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Strategies & Market Trends : REITS - Buying 1 - 2 weeks before going ex-dividend -- Ignore unavailable to you. Want to Upgrade?

To: gregor who wrote (2486)	12/9/2003 10:54:27 PM
From: Richard Barron	Read Replies (1) \| Respond to of 2561

Gregor, You are correct. A 2.5% inflation rate with 7.5% bond rates would spell sharp correction for REITs. Whether this prophecy is accurate .... The are 3 more factors that are critical. They include supply/demand balance of space. Productivity increases don't translate into much more space demands, and there may be desire to build-to-suit more space that would compete with existing space. The 2nd factor is how much the REITs were able to refinance and lock in low rates. A REIT with a large % of variable rate debt will have a FFO drop as expenses will climb faster than income. The 3rd factor is market momentum. If investment and pension money wants to put a certain % into real estate - that would bode well. If momentum players dump REITs to chase the sectors that benefit from these productivity gains... watch out below. A 4th factor that is becoming real - a weakening dollar. A continued slide will lean towards US manufacturing increasing - which would provide demand for space as well as increase jobs. This would help REITs eventually. This may cause more severe inflation as the foreign exporters would have to raise prices to maintain their profits in terms of their home currency. I have been adding some blue chips with 30% or more of their business overseas, figuring a weakening dollar will help earnings. Gregor - REITs are priced at extreme FFO multiples and NAV premiums similarly to the end of 1997. That was followed by 2 years with 15-20% drops in principal. Still - it's hard to fight the tape as the ^RMS keeps running within the channel. Richard