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REITs are Smart Play in
Current Economy REIT Review News.
NEW YORK, December 27, 2006 – Reit Review.com –
As the year draws to a close, the results from Wall Street show a
clear investment winner for the year: Real Estate. Analysts at
Morningstar Inc., ranked Real Estate Investment Trust (REIT) mutual
funds as a top winner for 2006, with gains of over 30% year-to-date.
To put that into perspective, the Dow Jones Industrial index is up
approximately 15% for the year, and the Standard & Poors 500 index
has a gain of about 13%.
That probably comes as quite a surprise to anyone who has been
following the big “real estate bubble” story over the past year.
It turns out that pockets of softness in residential home prices has
had little or no impact on the typical commercial, industrial and
rental properties that REITs are predominantly invested in.
If anything, the run up in home prices over the past five years,
combined with recent reduced home selling rates have actually driven
up demand and returns in the residential rental portion of REIT
portfolios.
Recent mega-deals in the REIT market, including the largest real
estate deal ever; the Blackstone Group’s acquisition of Equity
Office Properties Trust (NYSE: EOP) for $36 billion in cash and debt
have helped to support REIT valuations across the board.
Additionally, narrowing CAP rates have also had a favorable impact
on REIT pricing.
With REIT’s paying a large portion of their income as dividends
every year, they are attractive for dividend sensitive investors and
compete for investor interest with high yielding utilities like Con
Edison (NYSE: ED), and financial industry giants like Citigroup (NYSE:
C) and J.P. Morgan Chase (NYSE: JPM).
While 2006 returns don’t create any guarantees for the future, much
of what made REITs such a success in 2006 is still present as we
head into 2007.
Barring any cratering of the economy, 2007 looks like another good
year for REITs.
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