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Strategies & Market Trends : REITS - Buying 1 - 2 weeks before going ex-dividend
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To: mattie who wrote (538)12/16/1997 3:39:00 PM
From: Richard Barron  Read Replies (1) of 2561
 
Mattie,
Most of the top notch REIT's trade 12-16 x current year FFO. So top ones should trade 11-14 x next years FFO.

AGT confirmed today that they believe they can achieve the current estimate of $2.90 FFO for next year. Since they have about $2.33 FFO in the last 12 months and should do about $2.40-2.45 this year, that leaves them with 15-20% growth next year and a FFO multiple of 9 times '98 estimates. Not many REIT's will grow by 20% next year, nor will many of them trade as low as 9 x next year's FFO, so... some of the lesser known REIT's are better bargains sometimes.

Generally, the best time to enter the top notch REIT's are when they have pulled back 15-20% from their highs. This is as much as they will pull back without breaking down. A break down is only likely if there is overbuilding in that sector and a chance that FFO growth will stall out, or that a recession is arriving, which will slow down growth especially in hotels as well as in office, retail, and warehouses. If the recession is caused by inflation and the feds jacking up interest rates to slow down inflation, REIT's that have good long term mortgages will do well, since they will be able to raise rents due to the inflation.

Richard
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