Investors Buy Real Estate Firms to Beat Poor Returns on CDs Cash-Rich Real Estate Investment Trusts Take on a Larger Share of Property Financing

By David C. Walters, writer of The Christian Science Monitor | The Christian Science Monitor, January 21, 1993 | Go to article overview

Investors Buy Real Estate Firms to Beat Poor Returns on CDs Cash-Rich Real Estate Investment Trusts Take on a Larger Share of Property Financing


David C. Walters, writer of The Christian Science Monitor, The Christian Science Monitor


WHETHER real estate markets are up or down, the buyer with cash can almost always call the shots. Today real estate investment trusts (REITs) have the cash.

In a recession-pummeled, debt-loaded real estate market, these publicly traded real estate companies are finding wide-open investment opportunities to add to their portfolios of properties.

"The REIT market is going to be very active in 1993," says Stanley Perla, a partner with the accounting firm Ernst & Young in New York. REITs are producing "an initial return somewhere between 7.5 and 9 percent, depending on the type of REIT and the management and operating history.... Compare that to a 3 percent certificate of deposit."

From $9.5 billion in 1985, REITs have grown into a $50 billion industry today.

"We easily have the ability to grow five times our current size," says Mark Decker, president of the National Association of Real Estate Investment Trusts in Washington. Big returns forecast

"The larger REITs with consistent records of cash flow and dividend growth have had access to the equity markets," says Elaine Derso, an analyst with Prudential Securities Inc. in New York. They have been taking "the cash and doing spread investing - going after the properties that are in the hands of the foreclosure portfolios of banks, the Resolution Trust Corporation, limited partnerships that need to raise money - and buying at yields that are in the 9, 10, and very often 11 percent range."

Kemper Securities Inc. predicts that through 1994 and into '95, some equity REITs should produce total returns (dividends and capital gains) of 15 to 20 percent per year.

In 1992, $6.45 billion in capital was raised by REITs through initial public offerings and secondary offerings. "We're seeing the evolution of a much more stable real estate capital-formation market," Mr. Decker says.

As one of the few ongoing sources of financing in real estate today, "strong REITs are raising capital at comparatively low cost, building their portfolios, and growing their cash flow," Decker says. "This is an excellent environment for buying real estate."

"A hot area has been REITs that invest in apartment houses," says Prudential's Derso. "There has been very little construction since the tax reform act of 1986."

For investors in multifamily housing, "this is not a bad time to be acquiring well situated apartment units," says Hugh Kelly, an analyst for Landauer Real Estate Counselors. "A lot of these assets could be subject to significant appreciation."

A large part of capital formation for real estate before 1986 was driven by the demand for tax shelters. The 1986 tax laws shifted the motivation away from writeoffs toward investing for income and growth. …

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

Investors Buy Real Estate Firms to Beat Poor Returns on CDs Cash-Rich Real Estate Investment Trusts Take on a Larger Share of Property Financing
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Full screen

matching results for page

Cited passage

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited passage

Welcome to the new Questia Reader

The Questia Reader has been updated to provide you with an even better online reading experience.  It is now 100% Responsive, which means you can read our books and articles on any sized device you wish.  All of your favorite tools like notes, highlights, and citations are still here, but the way you select text has been updated to be easier to use, especially on touchscreen devices.  Here's how:

1. Click or tap the first word you want to select.
2. Click or tap the last word you want to select.

OK, got it!

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.