Moderate recovery best scenario for real estate stock holdings

According to the National Association of Real Estate Investment Trusts, a broad-based but moderate economic recovery would be the most promising scenario for real estate stocks in 2002.

"When you look at the forecasts for investment performance that have been compiled by Wall Street analysts, what you find is that most are looking for total returns in 2002 of between 7 and 10 percent," said Michael R. Grupe, NAREIT's senior vice president, research and in-vestment affairs.

Grupe, who spoke during the association's recent industry forecast briefing, added, "Not only would that avoid undue pressure on interest rates which affects the operating costs of companies, but it would also help to stabilize the demand for space, principally in the primary metropolitan and regional markets around the country where the property portfolios of most publicly traded real estate companies are concentrated."

REITs outperformed other equities for a second consecutive year in 2001, with the NAREIT Composite Index posting a total return of 15.5 percent.

At the end of last year, the average dividend yield for REITs was 7.38 percent, more than 5 times greater than the average for stocks in the Standard & Poor's 500 Index.

In discussing the industry's public policy agenda, NAREIT President and Chief Executive Officer Steven A. Wechsler expressed disappointment in the Senate's recent failure to act on a federal program to ensure the availability of terrorism insurance coverage, but said he is hopeful there will be Congressional action in the near future.

According to Tony M. Edwards, NAREIT's senior vice president and general counsel, most policies up for renewal this year likely will exclude terrorism coverage.

"The large majority of our member companies did not have a January 1 renewal date," he said. "They are spread throughout the year, with June the big-gest month for renewals. For the few companies that had January renewals, however, several are having problems with certain coverage and therefore are not able to secure financing or refinancing for projects."

The House Financial Services Com-mittee is expected to hold a hearing on terrorism insurance legislation that the REIT and publicly traded real estate industry hopes will show the need for Congress to act.

In the meantime, NAREIT is cooperating with the U.S. General Accounting Office by providing information about the possible impact of a lapse in, or gap of, terrorism coverage.

The National Association of Real Estate Investment Trusts is the national trade association for real estate investment trusts and publicly traded real es-tate companies.

Members are REITs and other businesses that own, operate and finance in-come-producing real estate, as well as those firms and individuals who advise, study and service those businesses. The organization's Web site is www.nareit. com.