr. Hash.

Despite the new low-risk look of REITs, there is still no guarantee they couldn't crash in another downdraft in the real estate market, Mr. Hash stressed.

But the disasters of the past don't color investors' thoughts about the products today, said Steve Weschler, president and chief executive of the REIT trade group.

"At this point," he said, raising a warning that the 1970s could return, "would be like saying, 'Do you remember what happened to corporations in 1929?'"

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