ity is that (1) profitability, as a measure of performance, (2) is a correlate of the degree of concentration within the industry, which is representative of market structure. Profit is typically expressed as the product of a profit/revenue, profit/equity, or profit/total assets ratio. Concentration is typically expressed as the proportion of total industry activity for which a predetermined number of firms within the industry account.
The commercial mortgage-backed securities (CMBS) market is approaching the $100 billion mark, and is becoming a more efficient market in the face of increasing competition (Frantz, 1996). Conduits of this type have taken the place of the RTC (Resolution Trust Corporation) and many mortgage bankers. While such conduits may continue to see a winnowing out of participants, their transaction volume is expected to increase dramatically this year. The number of investors buying CMBS also is rising.
On the equity side, real estate investment trusts (REITs) show similarity to conduits in being a young growth industry that is getting stronger, despite some consolidations of smaller, older struggling, REITs to create better capitalized entities (Frantz, 1996) The $120 billion industry still attracts a wider array of large and small investors who see long-term viability and growth potential in a recapitalized real estate industry that increasingly resembles other publicly traded industries·valued more on its management and operations than on individual properties and transactions. The overall return for equity REITs in 1995 was 15.27 percent, pulled down by the retail sector. "While REIT gains did not outpace last year's broader bull market, REITs show signs of a commendably competitive long-term performance level, which Nomura Securities International Inc., compares to the tortoise in its race with the hare·slow and steady, but a winner" (Frantz, 1996, p. SEC3). Several individual REITs post much ...