Independent Research firms weigh in on REITs & Investment Opportunities

Due to the struggling commercial real estate market, tumbling prices of REITs, and the current credit crisis, the real estate- focused ETFs have been hit significantly hard. In 2008, real estate ETFs posted a return on -59% and from January 1st to present -28%.  The average loss for equity ETFs was -32% and -16% respectively.  However, for investors looking for income, real estate ETFs may be the solution. Rob Ivanoff, an ETF analyst for the Financial Research Corporation explained in a recent article that, because the performance has been so horrible, the dividends are great. With dividends of 11.5%, real estate ETFs can allow for the addition of cash to portfolios.ETFGuide, a firm that provides general news and commentary on ETFs, also sees real estate ETFs as a potential investment opportunity. Co-founder Simon Maierhofer said, “If you have the staying power and room to have real estate in your portfolio, this is something to consider…If you’re going to invest in equities right now, it definitely makes sense to invest in something that pays a cash incentive.” However, he also warned, “…highest cash incentive comes with risk and if it sounds too good to be true, it often is too good to be true.”Morningstar, amongst the top 3 firms with broadest set of ETF research capabilities concurs.  Scott Burns, director of ETF analysis at Morningstar called the current real estate sector “a speculative investment, at best.”Additionally, Green Street Advisors, an independent specialized research and advisory firm focused on the real estate investment trusts (REITs), recently reported on the significantly low stock price of individual REITs. In February of 2007, REIT shares peaked. Two years later, the sector is down 75%. Mike Kirby, Chairman and Director of Research said, “I don’t think they’re table-pounding cheap- I think they finally crossed through the threshold where we’re willing to call them cheap.” Like Maierhofer and Burns Kirby warned that property REITs may or may not be a bargain. Firms will need to rescue their debt by about as much as they are worth in the stock market.The original article can be found here


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