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This from 4/5 WSJ:

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REITs Hold Their Ground Amidst Market's Turmoil

By BARBARA MARTINEZ

What goes around comes around.

As stock prices across the board plummeted midday Tuesday, real-estate investment trust shares held surprisingly steady, a vindication that investors and analysts of this beaten-down industry have been waiting months for.

"We're walking around the office kind of happy here," said John Lutzius, analyst at Green Street Advisors, Newport Beach, Calif. In the middle of the day, when the Nasdaq Composite Index had plunged 13% and the Dow Jones Industrials were down nearly 4%, the Morgan Stanley REIT Index was down only 0.6%.

By the end of the day, the REIT index had risen 0.1%, while the Nasdaq composite fell 1.8% and the Dow industrials declined 0.5%.

For months, REIT investors have had to watch technology stocks -- some with no profits and no assets -- soar while REITs, which own real properties and are posting increased earnings, have watched their share prices erode.

But on Tuesday, the tables turned, and REIT stocks were finally sitting pretty. Trading volume on many of the largest REIT stocks was more than double the average. That means "folks were in some cases taking shelter in this group," says Larry Raiman, analyst at Donaldson, Lufkin & Jenrette Inc.

The reasons why REITs held up in the storm Tuesday are quite simple. "We didn't have the kind of run-up the market had last year and the year before," says Dan Pine, senior vice president and portfolio manager at Alliance Capital Management. Mr. Pine added that much of the fear that took hold of technology investors Tuesday has already been worked into REIT stock prices.

Also, the potential REIT sellers "already did sell" their shares some time ago, says Joseph M. Harvey, senior vice president of Cohen & Steers Capital Management, which manages about $4 billion of real-estate securities. "Everyone rotated out of REITs last year or the year before," he says. "The sellers are done."

Mr. Harvey says investors may now have to adjust their thinking about investments. The current mindset has been: "Give me high beta [volatility]. Give me capital appreciation. I don't care about income. I'm not factoring risk into my investment decision," says Mr. Harvey. "I think the market activity over the past several days reminds everybody that you should be thinking about valuation and you should be thinking about risk and income."

Analysts and investors note that REITs today are offering benefits that highflying high-tech shares simply can't. "The earnings are growing 7% to 8%, REITs are increasing their dividends, the average dividend yield is now 8.5%," says James Trowbridge, portfolio manager at Invesco Realty Advisors, which manages about $850 million in real-estate securities.

What's more, investors can get a good sense of a REIT's underlying worth by its net asset value, or the value of the underlying real estate. Most analysts believe REIT stocks are trading at a 10% to 20% discount to net asset value, when they should more appropriately be trading at net asset value or a little above.

Prospects for REITs had begun to brighten even before Tuesday. DLJ's Mr. Raiman reports that over the past few months, clients have mostly stopped calling to ask him which REIT stocks to sell. Last week, the influential Abby Joseph Cohen, chief U.S. equity strategist at Goldman Sachs, suggested in a television interview that down-and-out real-estate stocks might be a good buy. "Of all the sectors that have been beaten up, that's one of the ones she isolated," says Jonathan Litt, analyst at Salomon Smith Barney.

But what happens Wednesday and in the near term for REIT stocks? Few REIT investors care to hazard a guess after such a short time. Mr. Litt thinks "the more people get cautious about the broader market, the more they're going to look to invest in REITs."

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.....Jen

-- posted by JenL_2