News
REITWEEK REPRISE
June 13, 2011
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| With REITs like AvalonBay Communities and Boston Properties being major players in Boston, it's good to know what the sector is doing, and here's what we learned at REITWeek. REITs are on a run lately, up 125%, more than double the S&P 500, AvalonBay Communities CEO, NAREIT chair and Hingham?s own Bryce Blair said at last week?s conference where over 1,000 investors crowded the Waldorf-Astoria in NYC to hear from 100 REITs. Some NAREIT stats to chew on: the self-storage sector topped other REIT market sectors in the first five months of the year, with an 18.4% gain. Among the primary food groups: the office sector led the way with a 17.8% gain, followed by apartments (16.9%), industrial (16%), and retail (13%). Within the retail sector, regional malls drove performance with a 17.6% gain. And leading the way for investor return over the past 12 months was industrial (45.6%), apartments (38.7%), retail (34.5%), and office (29.3%). |
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| Keynoting the luncheon was Roubini Global Economics founder and NYU professor of economics Nouriel Roubini, dubbed Dr. Doom by The New York Times. (At least they bestowed him with an advanced degree in Doom.) But his outlook was only partially bleak. The bad news is about crisis in the Middle East, the Japanese earthquake, commodity prices, and an unsustainable fiscal deficit. But the market has been resilient despite several shocks to the global economy, and there are things going our way: a global economic recovery, lowered risk, corporate balance sheets in better shape, an improving CRE market, and long-term growth prospects in emerging markets. There have been talks of a global economic slowdown, but optimists are saying it's just a soft patch. Potential rough spots: painful deleveraging in the public and private sectors, unemployment, government debt, the periphery of the euro zone, and loss of competiveness in the US. |
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| AvalonBay Communities? growth has been stronger than anticipated, with FFO growth of 19% year-over-year, we learned from Bryce (right), joined by CFO Tom Sargeant and president Tim Naughton. (This will be Bryce?s last REITWeek appearance as CEO. Monday he said that he'll retire at the end of the year and Tim will become CEO.) He says fundamentals in the multifamily market continue to improve; the REIT saw 7% to 7.5% growth in rates for renewals and new move-ins. Traffic and turnover remain elevated thanks to young adults? propensity to rent, housing market sluggishness, and a lack of supply, which is still encouraging despite slowing GDP and job growth. It's a good time to put capital to work, they say—and AvalonBay has $900M in new communities under development. There's also opportunity for rental growth, as its tenants are spending 20% of their income on rent, where 21% to 22% is normal. |
