With modest economic growth and an extended bull market in stocks, is this the time for Real Estate Investment Trusts (or “REITs”)?
REITS FOR TODAY’S MARKET ENVIRONMENT
“We like what we see on the ground,” Griffin Capital Chief Economist, Dr. Randy Anderson told Fox Business in August. “Occupancy rates are strong, vacancy rates are low, so we’re seeing good, strong fundamentals and strong NOI (net operating income) growth.”
Also, REITs are attractively valued. “A lot of the REIT market is undervalued, trading at approximately two percent below net asset value, but you have some companies in the retail sector trading double digits below net asset value, you’ve got the office sector trading at double digits below net asset value and we also like industrial, even though it’s trading at a slight premium,” said Dr. Anderson.
WIDEN YOUR INVESTMENT OPPORTUNITIES
Investing for your future? Stocks, bonds and mutual funds are not your only options. To reach your financial goals, you may need to go beyond traditional investments. With more than 20 years of helping investors build better portfolios, Griffin Capital, a leading alternative asset manager with nearly $11 billion in assets under management, believes real estate should be a core holding in the portfolio of every investor.
Often seen as hybrid of stocks and bonds, real estate has been used by institutional investors and ultra-wealthy individuals for decades to generate consistent income, realize growth of capital and to diversify investment holdings. While the high costs of buying properties may make real estate investing prohibitive for many individual investors, REITs offer an efficient way to invest in real estate without high capital requirements. With REITs, investors also don’t have to manage and maintain the properties themselves.
WHAT’S A REIT?
A REIT is a professionally managed company that pools money from investors and uses those funds to build a portfolio of income-producing properties. Investors that purchase REIT shares receive ownership interest in the portfolio and receive income (paid monthly or quarterly) from rent payments of the leased properties and capital gains from the profit realized in property sales.
REITs may purchase various types of properties, including office buildings, warehouses, apartment buildings, healthcare facilities, data centers and self-storage facilities. Depending on its objectives, a REIT may own just one type of property (e.g., office buildings) or it may own several types of properties.
TYPES OF REITS
REITs that purchase properties are known as equity REITs, which are the most popular of the three varieties of REITs. There are also mortgage REITS, which provide direct financing to buyers of real estate or purchase mortgage-backed securities. Mortgage REITs generate revenue from the payment of interest from borrowers, which are then passed on to investors. A third variety are hybrid REITs, which are a combination of equity and mortgage REITs.
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