Doing What's Right... "I challenge you to find another industry with better disclosure than REITs." That's Michael Ernst, CFO of Prentiss Properties writing in response to my July 2 Dispatch, Realpoint Spotlights WorldCom Exposure. Although not posted to its web site until July 1, Prentiss did issue a complete press release explaining its WorldCom exposure on June 27, 2002. "We went way beyond what most of our peers released." (As was widely predicted, WorldCom declared bankruptcy on July 21, 2002.)

On July 8, 2002, AMB Property Company led the REIT industry by announcing that it would expense the fair value of options -- a week before Coca-Cola made a similar announcement. Here's how the San Francisco Chronicle reported AMB's decision on July 9, 2002. "Hamid Moghadam, chief executive officer of AMB, says that his firm is expensing options 'because it's the right thing to do.' AMB has a history of being out front on issues favored by shareholder rights groups."

Warren Buffet argues strongly that options should be treated as an expense. "If options aren't a form of compensation, then what are they? If compensation isn't an expense, what is it? And if expenses shouldn't go into the calculation of earnings, where in the world should they go?" (Fortune's Street Life, July 12, 2002) ... So what do you think? Should REITs expense options?

--Peter Pike