Tag Archive | REITs

Three Real Estate ETFs Worth A Look

Despite woes in residential real estate, the commercial real estate sector appears to be showing signs of stabilization shinning a light on the iShares Dow Jones US Real Estate (IYR), the Vanguard REIT ETF (VNQ) and the iShares Cohen & Steers Realty Majors (ICF) .

In the month of July, vacancies in apartment buildings, office complexes, retails malls and self-storage facilities showed no significant signs of rising indicating that the sector could be starting to stabilize.   In fact, occupancy rates for apartment buildings are currently around 92 percent and around 84 for office buildings, much higher than a year ago.  Additionally, rents on commercial properties are no longer falling and numerous real estate investment trusts, known as REITs, are reducing debt on their balance sheets. Read More…

Triple Net Leases Give Opportunity In Commercial Real Estate

Although the majority of commercial properties continue to struggle, triple-net leases continue to be the best performing sector of the commercial real estate marketplace and will likely continue to do so, with some generating as high as double digit annualized returns. 

In general, the commercial real estate sector has taken a devastating blow as a result of the global recession.  During 2007 though 2009, the sector as a whole witnessed prices fall by nearly 40 percent, as the sector is highly dependent on and driven by  a booming economy and job creation.  However, one sector in commercial real estate that didn’t fall as hard as the others was triple-net leases; they declined in value by nearly 15 percent during 2007-2009 (the S&P 500 dropped nearly 24 percent during the same time period).

Triple-net-leases are unique in that they are long-term leases in which tenants agree to take responsibility for maintenance, taxes and insurance- the three largest expenses of a rental property. From an investor’s perspective, they have appeal because they generate returns in two ways: through price appreciation and through income.  Additionally,

A common way to play the sector is through real estate investment trusts (REITs) which focus on triple-net leases.  One such REIT is Realty Income Corporation (O).  Not only does Realty Income Corp. have a relatively strong balance sheet, it has positioned itself well against its competitors as a result of its strong sale-leaseback underwriting in the retail industry.  Additionally, Realty Income is primarily involved in triple-net leases with tenants which results in 90%-plus EBITDA margins and healthy cash flows.  Lastly, Realty Income has continues to increase its dividends year over year for the past 13 years, even during the recession, which means that the REIT is generating positive cash flow and is expected to continue to do so.  O closed at $31.53 on Monday. Read More…

Why REITs Are Drawing Attention

As the real estate market shows some signs of prosperity, real estate investment trusts (REITs) have been drawing investor attention and for good reason.

At the commercial real estate level, REITs are attractive because they offer an opportunity to a debt market that banks, insurance companies and other financial institutions are not considering.  A weak labor force, declines in consumer spending and other recessionary factors put pressure on income producing properties and increased stress on the loans that these properties supported.  In turn, this created an opportunity for REITs to lend to these income property owners.

As for residential REITs, they are drawing attention because of their record low prices.  Some investors think that the worst has past for residential real estate and are looking to buy when prices are low.  The trends in both commercial and residential REITs have enabled the iShares Dow Jones US Real Estate (IYR) to reap the benefits.  The ETF is up 94% over last year to close at $52.67 on Wednesday.  Another notable mention is the iShares Cohen & Steers Realty Majors (ICF), which is up over 100% over the last year and closed at $60.67 on Wednesday.

This attractiveness appears to be emerging globally as well.  In fact international REITs are drawing even more attention because they earn profits in foreign currencies and are enabling investors a new way to hedge against an instable dollar.  As a result, the iShares FTSE/NAREIT Global ex-US (IFGL) has gained nearly 52% over the past year and closed at $29.90 on Wednesday. Read More…

Be Wary Of Commercial Real Estate

By Kevin Grewal

As residential real estate foreclosure numbers seem to be subsidizing and rates of negative equity are easing, the residential real estate sector appears to be stabilizing, however, the commercial real estate sector seems to be a different story.

The troubles in the commercial real estate markets continue to unwind, which is evident in the most recent problems seen by the Dubai World.  In fact, some experts suggest that the default rate in speculative-grade debt will hit 12% to 14% by the end of the year, marking a 28-year high.  What makes this predicament even more unique is that it is not only the small business owner who is defaulting on payments, large companies with assets north of $100 million are as well. Read More…

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