Newspaper article THE JOURNAL RECORD

Acquisitions, Economy Spur REIT Growth In'96

Newspaper article THE JOURNAL RECORD

Acquisitions, Economy Spur REIT Growth In'96

Article excerpt

"Real estate investment trusts, or REITs, are expected to report fourth-quarter earnings increases of about 11 percent, spurred by property acquisitions and a growing economy.

Companies owning hotel and office industrial properties -- such as Starwood Lodging Trust and CarrAmerica Realty Corp. -- are expected to lead, with many recording profits at least 20 percent higher than the year-earlier period. These companies were some of the most active property buyers in the last year.

For the real estate industry, conditions have never been better. Low interest rates are letting companies raise inexpensive capital and put it to work buying high-yielding properties. A strong economy is helping fill buildings at a record pace, allowing landlords to increase rents. "It's going to be a heck of a quarter," said James Ulmer, head of Aires Real Estate Securities, a research firm in Baltimore. Earnings are about equally divided between acquisitions and rent growth, said Chris Hartung, a real estate securities analyst at Montgomery Securities in San Francisco. "We're at a stage in the recovery where companies are finally getting a balance between external and internal growth." Companies owning either apartment or retail properties, the largest part of the REIT industry, are expected to see earnings rise an average of about 8 percent, analysts said. Examples include Equity Residential Properties Trust and Simon DeBartolo Group Inc. That's in line with recent quarters and comes even as the apartment market enters the latter stages of a recovery and retail sales remain sluggish. Investors should expect few surprises. REIT earnings are predictable given their long leases. In the third quarter, PaineWebber Inc. said more than 80 percent of the 119 REITs it tracks reported earnings within 2 cents a share of analysts' estimates. A strong economy typically spurs travel, helping hotel companies quickly because they can change their rates nightly in response to increased demand. Office owners, by contrast, are locked into leases that can freeze rents until they expire. U.S. lodging profits are expected to reach a record $11. …

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