Tags: REIT | slump | commercial | slump

REITs Fly High, Defying Calls for Commercial Real Estate Slump

By    |   Monday, 12 April 2010 02:44 PM

For months some experts have been saying commercial real estate would be the next shoe to drop for the economy.

But investors in real estate investment trusts, or REITs, obviously don’t feel that way. The MSCI U.S. REIT Index has returned a whopping 10.5 percent so far this year.

"There are favorable tailwinds in terms of real estate fundamentals bottoming," says Joseph Smith, portfolio manager for ING Global Growth Real Estate Fund.

"As the capital markets crisis seems to be over, and as these companies have recast their balance sheets, they have superior access and cost of capital advantages," he told CNBC.

Investment in distressed assets and in assets that had to be unloaded by troubled institutions has fueled the market.

"Large public REITs raised about $25 billion in cash in order to have a war chest to buy commercial real estate and other real estate assets as banks failed," Mike O'Rourke, chief market strategist at brokerage firm BTIG, told CNBC.

"The big REITs, since they had access to markets and could raise capital, they'd be the strong hand. As the weaker hands started liquidating, they'd be able to buy everything."

In a sign of the market’s strength, Starwood Capital Group, founded by real estate legend Barry Sternlicht, just finished raising about $2.8 billion of capital.

“Everyone knows of somebody who’s in trouble with something in real estate today,” Sternlicht told investors, according to Bloomberg. “It’s a great opportunity for us.”

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For months some experts have been saying commercial real estate would be the next shoe to drop for the economy. But investors in real estate investment trusts, or REITs, obviously don t feel that way. The MSCI U.S. REIT Index has returned a whopping 10.5 percent so far...
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Monday, 12 April 2010 02:44 PM
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