VOL. 116 | NO. 196 | Wednesday, October 9, 2002
By STACEY WIEDOWER
REITs bright spot in otherwise dismal market
By STACEY WIEDOWER
The Daily News
Even with the economy in its current sag, real estate
investment trusts are having a positive year, according to data provided by the
National Association of Real Estate Investment Trusts, or NAREIT.
The NAREIT composite index is up 2.74 percent, said Chuck
DiRocco, the associations senior director for industry analysis. Thats
compared to broader benchmarks the Russell 2000 is down 26 percent, and the
S&P 500 is down 27 percent.
So, right now, REITs, in an investors eyes, seem to be a
stable, smart investment in an economy that everyone at this point is kind of
Kent Mathis, a financial consultant with AG Edwards &
Sons Inc., said with current interest rates, he suggests REITs as a way for his
clients to get some extra return without taking a lot of extra risk.
But, he also emphasizes the importance of diversification in
all investing, including REITs, he said.
If youre going to invest in REITs, you dont want to own
any one REIT, he said. Because, just like in any other type of equity
investing, you want diversification. In the world of REITs, you want to own a
housing REIT, an office or commercial REIT, and you want something in several
different parts of the country.
He said some REITs he particularly recommends are Capital
Automotive, or CARS, which is trading in the $25 range and paying a yield of
about 6.5 percent; Boardwalk Equities, or BEI, which is trading in the $9 to
$9.50 range with a yield of about 6.8 percent; and Healthcare Realty Trust, or
HR, which is trading in the $30 to $31 range and paying about 7.8 percent.
He said locally owned REITs, such as Mid-America Apartment
Communities and Equity Inns, are favorites of some local investors, but he
always recommends diversification.
For example, Kimco Realty is one REIT Ive advocated for a
long time, he said. But, as much as I think its a great company, I dont
believe you need to put all $10,000 of your CD money into Kimco. Split that up,
put $2,000 apiece into five different REITs so youre always covered in case of
catastrophe in any one market.
When selecting REITs to purchase, local investment analysts
suggest seeking companies with strong balance sheets, or not too much debt.
If you think the economy has bottomed and is coming back,
it seems logical to think that REITs have kind of weathered the worst of the
storm, and there doesnt seem to be a lot of downside for good, solid
companies, one consultant said.
And, though low interest rates tend to have a negative
effect on REIT prices, dividend payments the size of an investors checks
dont typically drop, analysts said.
I dont think its a bad thing when my yield drops, Mathis
said. I think its a horrible thing when my dividend drops.
Mathis said when analysts predict amazing growth in the REIT
market, he doesnt necessarily get excited.
I dont get excited when Money magazine says REITs are the
greatest buy in the world, and I didnt get excited when they said they stunk
back in 1999, he said.
In 1999, nobody wanted REITs everybody hated them. You
could make a fortune buying amazon.com, and REITs were boring, paying 6
percent. Well, REITs are still paying 6 percent, and amazon.com isnt doing so