Wednesday, April 15, 2009

A Recovery for Real-Estate Stocks

By Velida Alemic

REAL-ESTATE INVESTMENT trusts posted a 14.4% return for the week ended April 9, outperforming all major indices for the week but continuing to lag on a year-to-date basis. The recapitalization of the REIT industry continued with Ventas (ticker: VTR), ProLogis (PLD), and Equity One (EQY) all successfully pricing new share offerings this past week.

With each round of successful fund raising, the market's bearish view on REIT balance sheets has somewhat abated and investors have begun to return their focus to leasing fundamentals, which vary widely by property type and market. We continue to recommend REITs with diversification across tenants and geographically, strong dividend coverage at the cash flow level, and manageable 2009 and 2010 debt maturities. Such REITs within our coverage include Realty Income (O), National Retail Properties (NNN), EastGroup Properties (EGP), W.P. Carey (WPC), Federal Realty Investment Trust (FRT), Mission West Properties (MSW) and Liberty Property Trust (LRY).

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