Join        Login             Stock Quote

Which REIT Stocks To Own If We Go Over The Cliff?

 December 27, 2012 04:30 PM

(By Mani) The fiscal cliff remains the biggest item on the economic agenda, and it seems Washington may not get a deal done to avert the tax hikes and spending cuts becoming law on January 1, 2013.

Deutsche Bank's Head of Government Affairs, Frank Kelly, has reduced his expectation that a deal would get done prior to going over the cliff to 40 percent from 60 percent. He thinks there is a 50/50 chance the Democrats get a smaller plan through both houses dealing with the AMT and Doc fixes as well as the Bush tax cuts, and has also been hearing increasing chatter about a 30-day stopgap to buy more time.

In this backdrop, let' see what will happen to Real Estate Investment Trust (REIT) stocks when the economy goes over the cliff.

[Related -Will The Dividend And Buyback Frenzy Continue?]

A REIT is a company that owns, and in most cases, operates income-producing real estate. They own many types of commercial real estate, ranging from office and apartment buildings to warehouses, hospitals, shopping centers, and hotels.

Apart from diversity, REITs are also investor friendly as they should pay out at least 90 percent of their taxable income to investors. That's why they carry high P/E ratios and are the favorites among income investors.

"In general, with the potential for another recession, we'd expect the ‘usual suspects' of defensive or more recession-resilient names, such as Public Storage (NYSE: PSA) and American Campus Communities, Inc. (NYSE: ACC), to hold up relatively well," Deutsche Bank analyst John Perry said in a client note.

[Related -Storage REIT Performance And Valuation Comparison]

Within retail, necessity-driven, grocery-anchored shopping centers such as Regency Centers Corp. (NYSE: REG), Equity One Inc. (NYSE: EQY) and Weingarten Realty Investors (NYSE: WRI) would be benefited.

Given solid balance sheet and increasing value-orientation through its expanding outlet center business, Simon Property Group Inc. (NYSE: SPG) may also do well.

"Apartments would likely take a hit, though a resulting recession would probably prevent home ownership rates from rebounding. We'd generally avoid office in such an environment, but if necessary, we'd go for quality, credit and lease duration with a name like Boston Properties Inc. (NYSE: BXP)," Perry added.

iOnTheMarket Premium


Post Comment -- Login is required to post message
Alert for new comments:
Your email:
Your Website:

rss feed

Latest Stories

article imageThe Long-Suffering Average Investor

Earning a respectable investment is hard. Holding it on to it is even harder, according to a variety of read on...

article image3 Stocks To Benefit From The Trillion Dollar Wealth Transfer

I will never forget what a key mentor told me earlier in my investing career, "You can chase billion-dollar read on...

article imageHow The Oil Market Could Crush These Homebuilders

Texas is the nation's largest oil-producing state. In fact, it is the world's sixth-largest oil market, read on...

article imageThe ECB Came Through on Stimulus for the Eurozone.

In last Saturday’s blog I said this week will be important in defining whether this is just another read on...

Popular Articles

Daily Sector Scan
Partner Center

Related Articles:

Jobs Report Quells Taper Talk
More Articles on: Finance , Real Estate

Fundamental data is provided by Zacks Investment Research, and Commentary, news and Press Releases provided by YellowBrix and Quotemedia.
All information provided "as is" for informational purposes only, not intended for trading purposes or advice. iStockAnalyst.com is not an investment adviser and does not provide, endorse or review any information or data contained herein.
The blog articles are opinions by respective blogger. By using this site you are agreeing to terms and conditions posted on respective bloggers' website.
The postings/comments on the site may or may not be from reliable sources. Neither iStockAnalyst nor any of its independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. You are solely responsible for the investment decisions made by you and the consequences resulting therefrom. By accessing the iStockAnalyst.com site, you agree not to redistribute the information found therein.
The sector scan is based on 15-30 minutes delayed data. The Pattern scan is based on EOD data.