From left: Equity Residential CEO David Neithercut and UDR CEO Thomas ToomeyAs nationwide residential rental vacancy rates near their five-year lows, multi-family real estate investment trusts are performing well and believe more profit is on the way. Reporting from the National Association of Real Estate Investment Trusts’ conference in Dallas the Wall Street Journal said generational factors and the weak economy are driving rental strength, and large landlords will hike rents in their portfolios as a result.

Young adults prefer to live close to city centers, UDR CEO Thomas Toomey said, and the firm’s 62,000-unit portfolio is more than 96 percent occupied. “We don’t have a problem finding customers. This is now a time when we’re just going to end up increasing rents.”… [more]

Seeking the generally higher yields real estate investment trusts produce, investors have poured an additional $3.7 billion into U.S. REIT funds this year, Bloomberg News reported, bringing the total amount of assets in those funds — including exchange-traded funds — to $96 billion, shattering the previous record of $87 billion set in February 2007.

“REITs are attracting attention because of their income, the dividend yield, and the fact that REITs do own hard assets, which offer inflation protection,” said Philip Martin, REIT strategist at research firm Morningstar. The average annualized dividend growth rate of REITs over the last two decades is 5.75 percent, according to the firm, about twice the rate of inflation…. [more]

Investors from around the world want to own commercial real estate assets in New York City. Equally important for ownership is the publicly traded and non-traded real estate investment trusts seeking opportunities in the Big Apple.

REITs like SL Green Realty, Vornado Realty Trust, Boston Properties and Brookfield Properties have significant ownership in the city’s best office buildings.

With regard to the prize asset class in New York City, the residential rental market, REITs who have dominated ownership in this market, especially in Manhattan, have included Equity Residential; Apartment Investment and Management Company, or AIMCO; AvalonBay Communities and Archstone-Smith (no longer a publicly traded REIT, although it could potentially go public again). … [more]

U.S. commercial property deals may double this year as confidence builds among investors who believe those values will rebound, Bloomberg News reported. Blackstone Group’s planned $9.4 billion purchase of U.S. shopping centers and Ventas’ proposed $5.7 billion buyout of a healthcare real estate investment trust may be a sign that a wave of commercial real estate acquisitions is coming as buyers regain confidence in the market. “Both these deals are a great signal that liquidity has returned to the commercial real estate space,” Dan Fasulo, managing director of Real Capital Analytics, said…. [more]

Real estate investment trust SL Green has acquired the remaining ownership interest in 521 Fifth Avenue, a 39-story office building with ground-floor retail space on the corner of 43rd Street. SL Green picked up the remaining 49.9 percent interest from City Investment Fund, with whom SL Green had purchased the 490,000-square-foot building in 2006. Although it was not immediately clear what SL Green paid for the remaining interest, a statement from the REIT said that “the transaction values the consolidated interests [of the building] at $245.7 million.” TRD… [more]

“We think 2011 will be another pretty good year” for real estate investment trusts, Paul Puryear, director of real estate research at Rayond James, told CNBC in the video above.
“The sector is very cyclical… We’re looking for 10 to 15 percent [in returns] this year.” However, attorney Adam Leitman Bailey noted that although REITs can do very well, “overall, the market is trashed,” he added. “This could be the greatest buying in history of commercial real estate… if you have cash. There are a lot of deals to be scooped up, just noone can afford them.” According to Puryear, the mortgage market is starting to reconcile itself and cap rates are going down. He also predicted that 2011 would be a better year than 2010, “but not great,” in terms of REITs making investments.

Despite bleak market conditions, mutual funds and exchange-traded funds in the real estate sector have rebounded during the past year, the Wall Street Journal reported. Real estate has been the top-performing U.S.-stock fund category this year, through August, with a 13.7 percent total return, according to Morningstar, compared with a negative 4.6 percent for the Standard & Poor’s 500-stock index over the same period. Real estate funds typically invest in commercial real estate and multi-family — not single-family — housing. They also tend to concentrate on real estate investment trusts, or REITs. Whether or not real estate funds will continue to remain strong depends on the economy, though government officials have expressed concern that the recovery is stalling. “Real estate is a leveraged play on the U.S. economy,” said Timothy Strauts, a Morningstar analyst. “If we go back into a recession, real estate will fare worse” than the broad stock market, he said, but if the economy “continues to slowly grow, real estate will continue to lead.” [WSJ]

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Although New York’s commercial real estate market will likely rebound faster than markets in most other parts of the country, the fundamentals are still weak and real estate investment trusts should not simply count on the economic recovery to lift their results, according to a new white paper released this week by Grant Thornton, Crain’s reported. The white paper notes that many real estate companies that performed well prior to the recession are not guaranteed to be equally strong performers post-recession. Much of this divergence is due to REITs diversifying their real estate portfolio without properly understanding the new markets in which they were entering. “Just because a company goes into the real estate market on top at the beginning of the cycle doesn’t mean it’ll come out of this slump in the same position,” said Paul Melville, the author of the white paper and a partner at Grant Thornton. Although fundamentals are soft, Melville predicts that 2011 will be better for the commercial real estate market and for those REITs who are proactive with their investments. [Crain's]

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A major hotel real estate investment trust and subsidiary of Lehman
Brothers Holdings has filed for bankruptcy protection in New York,
after buckling under $1.42 billion in debt, according to the Wall
Street Journal. Innkeepers USA Trust currently owns more than 70 hotels
across 19 states, many of which ran under widely known brand names like
Marriott, Hyatt and Hilton. The Palm Beach, Fla.-based REIT aims to
eliminate around $700 million worth of debt through the bankruptcy,
experts say. The news comes on the heels of a rocky relationship with
one of its brands, Marriott, which threatened to remove its name from
23 hotels in the REIT due to a perceived lack of upkeep. Innkeepers and
Marriott ultimately struck a deal on June 25. [WSJ]

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A glut of real estate investment trusts are going public in the coming weeks, buoying optimism that national commercial real estate prices could see a short-term boost, according to National Real Estate Investor. The hope is that these REITs will continue to rake in capital through the end of 2010, which would, in turn, be funneled into the battered commercial market. … [more]