REITs - Real Estate Investment Trusts - Info &amp; Discussion

RMS Indices comparison 1 YR Chart

Top 81. May 3, 2000 9:32 PM

» JenL_2 - REIT Index (RMS)

Rhyne - Some charts to illustrate:

RMS 1 YR Chart

RMS Indices comparison 6 MO Chart

WOW! is all I can say about the REIT Index performance since Dec. Did anyone buy REITs at the bottom mid Dec? You REIT investors gave us the heads up on this thread when REITs were near the bottom. Thanks and hope someone listened and followed your advice......Jen

-- posted by JenL_2

REIT Comeback Or Head Fake?

Top 82. May 10, 2000 2:33 PM

» JenL_2 - REIT Comeback Or Head Fake?

from 5/10 SmartMoney.com:

By Lewis Braham

LAST YEAR, for one brief shining moment, real estate investment trusts took the market by storm. For two months, April and May, REITs dominated the charts while the heady tech sector lost its head. Then the situation reversed, and REITs landed in the dumpster. This April it happened again. While the Nasdaq index plummeted 15.6%, the NAREIT Composite Index jumped 6.6%. As a result, REIT funds are now the third best performing fund category in 2000, up an average 9.1% as of May 4. Meanwhile, the average tech fund is down 1.6%.

Is this another head fake? As I wrote in an earlier column, I lived to regret recommending REITs last year. But this rally, REIT fund managers say, is different. "The tip off for last year's rally was the shift towards value stocks, of which REITs were definitely a part," says manager David Jellison of Columbia Real Estate Equity fund (CREEX). "But this year's rally is about a shift from growth at any price to growth at the right price. That's why drug stocks are doing well, although they're not exactly cheap."

So why are REITs rising? Because they're growing at the right price. While REITs were extremely cheap last April, their important earnings measurement, funds from operation (FFO), were still falling from the peak of the real estate cycle in late 1997. "Two-and-a-half years ago REITs' FFO growth peaked in the mid-teens," Jellison says. "Now they're priced to grow in the single digits. The market has said this rate of growth is sustainable." In fact, although Merrill Lynch predicted only an 8.7% FFO growth rate for the sector in 2000, REITs have been surprising on the upside. According to NAREIT, a REIT trade association, first-quarter FFO growth has averaged 12% for the 74% of REITs that have reported earnings......

....Jen

-- posted by JenL_2

A Good Year for REITs -- So Far

Top 83. Jul 21, 2000 7:38 PM

» JenL_2 - A Good Year for REITs -- So Far

This from 7/17 Barron's:

By BARRY VINOCUR

Real-estate investment trusts confirmed their comeback in the year's first half. Spurred by a shift of cash from technology stocks in the spring's "tech wreck," the widely followed Morgan Stanley REIT Index showed a total return of 13.3% through the first half. And despite the runup in share prices, the average company in the index still boasted a dividend yield just north of 7%. Large-cap REITs -- as measured by Cohen & Steers Realty Majors, an index made up of the industry's 30 largest companies -- fared even better, posting a 14.8% total return for the first half.

REITs would have done even better had it not been for a frenetic wave of selling on June 30. Carl Tash, founder and principal with the California-based hedge fund Cliffwood Partners, reports that by his tally, 9.8 million shares of companies' stocks in the Morgan Stanley REIT Index traded in the session's last 12 minutes, compared with an average of 10-12 million shares a day since the REIT rally began. Tash, whose fund specializes in property stocks, and others attribute the flurry partly to a pair of sell programs targeting more than 70 stocks timed to exploit end-of-quarter window dressing by REIT funds. This time selling pressure overwhelmed the buyers, and the sellers got burned. The shares rebounded strongly in the July 4 shortened week, and several brokerage-firm analysts have raised their target rates of return this year to more than 20%.

Not everyone is so bullish. For one thing, the course of REIT share prices depends in part on what happens to tech stocks and other sectors. "There's no way to know how much money was parked in REITs by portfolio managers who sought shelter during the tech wreck," says Tash. If tech stocks rebound, or another sector emerges as the hands-down leader, REITs could suffer.

The Fed and possible further rate hikes also pose a threat. REITs' exposure to floating-rate debt, as well as the need to refinance borrowings in the normal course of business, could cut into earnings growth. For instance, a number of brokerage-firm analysts recently slashed their earnings estimates for General Growth Properties, a shopping-mall REIT, for this year and 2001 because of the impact of rising rates.

Another wild card: The market might have to absorb a flood of fresh shares. Several REIT executives report recent calls from investment bankers about raising cash through the sale of new stock to take advantage of lofty share prices. Though a number of blue-chip REITs are already on record as saying they have no intention of returning to the equity market this year, the combination of rising stocks and strong real-estate fundamentals may be too tempting for some REITs to resist.....

Subscribe to Barron's & WSJ Online @ http://www.wsj.com

.....Jen

-- posted by JenL_2

What Will End REITs' Rally?

Top 84. Aug 6, 2000 12:54 AM

» JenL_2 - What Will End REITs' Rally?

This from 8/7 Barron's:

A Technical Answer

By Barry Vinocur

After back-to-back years of negative returns, real-estate investment trusts are having their best year since 1996. The widely followed Morgan Stanley REIT Index has chalked up a total return of some 25% so far, outperforming broader market benchmarks -- most notably the formerly red-hot, technology-heavy Nasdaq.

Helping to fuel the run-up are second-quarter earnings surprises from a long list of companies. Heading into last week, REITs had delivered growth in funds from operations -- the REIT equivalent of earnings -- of 11.5%, well ahead of the expected 9.2% FFO growth, according to analyst Jonathan Litt of Salomon Smith Barney. The sector's performance has brought a step-up in the flow of money into the sector. According to AMG Data Services, in the most recent week, real-estate mutual funds enjoyed the largest fund inflow in recent memory, totaling $146.5 million.

Are those investors arriving at the party too late?

To answer that question, the newsletter Realty Stock Review compared recent valuation measures with the levels at the end of 1997, just before the start of the REIT stocks' two-year slump. Based on that review, it's tough to argue that REITs have become overvalued today.

For instance, at the end of 1997, the average property-owning REIT followed by the newsletter was trading at just over a 20% premium to consensus estimates of its net asset value. As of July 28 of this year, the average REIT was changing hands at a 9% discount to estimated NAV.

The dividend yield on more than 120 REITs tracked by Realty Stock Review at the end of 1997 was 6.3%; as of July 28, it was 8.5%.

Most notably, REIT multiples are well below their late 1997 levels. As of July 28, the universe of REITs and non-REIT real-estate operating companies tracked by the newsletter were trading at 8.6 times consensus estimates of next year's adjusted FFO. At the end of 1997, the stocks were trading at 12.8 times.

What could put an end to the REIT rally? At the top of nearly everyone's list is a sharp and sustained run-up in tech stocks; studies indicate that Nasdaq shares and property stocks tend to move in opposing directions.

In a recent dispatch to clients, analyst Lou Taylor of Prudential Securities noted that since January 1, the Morgan Stanley index has had a negative correlation with the Nasdaq Composite. He also observed: (1) the Nasdaq's peak nearly matched the trough for the Morgan Stanley; (2) even as the Nasdaq rallied in June, so did the Morgan Stanley, suggesting little conviction in the Nasdaq rally; and (3) when the the Nasdaq turned down in early July, REITs went almost straight up.

"So for those wondering when the REIT rally will end, we would look to Nasdaq," Taylor wrote. "If it starts to rally, we think investors are going to take money out of REITs."......

Subscribe to Barron's & WSJ Online @ http://www.wsj.com

......Jen

-- posted by JenL_2

Top 85. Aug 6, 2000 8:27 AM

» Oaktoad - I have posted this before, but REITs could be compared to

the new 'I' bond. Interest with inflation protection. Perhaps not as guaranteed, but the total returns should be higher over a long period.

For some reason, even though there is building going on, it does not appear to be excessive. This means that there may not be the usual crash in real estate that there often has been.

Maybe people are getting more rational as we get better educated about economics, etc.

-- posted by Oaktoad

http://www.quicken.com/investments/estim...

Top 86. Aug 16, 2000 4:50 PM

» Happy - Kirk, this company owns apartments in Northern California.

Kirk, this company owns apartments in Northern California. It is up lately, but still not higher than a few years ago. Landlord friends in the City tell me they are getting re-rents on 2 bedrooms of $3500 per month. A couple of years ago these were going for $1500. I think big institutional investors like Avalon Bay (AVB), probably have only just begun to pass thru massive rent increases that are coming. Future looks good for cash flow, which is what these kinds of cos. sell on. What do you think?

AvalonBay has about 25% of their apartments in the Bay Area. Another large apartment REIT is Essex Property (ESS). They are only on the West coast.

Does anyone know of any other REIT apartment owners, more concentrated in the Bay Area?

-- posted by Happy

Hard assets, harder call

Top 87. Apr 15, 2001 8:34 PM

» JenL_2 - Hard assets, harder call

Wanted to bring this thread up again to check in on how REITs are doing. This from 3/6 MarketWatch.com:

Real estate funds have soared; can they keep it up?

By Justin Wiser

Real estate mutual funds may be based on terra firma, but their performance in recent years has been as flighty as any sector.

As a group, funds holding shares of real estate investment trusts have avoided the market's slide. The average fund soared 25.8 percent in 2000, they remain in positive territory this year and they led all fund categories with a 2.8 percent gain last week.

The group's trailing 12-month return of 29.7 percent lags only the financial services group at 40.2 percent, according to Morningstar.

Even with its gains, many experts say the sector is still undervalued, though its volatility makes performance extremely hard to call.

"As with any other sector play, it comes in and out-of-fashion, and you never know when the next move will be," said Kunal Kapoor, a senior analyst at Morningstar.

Leaner times

A general market shift to value stocks and renewed interest in income-bearing securities helped fuel last year's fund returns. The group also was coming off a weak stretch as investors ignored REITs during the fast-rising bull market. Real estate funds lost an average of 15.8 percent in 1998 and dropped 3.3 percent in 1999.

Those setbacks have resulted in a rather tame five-year average return of 10.3 percent, compared to 15.8 percent for the S&P 500.

Cohen & Steers Realty fund (CSRSX) manager Martin Cohen expects the group's recent strong performance to continue.

"The fundamentals are pretty solid," Cohen said. During his 25 years in the real estate business, he can't remember any point where this late in the economic cycle the country wasn't suffering from overbuilding, he said.

The market avoided overbuilding due to an increased flow of information and increased caution among lenders who haven't been extending loans as freely as in the past, Cohen said.

Cohen, whose fund rose 26.6 percent in 2000, said he likes the prospects for office REITs such as Vornado (VNO) and Equity Office Properties (EOP) , because of tight markets in New York, Washington and other large cities.

REITs are publicly traded companies that manage a portfolio of real estate. Many concentrate holdings in one area, such as offices, apartments, retail centers and even prisons.

"REITs still look cheap," Lehman Brothers analyst David Shulman said. "On a total-return basis, they'll probably generate returns of 10 to 15 percent by year's end."

"We like apartments and office REITs over retail because we worry about excess capacity in retail," Shulman said. "It's less of an issue now in offices and apartments."

Lehman has strong buy ratings on Boston Properties (BXP) , SL Green Realty Corp. (SLG) , and AvalonBay Communities (AVB) , among others.

Asset Allocation

Kapoor cautioned that apparent value in the REIT area may not be the best reason to invest in the space now.

"That's totally irrelevant," he said. "The question is do you want to own REITs as part of your portfolio. Pick good funds and hold them and you'll have the best chance to benefit from upswings."

An asset allocation of 5 to 10 percent in real estate is appropriate for most investors, he said, though younger investors may want to keep all their money in more growth-oriented areas.

A few of Kapoor's favorite real estate funds are Security Capital U.S. Real Estate (SUSIX) , MSDW U.S. Real Estate (MSUSX) and Columbia Real Estate Equity (CREEX) .

"It might be sensible to put real estate funds in a tax-deferred account because they do throw off a lot of income," Kapoor added. REITs often yield as much as 6 or 7 percent.

This chart should show total returns:

<img src="http://qccharts.quicken.com/bin/graphcgi..." width=475 height=220>
CSRSX, SUSIX, MSUSX, CREEX 3 YR Chart

This chart doesn't...

<img src="http://pvcharts.quicken.com/bin/icenter...." width=470 height=250>
REIT Funds, S&P500, Nasdaq 1 YR Chart

In Dec '99 the REIT Investors in the group said to Buy REITs - Good Call! What say you now?.....Jen

-- posted by JenL_2

Growing Number of REITs Are Planning to Issue Stock

Top 88. May 15, 2001 8:48 PM

» JenL_2 - REITs Plan to Issue Stock

This from 5/16 WSJ:

By RAY A. SMITH

Spring is certainly here in the REIT world, as evidenced by the meager but significant rash of stock offerings conducted of late. As real-estate investment trusts continue to outperform companies in the S&P 500 -- they have done so for more than a year now -- a growing number of REITs are feeling the time is right to go fund raising on Wall Street.

In the past month alone, six REITs, most recently Health Care Property Investors Inc., have issued common stock. Another of those six, shopping-center owner Weingarten Realty Investors, Houston, also issued equity back in January.

More such offerings are in the pipeline. Glimcher Realty Trust, a mall REIT based in Columbus, Ohio, is busy planning a public offering of five million shares.

The offerings come amid a few but significant consolidation deals in the REIT industry. Three big deals have been announced so far this year, creating large players in the hotel, apartment and office sectors.

FelCor Lodging Trust Inc. announced last week it agreed to buy MeriStar Hospitality Corp. for $1.1 billion in stock and cash. A week earlier, Archstone Communities Trust announced plans to acquire Charles E. Smith Residential Realty Inc. in a stock deal valued at $2.2 billion. Both deals follow plans announced by Equity Office Properties Trust, the nation's largest publicly held office-building owner, to buy Spieker Properties Inc., the leading publicly owned office-building owner on the West Coast, in a cash-and-stock deal valued at $4.48 billion plus debt.

Consolidation has been a major issue in the industry since 1998, when REIT stocks began their two-year slump. But consolidation isn't nearly as contentious as discussions about stock issuance can get.

Analysts and investors were generally ambivalent about offerings during the industry's bear market. However, they were highly critical of those conducted by companies whose stocks were trading below the value of their underlying assets. The number of offerings fell to eight in 2000 from 28 in 1999 and 220 in 1998, according to SNL Securities LC, a financial-information research firm in Charlottesville, Va. With almost half of 2001 gone, seven offerings already completed and Glimcher's on the way, the pace of offerings will be way ahead of last year, if stocks keep rising.

"The mere fact that your stock is trading above net-asset value doesn't mean you should issue equity, but it does give you a green light," says Mike Kirby, principal at Green Street Advisors. "If you're trading above NAV, you can at least consider the possibility, but only if you have value-enhancing investments to take advantage of."

Kenneth B. Roath, chairman and chief executive officer of Health Care Property Investors, says the company was pleased with the price at which it issued 3.5 million shares -- $34.80 -- above analysts' estimates for the Newport Beach, Calif., REIT's net-asset value.

The $115 million in net proceeds from the offering will be used to acquire properties, particularly nursing homes and assisted-living centers, and retire short-term debt. Mr. Roath believes reinvesting the proceeds into acquisitions will boost the company's long-term growth rate.

For those REITs searching for ways to raise capital without the benefit of a stock that trades at a premium to net-asset value and a compelling use of proceeds, Salomon Smith Barney analyst Jonathan Litt suggests "why not just sell some assets and buy back stock if you want to create shareholder value?"

Mr. Litt, a longtime advocate of stock buybacks as a way to create shareholder value, cites diversified REIT Crescent Real Estate Equities Co., Fort Worth, Texas, as an example of a REIT that trades at a significant discount to net-asset value and uses asset sales to actively buy back stock. "Disposing of selected properties to improve the balance sheet is a logical choice to raising equity" for these companies, he says.

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

....Jen

-- posted by JenL_2

Top 89. May 15, 2001 9:06 PM

» mitelo - Re: REITs Plan to Issue Stock

In response to message posted by JenL_2:

I appreciate this article, Jen. I have HMT, HR, and Cohen and Steers Realty Shares. So far, they have all been good to me.

I have heard of disastrous periods for REIT's in the past, so I am always cautious and a little leery of individual issues. The insiders seem to have a big advantage, as always. The officers' salaries are sometimes outlandish.

This type of article is very helpful. Thanks.

I promise, I am not following you.

-- posted by mitelo