Apartment REITs: The Big Bull Market in Housing

Renters might not like it much but a provincially-mandated increase in rent-controlled Ontario is likely to be greeted with open arms by landlords, even though the hike is weak by historical standards. After only allowing an increase of 0.8% in 2014, near an historical low, the Ontario Ministry of Municipal and Housing Affairs will double that to 1.8% in 2015. Despite the increase, Mario Saric, a real estate analyst with Scotiabank, says the announced hike is still well below the five-year and 10-year averages for increases of 1.8% and 1.9% respectively.

Brad Case submits:Barron’s published an article Saturday by Andrew Bary providing specific buy recommendations for publicly traded REITs. Bary interviewed Craig Leupold and Mike Kirby, president and director of research, respectively, of Green Street Advisors, the leading equity analyst firm specializing in REITs. Here are some highlights:

Given the choice, Sam Kolias, the chief executive of Boardwalk Real Estate Investment trust, says he’ll always take low interest rates over a higher rate environment. “The (current) interest rates are much lower than the (debt) we are renewing, so that’s positive,” said the head of one of the country’s leading landlords, with 32,000 units. Kolias has the added burden of dealing with a majority of the REIT’s net operating income coming from Alberta, hard hit by falling oil prices.

Data released on Friday by state regulators showed that China’s non-performing loans rose 141 billion yuan during Q1, marking the sharpest quarterly increase on record and bringing the total to 983 billion. 

MUMBAI: Small is big. Investors and market experts worried over the tepid performance of the Nifty and the Sensex need only to look at the broader market where the picture appears to be considerably brighter. The mid-cap indices on both the BSE and the NSE have been hitting new all-time highs for the past three days while the Nifty smallcap index is at a seven-year high. The BSE small-cap index is still off its all-time high but all the four indices have been rising continuously for the past eight days, gaining 7-13.5%.

Could developers faced with a glut of condominiums turn to apartments? Real estate brokerage Rock Advisors Inc. is predicting that the number of purpose-built apartments will grow in 2014 as developers look elsewhere for income. “Everything that a condominium developer does can be applied to the building of apartments,” says Derek Lobo, chief executive of Rock Advisors, in a release.

By Brett Williams: REITs (Real Estate Investment Trusts) are a longtime favorite of many stock market investors for their typically high yields, tax-favored status, and the ability for any investor to gain an equity stake in real property. While many REITs got slaughtered during the brutal real estate crash of 2008, and many others went belly up, there have been survivors who have struggled through and may reward investors greatly in a rebounding economy.