REITs Improve
REITs Move Off Bottom, Can Commercial Real Estate Be Far Behind?
Source: costar.com
"Data from the National Association of Real Estate Investment Trusts (NAREIT) clearly show that investors have smiled on REITs so far this year. There were 45 secondary equity offerings in the REIT industry in 2009 through May 31, which raised $14.2 billion. In May alone, 18 secondary equity offerings raised $5.3 billion. By comparison, there were 76 secondary offerings in all of 2008 raising about the same amount.
This was greeted as very good news indeed by commercial real estate observers, as REIT share prices historically lead direct commercial property values by approximately five quarters, and the trough in the current market cycle may have been reached in early March, NAREIT reported. REIT shares fell 75% from the industry's peak in February 2007 through this March 6. But from that point through the end of May equity REITs were up 58%, led by double-digit gains from lodging and commercial financing REITs."
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One item to note in the REIT market is that they account for roughly one tenth of the commercial real estate market. One expert felt a portion of the market found its bottom. We'll have to watch the market and follow the recovery of this sector.
Leverage is an important financial feature of all properties and investments. I found it interesting that the article seems to think the economy hasn't bottomed out yet and the lag in the real estate sector is still on the downside.
- Christopher Mellen | Flag this comment for review