Real estate investment trusts have outperformed the stock market for the past seven years. REITs combine the best features of real estate and stocks and are an efficient way to invest in commercial and residential real estate. Typically, an REIT owns and in most cases operates income-producing real estate properties such as apartments, shopping centers, offices, hotels, and warehouses. Over the past few years, a number of REITs from outside the area have shown interest in owning New York properties.

Last week Chicago-based Equity Residential purchased a two-year-old, 135-unit residential rental building with about 7,900 square feet of retail space at 600 Washington St. in the West Village. The seller was one of New York’s most active developers of residential apartments, J.D. Carlisle, led by Jules Demchek. Equity paid $75 million, or about $516,000 a unit, or $935 per square foot of rentable apartment space. Last April, J.D.Carlisle and other investors sold the 33-story Olivia, formerly the Pennmark, at 304-324 W. 34th St. and 305-319 W. 33rd St., to Ofer Yardeni and Joel Seiden, a principal of Stonehenge Partners, and a consortium of investors. They paid about $240 million for the 33-story, 600,000-square-foot mixed-use building with 333 units and 300,000 square feet of commercial space.

Equity Residential is the largest publicly traded REIT owner, operator, and developer of multifamily housing in America, with nearly 200,000 apartments. Last November the company bought three rental apartment towers known as Trump Place, at 140, 160, and 180 Riverside Boulevard on the Upper West Side for $809 million.The properties were built between 1998 and 2003 and consist of 1,325 apartment units, totaling about 1.06 million square feet, 40,000 square feet of retail space, and 424 parking spaces.The purchase price equates to about $580,000 per apartment unit, or $723 per square foot of rentable apartment space.

In October 2004 Equity Residential paid about $100 million, or $420,168 a unit, for the 22-story, 238-unit residential tower at 71 Broadway. The landmark building used to be the headquarters of U.S. Steel and was converted to residential use in the mid-1990s. In August 2004 the company bought the 80/20 market-rate rental apartment building, Hudson Crossing, at 400 W. 37th St. and Ninth Avenue. It paid $93.1 million, or $359,460 per residential unit, for the two-year-old building to an investment partnership of the Dermot Organization. Equity Residential now owns six properties with 1,957 units in Manhattan. The company owns 15 properties in the New York metropolitan area, in places such as West New York, Hackensack, Jersey City, and Tarrytown.

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Last year Equity Office Properties Trust, the nation’s largest publicly traded office building owner, paid about $505 million for a majority interest in the Verizon Building, a 41-story, 1.2 million-square-foot office tower at 1095 Avenue of the Americas. Equity Office will acquire 1.03 million square feet, or nearly 80% of the tower, including 30,000 square feet of retail space, as well as the naming rights for the building. Verizon retained ownership of about 200,000 square feet. In July 2004, Equity Office purchased the 380,796-square-foot office component of the Merrill Lynch Financial Center at 717 Fifth Ave. Equity Office owns six other office properties in Manhattan, including 1301 Avenue of the Americas and Park Avenue Tower.

In January, the Denver-based REIT Archstone Smith, one of the nation’s largest apartment companies, announced its acquisition of the Gershwin, a 40-story, 550-unit, 80/20 rental building with about 41,000 square feet of retail space at 250 W. 50th St. and Eighth Avenue.The company paid $342 million to Jack Resnick & Sons, which developed the property in 1998.Including this acquisition, Archstone owns nine apartment communities in the New York area. One of these is the Mosaic, a 627-unit complex in the Clinton neighborhood, a joint development with the Dermot Organization that has been under construction since last July. Currently, about 13% of the company’s portfolio is in the New York area.

Last August the company acquired the Aston, a 266-unit residential tower at 800 Avenue of the Americas between 27th and 28th streets, for $195 million. The building was sold by Adellco, which finished the 38-story, 80/20 rental building in 2004. Also in August, the company bought the 222-unit residential 80/20 rental building, the Foundry, built in 2001 at the corner of Tenth Avenue and West 55th Street. It paid $87.6 million to the Gotham Organization. In March 2004 the company paid $125.5 million, or $492,126 a unit, to the Related Companies for the 29-story, 254-unit Sonoma rental building at 300 E. 39th St. and Second Avenue. The building, which opened in 2001, was financed under the 80/20 program. In May 2002 Archstone made its first acquisition in the region, paying $209 million, or $413,000 a unit, to a joint venture of Tishman Speyer Properties and Travelers for the 35-story, 506-unit Park Hudson, which was built in 2000 at 101 West End Ave. and 64th Street. The company’s other apartment communities in the New York area are in Hoboken, Westbury, Long Island, and Stamford, Conn. According to industry sources, Archstone is under contract to purchase a 34-story, 269-unit marketrate rental apartment building, the Marlborough House, from Glenwood Management.

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Avalon Bay, based in Alexandria, Va., is one of the nation’s leading REITs. Last summer, the first tenants moved in at Avalon Chrystie Place, a 361-unit mixed-use apartment building on a former parking lot on the south side of East Houston Street between Chrystie Street and the Bowery. The building is 80% owned by the New York State Common Retirement Fund. A total of 72 units are reserved for affordable rentals under the 80/20 program.This building, which will house a 75,000-square-foot Whole Foods Market, is the first of four rental towers under development. In April 2002 Avalon Riverview, a 372-unit rental tower overlooking the East River and adjacent to the Queens West development in Long Island City, opened to its first tenants. The company has developed six residential developments in Westchester and five communities in Nassau and Suffolk County.

Under the 80/20 program, developers have the opportunity to obtain floating or fixed-rate financing, a 20-year abatement on real estate taxes, and gain low 4% income tax credits. Due to the financing structure of rental buildings developed under the 80/20 program, it is difficult for REITs to convert the rental units to condominium for a period of up to 15 years.

An Atlanta-based REIT, Post Properties, a developer of upscale apartment communities, entered the New York market in 2002 when they joined with a Manhattan-based developer, the Clarett Group.The joint venture developed the market-rate 20-story rental building, Post Luminiaria, at 385 First Ave. and 23rd Street. The following year, they completed the Post Toscana at 389 E. 89th St.

REITs offer investors the chance to own a piece of New York and other real estate properties around the nation and reap the rewards of stock ownership, appreciation, and dividend return.

Mr. Stoler is a television broadcaster and senior vice president at First American Title Insurance Company of New York. He can be reached at mstoler@firstam.com.