REITs still on the money despite dull 4Q performance

Real Estate Weekly,  March 5, 2008  

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Continued concerns about the credit market and its impact on financial liquidity and the economy caused serious declines in REIT stocks in November and December, and in 2007 the broader markets outperformed REITs for the first time since 1999.

While last year's performance was defined by a dismal fourth quarter, the most pessimistic of predictions for 2008 will most likely fall wide of the mark, LaSalle Investment Management announced in their 2007 / 2008 US Real Estate Securities Market Review and Outlook.

LaSalle believes the magnitude of property value declines will be limited by healthy (albeit softening) fundamentals, limited construction and continued interest in real estate from institutional investors.

Furthermore, the investment manager's outlook states that the likely degree of decline in private market values is more than fully reflected in the pricing of REIT stocks today.

LaSalle's baseline forecast for the REIT sector assumes GDP growth slowing to 1--1.5 percent in 2008 and a rebound in 2009 with GDP growth returning to normalized levels of 2.5 to 3 percent. The combined strength of the global economy, export support provided by the weak dollar and strong Fed and other U.S. government action will prevent a hard landing.

Stan Kraska, Co-Head of Global Securities, LaSalle Investment Management, commented: "We see 2008 as a year when low--to moderate-leverage capital will replace highly-leveraged buyers.

"Even with increased economic problems, the real estate business in the United States remains relatively strong and we expect to see earnings of public real estate companies continue to grow at a solid rate."

Kraska continues, "We believe there continues to be a buying opportunity in the US REIT market today, and that REITs continue to offer the current income and diversification benefits, compared with other investments, which make them key to diversified portfolios."

COPYRIGHT 2008 Hagedorn Publication
COPYRIGHT 2008 Gale, Cengage Learning