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Reits revival talk may just be whistling in the wind

Reits have taken a severe beating as property prices have tumbled. Yet there is little agreement about where the bottom of the market lies. Reits cheerleaders are still talking up their recovery prospects, but is talk of a renaissance premature? Julian Marshall reports.

Diamonds in the Reits rough

Depending on which market barometer you read, real estate investment trusts are either a potentially good investment or best left untouched, even by the longest bargepole. The minute one of the sector’s standard bearers attempts to make a rallying call, almost immediately it receives another hammer blow.

Research and analysis of Reits offers vastly conflicting opinion. For instance, Standard & Poor’s third-quarter report into global property suggested Reits offered investors some opportunity. This despite, or perhaps because, in mid-November, US Reits had falled 70% from their February 2007 peak, and 58% since October 1. Picking her words carefully, Beth Piskora of S&P Equity Research wrote: "It’s been a tough real estate market but S&P Equity Research is still enthusiastic about select real estate investment trusts."

S&P still ranks some Reits with four and five stars and believes in the long term larger Reits should be set to perform well. Ernst & Young’s latest research, Global Reits: Riding out the storm, showed that Europe and Asia’s Reit markets were holding up well, posting small gains in market cap during the year, despite the gloomy conditions. Total market capitalization of publicly listed Reits around the world reached nearly $605 billion to June 30 this year, down from $764 billion a year earlier.

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