Wednesday, 25 February 2009

REITs, Real Estate Companies in Developed Markets Seen Tapping Equity Markets to Cut Debt, According to Julius Baer

Julius Baer, the Swiss wealth management bank, says REITs (Real Estate Investment Trusts) in Australia (Westfield), the UK (British Land, Hammerson) and Singapore (CapitaMall) have begun to tap the equity markets in an effort to de-lever. In the U.S., numerous companies are paying part of their dividend in stock to protect cash holdings. Low valuations will spark a recovery in U.S. REITs by the second half . Asian REITs look attractive -- the problem is the unstable business environment there, said the bank.

''As fewer buyers are in sight due to the shortage of bank loans, as institutional investors are faced with redemptions and as leveraged investors remain absent from the market, an accelerated price decline is in the cards,´´ says the bank in its February Investment Policy report. ''In the direct market, price declines have not reached the bottom, but the sector should be halfway through the downtrend.´´ It finalises with an interesting comment about bond markets: ''Stabilising bond markets could be supportive for global real estate stocks as a near-term catalyst.´´

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