Many analysts and experts feel that real estate investment trusts, or REITs, and REIT ETFs could be poised for a rally that resembles the heady 1990s once the market recovers.
Once the commercial property market begins to recover, real estate investment trusts, or REITs, could be the front runner for the asset class. Anton Troianovski for The Wall Street Journal reports that the recovery environment could reflect the 1990s, when many real-estate developers went public to avoid bankruptcy and helped turn real-estate investment trusts into a major force in the property market.
REITs are in a good position to profit from the commercial property bust, but the equity deals that companies made have watered down shareholder stakes in ownership. But this has left many REITs in a position to sidestep any loan defaults and benefit when the property market hits trouble.
Meanwhile, hotel shares, which are a staple in REIT investments, have outperformed the broader market. The stocks of hotel companies that are structured as real-estate investment trusts were up 11% during the past three weeks and 34% since the beginning of the year, reports the National Association of Real Estate Investment Trusts.
A.D. Pruitt for The Wall Street Journal reports that such gains far outpace the 6% year-to-date gain for all REITs and the 12% rise by the S&P 500 index. Investors are upbeat about hotel shares because improving credit conditions have allowed some hotel owners and operators to strengthen their balance sheets by refinancing debt or issuing additional stock. Some hotel owners are even walking away from some money pits and giving them to the lenders.
- First Trust S&P REIT Index Fund (FRI): up 10.1% year-to-date
- Dow Jones Wilshire REIT ETF (RWR): up 9.7% year-to-date; hotels are 6.3%
- iShares Cohen & Steers Realty Majors (ICF): up 6.1% year-to-date