REITs - Real Estate Investment Trusts - Info & Discussion: REITs - post 9/11/01

» JenL_2 - REITs - post 9/11/01

The last post of this thread was Sept 7 - only 17 days - but seems like ages ago - one day has changed America forever - but IMHO we'll come through this stronger than ever.

How have REITs held up in the aftermath of the 9/11 terrorist attacks? This from 9/25 WSJ:

---

Real-Estate Sector Is Expected To Suffer Less From Attacks

By RAY A. SMITH

Several of the real-estate industry's most influential leaders are saying their business will suffer less from the Sept. 11 terrorist attacks on the World Trade Center than will other sectors of the economy.

"It is the first time in 40 years that I have been in business, where there is no excess supply, at least in the markets we are in, going into an economic decline," said Mortimer B. Zuckerman, chairman of Boston Properties, an office landlord based in Boston with a portfolio concentrated in New York City, Washington, D.C., Boston and San Francisco.

Mr. Zuckerman, along with Sam Zell, chairman of the nation's largest office and residential real-estate investment trusts; Milton Cooper, chairman of shopping center REIT Kimco Realty Corp., and Larry Siegel, chief executive of Mills Corp., a big owner of value-oriented malls, each cited limited amounts of supply, especially in the office market, as a fundamental reason why the industry will hold up better than others.

The executives maintained in a conference call arranged by Salomon Smith Barney that with supply near capacity and with banks' tighter lending standards for new projects, there is little risk of a building boom or oversupply overall, meaning companies should post solid earnings as their buildings are fully leased.

"Rents will not continue to go up, but by and large they will stabilize in most markets," Mr. Zuckerman said. "And there won't be any great economic downturn in the commercial real-estate market, at least in the markets we are in, simply because there is no excess supply."

While these executive were sending out a message of reassurance and fewer bumps on the long road ahead than other sectors, the markets were sending a radically different message.

Last week, the first full week of trading since the terrorist attacks, REITs fell, but less than the Dow Jones Industrial Average and the S&P 500 index. Monday, for the first time since the resumption of trading a week ago, all the indexes were up, but REITs rose less. In trading Monday, REITs rose 0.9%, while the Dow was up 4.5% and the S&P up 3.9%.

Mr. Zell, chairman of Equity Office Properties Trust and Equity Residential Properties Trust, based in Chicago, said the terrorist attacks combined with the slowing economy will definitely have an impact on new projects. He predicted "limited activity" in the development arena for the time being, "a significant gap in which nothing [will be] developed," which would be a good thing in terms of maintaining equilibrium of supply and demand and creating pent-up demand that could justify new construction.

Mr. Siegel, of Mills, Arlington, Va., said retailers that offer consistent values are poised to do well, as consumers attempt to make every dollar stretch. For his company specifically, he says, leasing on new developments hadn't slowed, with just one lease lost in one of the two big mall openings it has planned within the past two weeks.

All retail tenants should fare poorly in this environment, with some going bankrupt, said Kimco's Mr. Cooper, but those that are credit-worthy and have strong balance sheets should do better out of the retail group. Tenants such as supermarkets are an example he uses, and his shopping centers are anchored with grocers. Tenants with bad credit and weak balance sheets, on the other hand, could present a buying opportunity for Kimco, New Hyde Park, N.Y., he said, as the REIT specializes in acquiring distressed retail assets.

To be sure, the executives did acknowledge that some REIT sectors and some regions are in danger of being more severely affected.

Mr. Zell said the apartment sector won't suffer very much in the short term, even with massive layoffs, but could feel a greater impact in the long term. "It's naive to expect people not to double up or [move] back home," he said.

Mr. Zuckerman said he sensed the San Francisco office market is still declining, with rents that were $100 to $110 a square foot in the fourth quarter of last year now at $70. "I'm not sure we've hit bottom there," he said. "That market is one that is in difficulty."

subscribe to WSJ Online @ http://www.wsj.com

---

.....Jen

-- posted by JenL_2