ATLANTA, GA– Despite the overall hardships of the commercial real estate market and the grinding economy, real estate investment trusts (REITs) have performed well in recent years and appear poised for continued success.
Those were some of the points made by show host Michael Bull (top right photo)and his guests on the most recent episode of “America’s Commercial Real Estate Show,” which provided an enlightening look at the recent history of REITs and the factors that will influence their performance moving forward.
Over the last three years, the compound annual return for REITs has been about 40 percent, compared with 22 percent for the stock market overall, noted Brad Case (middle left photo), senior vice president with the National Association of Real Estate Investment Trusts. “You’ve had much stronger performance during the upturn for the REIT industry relative to other stocks,” he said.
Part of the reason for REITs’ success is the caliber of their portfolios, noted Bull, president and founder of Bull Realty. “REITs have a great quality of properties generally - Class-A, institutional-quality properties – and those help you recover a lot faster as well,” he said.
REITs currently enjoy “tremendous and wonderful access to capital” and are also benefitting from improving real estate fundamentals, said Steven Marks (middle right photo), managing director, REITs, for Fitch Ratings.
However, the agency isn’t entirely bullish on the REIT sector, Marks explained. Headwinds in the economy are cause for concern, and “we think the sector remains over leveraged despite the degree of equity capital that’s been raised over the last three years,” he said. “We still think the sector has a ways to go before we would think about upgrading the sector [from ‘stable’] to ‘positive.’”
By contrast, Brad Thomas (lower left photo), vice president of capital markets for Bull Realty who also writes about REITs for Seeking Alpha and Forbes, applauded REITs for their “very conservative management practices.”
“We’ve seen pretty low leverage balance sheets as compared to the private sector and the developers who all were highly leveraged,” he added. “Coming out of this recession, we’ve seen REITs perform much better [than private real estate firms simply because of the conservative capital.”
Like the other guests, William Kahane (lower right photo), CEO of American Realty Capital, expressed optimism about the health of commercial real estate markets and REITs moving forward, and he also noted that his retail REIT is seeing higher quality tenants and improved income streams.
“We are seeing sales growth among our retail tenants … ,” he said. “We’ve got a very durable income stream. We now derive over three-fourths of our rents from investment-grade-rated tenants.”
The next “America’s Commercial Real Estate Show” will be available June 21 and will provide a look at the latest commercial real estate technology.
Contact:
Stephen Ursery
Wilbert News Strategies
E-mail: sursery@wnspr.com
Office: (404) 965-5026
Cell: (404) 405-2354
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