Fools Rush In? REITs Regain
Favor, but Timing May Be Bad
REITs are popular again. Uh, oh.
Investors have shoveled $1.53 billion into real-estate investment-trust mutual funds so far this year, not far off the pace of the $3.4 billion raised last year, the highest level since REITs' heyday in the mid-1990s. The benchmark Morgan Stanley REIT Index is up 10.6% in the period. And a record number of new REIT investors -- not just the usual REIT specialists -- swamped an industry conference in New York earlier this month, according to the National Association of Real Estate Investment Trusts.
The attraction? REITs' average dividend of about 7% looks great compared with bonds and other yield-bearing investments.
But bears worry that general investors are rushing in at just the wrong time -- an old story in real estate. From their perspective, REIT share prices have drifted away from real-estate reality. The commercial real-estate market has been grim since early 2001. Rents are still falling in some markets, and vacancies -- averaging 17% in office buildings nationally -- are high by any historic measure. Leasing conditions aren't expected to improve until next year at the earliest -- and maybe not until 2005, some analysts say.
The group trades at an average of 14.4 times a commonly used earnings measure known as funds from operations, well above the 10-year average of 11.8 times, according to Green Street Advisors Inc., a Newport Beach, Calif., real-estate research firm.
And while REIT earnings are falling, REIT stocks now trade at an average of 105% to 115% of the estimated value of their assets in the private market. REITs historically have traded at about 100% of net asset values.
What's more, good news for the economy could be bad for REITs. Other stocks would become more attractive, while REIT earnings, which lag behind the broader economy, are expected to be still-mired in bad property markets. Yield chasers would flee as pressure builds on long-term interest rates.
"If cash keeps flowing in, you're going to have a lot of disappointed people," says Dave Shulman, a bearish REIT analyst at Lehman Brothers.
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Indeed, REIT shares have traded off the past few days -- dropping about 2.7% since their recent highs of mid-June, slightly worse than a pullback in the broader market. Mr. Shulman forecasts the Morgan Stanley Index to fall 8% from here to year-end.
Another downer: The federal tax bill approved last month makes REIT dividends less attractive by lowering income taxes on non-REIT dividends to 15%, while REIT investors must continue to pay as much as 35% on theirs. (A spokesman for the National Association of Real Estate Investment Trusts notes, however, that, even after taxes, REITs' average dividend will be three times as high as the average of companies in the Standard & Poor's 500-stock index.)
Bulls do have a case. Mike Kirby, a Green Street analyst, notes that continued low interest rates, combined with a sluggish economy going forward, would make REITs still look good relative to other investments. The benchmark 10-year Treasury note -- the usual comparison because REIT leases average about 10 years -- trades at a yield of 3.32%.
Also, pension funds and other institutional investors have been on a property-buying binge, paying up for property cash flows.
Their purchases have pushed down initial yields on buildings and increased the value of property that REITs have on their books.
Whether the higher prices last -- and return expectations stay low -- is matter of some debate, but Merrill Lynch's Steve Sakwa, another REIT analyst, sees it this way: "All investments have lower return expectations. Why shouldn't real estate?"
Some investing in the sector say they are looking beyond this year. "Yeah, we are in a down period as far as the property markets themselves are concerned," concedes John McCarty, associate portfolio manager of a REIT stock fund started just two months ago for buyers of variable annuities offered by Thrivent Financial for Lutherans, a fraternal-benefit society in Minneapolis with $3 billion in assets.
The fund's assets have jumped to $11 million from $5 million in the past six weeks. "We're trying to take that long-term view," Mr. McCarty says.
Still, bears note that REIT insiders are sellers -- by a 24-to-1 ratio in the first quarter, according to Lehman, which tracks transactions over 10,000 shares. While the number of 10,000-plus-share "buys" by REIT insiders this quarter is a big zero, REIT brass sold $19 million worth of stock, not including options-related sales, in the second quarter through May 23.
That is already as much as the entire first quarter. Two directors of Equity Office Properties Trust, Chicago, recently sold blocks: Craig Vought sold 70,500 shares last month, and William Wilson dumped about 109,000 shares earlier this month.
R. Scot Sellers, chairman and chief executive of Denver apartment company Archstone-Smith, sold 36,000 shares last month, while Bedford Property Investors Inc.'s chairman and chief executive, Peter Bedford, sold a total of 25,000 shares late last month and earlier this month.
Representatives of Equity Office and Archstone-Smith declined to comment, while Bedford Property couldn't be reached to comment.
Another negative: Three big REIT share blocks are poised to hit the market, including a $730 million initial public offering of shares in Maguire Properties Inc., of Los Angeles, expected to price this week
REIT重获投资者青睐
房地产信托投资基金(REIT)再度受到青睐。
投资者今年以来已经向REIT投入了15.3亿美元（而去年全年的投资额为34亿美元）达到了90年代中鼎盛时期以来的最高水平。基准的摩根士丹利(Morgan Stanley)REIT指数在此期间上涨了10.6%。有相当数量的REIT新投资者（而不只是通常的REIT专业人士）充斥了本月初在纽约举行的行业会议，这是REIT全国协会(National Association of Real Estate Investment Trusts)透露的。
REIT的魅力何在? REIT的平均股息率约为7%，与债券和其他收益型投资工具相比显得相当不错。
但是看空者担心普通投资者涌入的时机是错误的－这类事情在房地产历史上屡见不鲜。在他们看来，REIT股票价格已经偏离了房地产的实际价值。商业房地产市场自2001年初以来已经在收缩。一些市场的租金仍在下降，而全国范围的写字楼空置率平均为17%，处于高水平。一些分析师预计，出租市场环境最早要到明年才能够改善，可能还会迟至2005年。
根据房地产研究公司Green Street Advisors Inc.的数据，REIT的平均市盈率为14.4倍，大大高于10年平均水平的11.8倍。
而随著REIT利润的下滑，REIT股价已是其在私人市场资产价值估计值的105%-115%。在历史上REIT曾经交易在资产净值的100%附近。
此外，经济的利好消息可能对REIT不利。其他股票可能变得更具吸引力，而落后于整体经济的REIT利润，预计在不利的房地产市场中更加难有起色。追逐收益的投资者在长期利率面临压力下将会逃离REIT。
雷曼兄弟公司(Lehman Brothers)一位不看好REIT的分析师达夫?沙尔曼(Dave Shulman)说，如果现金持续流入，则会有更多的人失望。
的确，REIT股价在过去数天来已经下跌－比6月中的近期高点下跌了约2.7%，比大盘的回落幅度略大。沙尔曼预计，从现在起到年底，摩根士丹利REIT指数将下跌8%。
另一个不利因素：上个月通过的联邦税收方案将非REIT股息的利得税下调至15%，而REIT的投资者仍需支付高达35%的利得税，从而使REIT股息的吸引力下降。不过，REIT全国协会的发言人指出，即使是在税后，REIT的平均股息收益率仍是标准普尔500指数成份股平均收益率的3倍。
看多者也指出了利好因素。Green Street的分析师迈克?科比(Mike Kirby)指出，持续的低利率加上经济疲软的趋势持续，将令REIT仍好于其他投资。基准的10年期美国国债（由于REIT的平均租期约为10年，因而10年期国债通常用来作比较）目前的收益率为3.32%。另外，退休基金和其他机构投资者也是房地产的积极买家，为房地产提供了现金流。
他们的购买导致房屋的初始收益率下降，而增加了房地产在REIT账目上的价值。
较高的价格能否持续（即预期回报仍保持低水平）仍是一些人争论的问题，但美林(Merrill Lynch)的REIT分析师史蒂夫?沙科华(Steve Sakwa)是这样看的，他说，所有投资的预期回报都在降低，房地产的回报为什么要例外呢？
一些投资于房地产业的人士表示，他们把目光放在今年以后。一个REIT股票基金的投资组合副经理约翰?麦卡提(John McCarty)承认，他们处在一个下降时期。他的基金在两个月前开始推出，向各种退休基金的买家出售由明尼阿波利斯的Thrivent Financial for Lutherans提供的30亿美元资产。
这个基金的资产在过去6周从500万美元猛增至1100万美元。迈卡提说，他们力图把眼光放远。
看空者仍然指出，REIT的内部人士是卖家－据雷曼追踪1万多只股票的交易发现，第一季度的比例为24比1。而这一季度1万多只股票中REIT内部人士购买的数量为零，第二季度至5月23日，REIT出售了1900万美元的股票，不包括与期权相关的出售。
这一数额已经与第一季度的全部数额基本相当。Equity Office Properties Trust的两位董事近期进行了大宗沽售：克雷格?沃夫特(Craig Vought)上月出售了70,500股，威廉姆?威尔森 (William Wilson)本月初出售了约109,000股。
丹佛住宅公司Archstone-Smith的董事长兼首席执行长斯科特?赛勒斯(R. Scot Sellers)上月出售了36,000股，而Bedford Property Investors Inc.的董事长兼首席执行长彼德?贝德福德(Peter Bedford)在上个月和本月初出售了25,000股。
Equity Office和Archstone-Smith的代表拒绝发表评论，记者未能联系到Bedford Property的发言人以发表看法。
另外一个不利因素是，又有三大REIT股票的大宗出售将打击市场，其中包括Maguire Properties Inc.首次发行新股筹资7.3亿美元，该股预计在本周定价。
