Most property-owning real estate investment trusts (Reits) will begin reporting third-quarter results this week against a backdrop of spectacular industry stock rallies even as rents and occupancy rates are falling.
Will weak fundamentals finally hurt the stocks during the worst commercial real estate downturn in about 20 years? ‘Underlying fundamentals over the last year probably will show up in a more pronounced fashion probably this quarter, compared with the somewhat benign numbers of the first couple of quarters,’ Michael Knott, senior analyst at independent research firm Green Street Advisors, said.
He noted that the sector is fairly valued.
Despite weak fundamentals, the stocks have rallied, with the benchmark MSCI US Reit Index up 10.4 per cent year to date and up 90.9 per cent since the low of March 6, when capital markets were at their tightest.
Fuelling the soaring stock prices is the ability of Reits to raise capital.
From Jan 1 through Oct 19, property owning Reits raised US$19.3 billion by issuing new shares and US$7.1 billion via corporate bonds, according to research firm SNL Financial. Continue reading
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