Wednesday, August 5, 2009

What's Up With The REITs?

The Low P/E Bin has two REITs, one a newcomer. Both have shot up recently, as has a Canadian commercial real estate company that's also a Bin member.

The two REITs are Cousins Properties, the newcomer, and Entertainment Properties Trust. The former was up 6.14% today, and there wasn't any earnings or other good news to account for it. Cousins' portfolio is a mixed bag of commercial, muti-family residential, retail and industrial properties. After going above $10 in early June, it sunk down to below $8. After spending some time at that level in early-mid July, it's shot back up to almost $10: $9.85, to be specific.

Entertainment Properties owns and manages movie theatres. It didn't have the June spill that Cousins had; it's been in a range since mid-May. Like Cousins, though, it's shot up recently although Entertainment Properties started in mid-July. From lower than $20 back then, it got to to $31.65 today in regular trading; it gained 7.32%. That gain was largely wiped out in after-hours trading, but it's still significant when paired with Cousins.

The Canadian company, which does own a substantial amount of American commercial real estate, is Brookfield Properties Corporation. After hitting a low of about $7, at about the time that Entertainment Properties did, Brookfield has climbed up to yesterday's close of $10.66.

These companies may have been pushed up by optimism, hopes, or dreams, but the rises in their stocks suggest that the commercial real estate collapse may have been exaggerated. Brookfield does have a lot of liquidity at its command; it could be the beneficiary of a continued fall provided that its own properties aren't affected. According to its latest earnings release, it still has a relatively low vacancy rate. So, Brookfield's rise could be opportunistic.

The other two stocks make me wonder, though. Stipulating that the market may have gone recovery-manic, I still suggest that the commercial real estate sector deserves a re-look. Things may not be as bad as advertised as of now, if only because the U.S government's bailouts are now trickling through to the sector.

Warning: Betting on government bailouts is a lot more hazardous than it looks.

1 comment: