Institutional investors were pushing management of real estate investment trusts (REITs) to take on increasingly more debt to provide them with higher distributions, investors at an ASX/Morningstar REIT presentation were told yesterday.

"Institutional investors use their power as investors within their mandates to question management - push management both positively and negatively," Equity Real Estate Partners executive director of funds Adrian Harrington said.

"A number of them were looking for a distribution growth from these trusts that was not sustainable," he said.

Harrington, who is a former funds management executive for property group Mirvac, added that REITs did not always give enough pertinence to the interest of retail investors.

"For the public record I would say: we've listened too much to the institutional investor and did not listen enough to the retail investor," Harrington said.

But he admitted the management of a number of REITs were also guilty of increasing the leverage of their trusts.

"Managers were looking to grow their portfolios, in some cases because of ego," Harrington said.

During the financial crisis, investors turned their backs en masse on REITs as their model of high leverage caused concern about their ability to refinance loans.
 
The S&P/ASX 200 A-REIT index has recovered more than 75 per cent since its lowest point at 546.90 points on 9 March this year, but is still trading more than 50 per cent lower compared to 2007 levels.