REITs Rally Again, Defying Predictions
It seems to defy common sense: Real-estate stocks continue to rally -- even as interest rates rise.
Eighteen months ago, many investors began to sell off their real-estate holdings amid warnings that the property market might have peaked. But real-estate investment trusts -- tax-advantaged investment companies whose shares trade on major exchanges -- have continued to outperform the market. This year alone, the Dow Jones Equity REIT Index is up almost 13%, compared with a gain of almost 4% for the Standard & Poor's 500-stock index. It's the fastest run out of the starting gate for REIT stocks in six years, according to SNL Financial, a research firm in Charlottesville, Va.
See more on the recent performance of REITs."The run-up in REIT prices has certainly been surprising, even to boosters of the industry like us," says T. Ritson Ferguson, chief investment officer for ING Clarion Real Estate Securities, a Radnor, Pa., investment-management firm.
The rally has partly been driven by mutual funds and other big investors, some of whom bailed on the sector 15 to 18 months ago and are now buying the stocks again, egged on by recent improvements in the outlook for almost every sector, particularly hotels and offices. REITs have been helped by fund managers and other investors who missed the big run-up and now fear that not owning them is hurting performance records.
Some money managers, having been wrong once before, are reluctant to tell small investors to bail out of the sector. Others factor in an individual's total exposure to real estate -- including homes and investment properties -- to determine whether that person should also be owning real-estate stocks.
Mark Cortazzo, senior partner of MACRO Consulting Group in Parsippany, N.J., says he's "cautiously optimistic" about REITs and tells his investors that these stocks still have the opportunity to outpace conservative investments such as bonds. But the 30% returns REITs delivered in 2004 don't seem sustainable in a time of rising interest rates and climbing insurance premiums. "People need to modify their expectations," he says.
For anyone who has owned REIT stocks over the past five years -- most small investors hold them in mutual funds -- it's been a heady ride. These public companies acquire, manage and operate real estate, and pay no corporate income taxes if they pay out at least 90% of their net income as dividends. They have delivered average total returns of nearly 13% over those five years, according to SNL Financial, although the performance varied by property type. REITs that specialize in regional and shopping malls led the pack, with industrial REITs not far behind. Office and apartment REITs lagged, but are seeing improvements in their markets recently.
To be sure, rising interest rates are still a concern for real-estate investors. Obviously, higher rates mean more-expensive mortgage loans, and they also raise the cost of borrowing for real-estate companies. Yet interest rates are still low by historical standards, and at current levels they are more of a concern for residential buyers than in the commercial property sector.
Real-estate experts also point out that incremental rate increases usually accompany an improving economy, which pays off for REITs in the form of lower building vacancies, higher rents and other revenue improvement. "The fundamentals are so good that interest rates can go up a bit and not hurt anything," says Rich Moore, an analyst with RBC Capital Markets.
However, improving fundamentals don't fully explain the run-up in REIT stocks so far this year. What's driving that, real-estate experts say, is all the mergers and acquisitions that are going on in the REIT world and the belief that there are more to come.
Since January 2004, 14 REITs have unveiled plans to exit the stock market and become private companies, with management and their backers often paying well above the companies' market value to buy out shareholders. In the past month alone Blackstone Group offered to buy two REITs, including CarrAmerica Realty Corp., based in Washington, D.C., in a record deal worth $5.6 billion, a price 18% above what the REIT's market value was when rumors of the deal first surfaced.
Other investors are buying REIT shares in hopes that they will be holding them when the companies are bought out at a premium, says Paul Adornato, senior analyst for REIT research at Harris Nesbitt, the U.S. research and investment-banking subsidiary of Toronto-based BMO Financial Group. "There's a segment of investors that are just speculating and not wanting to miss out on M&A action," he says.
However, as REIT stocks continue to rise, the gap between where the stocks are trading publicly and what private investors are willing to pay could close, says Jeff St. Denis, an SNL Financial analyst.
Adding to the fuel, the REIT sector spiked last week after the New York Post reported a rumor that Boston Properties Inc., an office REIT, will sell two New York City office towers to a Dubai investor for as much as $2.2 billion, or about $1,000 a square foot. Boston Properties didn't return phone calls seeking comment.
REITs started to slide again by early this week, and analysts cautioned investors against being too greedy. Yet other money managers argue that these short-term spikes are less important than the broader story of REIT stocks coming into their own as an investment class -- transformed from a risky alternative investment to a conventional portion of any investors' portfolio.
Write to Jennifer Forsyth at
jennifer.forsyth@wsj.comCorrections & Amplifications:
Real-estate investment trusts, or REITs, have delivered average total returns of 22.5% over the past five years. This article incorrectly said the average was nearly 13% over that time.
房地产投资信托基金卷土重来
利率上调的同时，房地产类股却在持续上扬，这看起来似乎有悖常理。
18个月前，美国房地产市场显现出了即将见顶的迹象，于是许多投资者开始抛售手中的房地产类股。然而房地产投资信托基金(real estate investment trust, REIT)的表现却始终强于大盘。单是今年到目前为止，道琼斯房地产投资信托基金指数的涨幅就接近13%，而同期标普500指数的增幅只有4%。据弗吉尼亚州研究公司SNL Financial称，这也是REIT类股在6年来年初开局表现最好的一次。
宾夕法尼亚州投资管理公司ING Clarion Real Estate Securities的首席投资长弗格森(T. Ritson Ferguson)表示，即使他们这样的房地产行业拥戴者，也对REIT价格的走高表示惊讶。
REIT价格上涨的背后有共同基金和其他大投资者在推波助澜，它们中的一些曾在15至18个月前减持了头寸，如今又重新买进，因为它们看到近来整个房地产行业前景都得到了改善，特别是酒店和办公地产领域，表现更是非凡。另外，REIT也受到了一些基金经理和其他投资者的眷顾，他们已经错过了一轮涨势，担心如果再错过一次，其盈利难免要受到影响。
一些基金经理以前曾做出过错误的判断，为避免二次犯错，他们也不愿让小投资者从REIT中撤出。而其他一些基金经理则会考虑每个投资者在地产领域总的投资状况，包括住房和投资性房产，以此决定他们是否应继续持有地产类股。
MACRO Consulting Group高级合伙人科尔塔佐(Mark Cortazzo)表示，他对于REIT类股持谨慎乐观态度。他告诉投资者，此类股票仍有机会超越债券等保守投资品种。REIT曾在2004年取得了回报率达30%的骄人业绩，但在如今这样一个利率不断上扬、保险费攀升的时期，这样的高回报恐怕难以维持，他说，人们需要调整一下自己的预期。
过去5年REIT股票的表现让所有投资者欢欣雀跃。REIT购买、管理、运营各类房地产项目，如果它们将90%以上的净利润用于分红，还无需缴纳企业所得税。根据SNL Financial的数据，REIT在这5年的平均回报率达到了近13%，当然不同地产类型表现各异。专注于地区项目和购物广场的REIT表现最佳，工业REIT紧随其后。写字楼和公寓REIT表现稍差，不过近来也有所起色。
当然，不断上升的利率依然是房地产投资者心中挥之不去的阴影。因为加息必然会让抵押贷款变得更加昂贵，同时还会增加房地产企业的借贷成本。不过与历史水平比较，如今的利率依然算是较低的。而且，对目前的利率水平更加担心的是住宅房产购买者，而非商业地产购买者。
房地产专家也指出，加息通常伴随的是经济的好转，而经济好转会带来房屋空置率下降、租金上升以及其他收入的提高等，这些都会让REIT获益。RBC Capital Markets分析师穆尔(Rich Moore)认为，基本面状况非常强劲，因此利率略微上调并无大碍。
然而，基本面因素的改善还不是今年REIT飙升的全部原因。房地产专家称，推动因素其实是REIT业界各种各样的并购活动，以及人们对更多并购的预期。
自2004年1月份以来，陆续有14家REIT公布了退市、成为私人公司的计划，它们的管理层及其支持者以远高出市值的价格从股东手中买下了股权。上月，Blackstone Group出价以56亿美元收购包括CarrAmerica Realty Corp.在内的两家REIT，交易金额达到了创纪录水平，这一价格较交易传言浮出水面之初的市价高出18%。
阿多尔纳托(Paul Adornato)是美国研究和投行子公司REIT研究部门的高级分析师，他认为，一些投资者买进REIT股票的目的就是希望这家REIT最终能被收购，从而赚得溢价。
不过，由于REIT股价在不断攀升，私人投资者愿意支付的收购价与市价之间的差距可能会缩小，SNL Financial分析师丹尼斯(Jeff St. Denis)。
此外，在《纽约邮报》(New York Post)上周报导写字楼REIT Boston Properties Inc.将以22亿美元的价格将其位于纽约的两座写字楼出售给一家迪拜投资者的传言后，REIT股票的涨势嘎然而止。Boston Properties没有回复记者的采访电话。
到本周初，REIT股票开始再度回落，分析师们也纷纷警告投资者不要过于贪婪。不过另有一些投资经理坚称，这种短期回落不足为虑，从长远来看，REIT股票必然获得其应得的重视，由冒险性的替代投资品种转变为任何投资者的投资资产中不可或缺的一部分。
