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Real estate shares off to a good start with REITs |
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Written by Mabelle
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Friday, 21 April 2006 |
Boston, MA, April 20—Earnings from REITs or Real Estate Investment Trusts soar 10% higher in 2006 and investors are happy. For the last three years, REITs have been a favorite—garnering 30% annually and easily outpacing stocks.
REITs are companies that own and operate commercial property portfolios. To avail of corporate tax breaks, REITs are required to pay out a large profit chunk through dividends. Investors are especially attracted to them since they are not as volatile as stocks and bonds.
The growth of REITs is partly attributable to a series of mergers and acquisitions, and financing companies pumping money into them.
Standard & Poor’s recently added shares of two REITs, Kimko Realty Corp and Boston Properties, to the extremely popular S&P 500 index. The two companies are set to report their quarterly earnings next week.
Kimko is a shopping center scheduled to release financial reports on Tuesday, with analysts polled by Thomson First Call looking for funds from operations (FFO) of 52 cents a share, up from 47 cents a share for the same period in 2005.
FFO is used to gauge REIT performance. It excludes gains or losses or losses on the sale of assets and non-cash charges for depreciation.
Following a higher occupancy rates of office real estate, Boston Properties is also set for an earnings report Tuesday. The company garnered more than 15% over the last three months.
Other S&P players are also reporting next week, including Archstone-Smith Trust (apartments), (warehouses) Pro-Logis and (malls) Simon Property Group Inc.
Wall Street predicts FFO increasing to 55 cents per share for Archstone-Smith (up from 46 cents), 55 to 87 cents per share for ProLogis, and $1.12 to $1.20 for Simon Property.
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