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REITs' gains have heightened each adviser's wariness about the sector. Joseph J. Janiczek, who had urged investors not to panic sell in April, has since gotten his clients out of the sector entirely due to what he considers unjustifiably high prices. Daniel B. Roe -- who had recommended that investors trim their holdings if they had grown beyond their minimum targets and buy selectively if prices fell -- still recommends that but even more so now than before. And James H. Kropp, who thought the price drop in April presented buying opportunities, isn't as bullish about such opportunities for all REIT sectors. "We are cautious as we find few undervalued REITs," says Mr. Kropp, managing director at Christopher Weil & Co., a San Diego-based investment manager. "The [sector] closest to being undervalued is the office sector. They probably have a downward trend in rental income for at least a year or two. That's the one sector where there might be some opportunity." As of last week, office REITs were up the least so far this year among the major REIT sectors, according to the Morgan Stanley REIT index. REITs have risen since April for a number of reasons, including the improving economy, which has led to modest increases in occupancy rates and leasing activity. There is also the continuing appeal of REITs' dividend yields, which have been higher than other investment instruments such as non-REIT stocks and bonds. The three financial planners think REIT valuations need to come down going forward, especially as interest rates rise and make other investment instruments more attractive from a price and yield perspective. REITs overall currently trade at about 19 times adjusted funds from operations, a commonly used measure of REIT earnings, compared with their historical average of 12 times adjusted funds from operations, according to Green Street Advisors. Meanwhile, the gap, or spread, between REIT yields and the yield on the 10-year Treasury has been narrowing, making REITs a relatively less compelling investment. Mr. Janiczek, chairman of Janiczek & Co., a wealth-advisory firm based in Greenwood Village, Colo., says prices would have to come down substantially enough to push yields back up and make REITs a more compelling investment. His firm doesn't tend to focus on sectors within REITs, instead investing in REITs across the board. Mr. Roe, principal of wealth-management firm Budros Ruhlin Roe in Columbus, Ohio, says investors should wait to see increased earnings -- without a corresponding gain in REIT stock prices -- before adding to their REIT holdings. "Without a significant increase in earnings from operations, then you have an overvalued sector," he says. And while some REITs are more attractive than others, he says, "there are none on an absolute basis that are really cheap." Quick Facts, Stats & Opinions Neiman Marcus' average sales per square foot is $541, well above all other department-store retailers. (Ellen Byron, WSJ 12-09) Update: Third Experiment in Stock Picking 12-17-04 A less than sector balanced portfolio is compared with the average of two REIT index ETF's: ICF [Cohen & Steers Realty Majors - the top 30 REITs by market cap] and RWR [the REIT Wilshire Index]. The first experiment went from Nov 02 to Oct 03 and the second experiment went from May 03 to May 04. This experiment continues a shift towards being over weighted in retail and having two key holdings - MLS and VNO. Earnings Guidance: CARS expects 2004 FFO of $2.52 to $2.56 a share, up from its prior guidance range of $2.47 to $2.52 a share. Thomson First Call currently targets FFO of $2.51 a share for the year. On 1-21 CARS increased its quarterly dividend to $0.4165 from $0.4140. The new annual rate is $1.666 per share. CARS also reaffirmed its 2004 annual dividend guidance of $1.70 per share. The company expects 10% to 15% of that dividend to be a return of capital. CARS on 4-13 announced that it declared a quarterly dividend of $0.4200 per common share of beneficial interest for Q1 ending 3-31. The dividend is payable on 5-20. CARS announced on 10-12 that it declared a quarterly dividend of $0.4265 per common share for Q3 ending September 30, 2004. The dividend is payable on 11-19 to shareholders of record as of 11-08. This represents an annualized rate of $1.706 per share and a 5.2% yield based on Friday's closing stock price. On 10-21 CARS announced 2005 FFO guidance of $2.69 to $2.71 per diluted share. The Company's net income per diluted share guidance is $1.86 to $1.88. CARS expects to pay its shareholders an annual dividend of $1.80 per share for 2005, an increase of 5.9% over 2004. AMB gave 04 FFO guidance of $2.30 - $2.40/share in their Q4 conference call on 1-14-04. The current consensus estimate is $2.34. AMB declared a regular cash dividend for Q1-04, of $0.425 per common share. The dividend reflects an annual rate of $1.70 per share, an increase of 2.4% over the 2003 dividend of $1.66 per common share. The dividend will be payable on 4-15-04, to common stockholders of record at the close of business on 4-5-04. UDR estimates that recurring cap-exp for 04 will be $470 per apartment home, or $0.25 per share [and UDR increased the cap-ex estimate to $510 in the Q2 call - as they continued to get 15% plus ROI on the investment in upgrades]. UDR's guidance for 2004 FFO is a range from $1.48 to $1.60 per share; and guidance for Q1-04 FFO is a range from $.37 to $.38 per share. UDR announced a regular quarterly dividend on its common stock for Q1-04 in the amount of $.2925 per share, payable on April 30, 2004 to shareholders of 4-16-04. This represents a 2.6% increase over the same period last year. On 10-25, UDR gave guidance for Q4-04 FFO at $0.38 to $0.39 per share (diluted) and $1.50 to $1.51 per share (diluted) for the full year 2004. The guidance for 05 FFO for the full year is $1.57 to $1.70 per share (diluted). OFC gave 04 FFO guidance of $1.66 - $1.71/share in their Q4 conference call on 2-11-04. The current consensus estimate is $1.69. On 9-14 OFC declared a quarterly dividend of $0.255 per Common Share of beneficial interest for Q3-04, an 8.5% increase from the previous $0.235 per share quarterly dividend. MLS increased the common stock cash dividend for Q1-04 by 5.3% to $0.595 per common share. The dividend will be payable 5-3-04 to shareholders of record on 4-23-04. MLS 2004 FFO Projection: $3.90 - $4.00. The current consensus estimate is $3.96. ARE on 3-17 declared a quarterly cash dividend of 60 cents per common share for Q1-04. The dividend is payable on April 15, 2004 to shareholders of record on April 2, 2004. The quarterly common share dividend represents a 3% increase to 60 cents per share from 58 cents per share paid for Q4-03. With one of the industry's lowest payout ratios, the Company announced this dividend increase after an aggregate dividend increase for 2003 of 16%. ARE on 6-21 declared a quarterly cash dividend of 62 cents per common share for Q2-04. The common share dividend represents a 3.3% increase in Alexandria's quarterly dividend. The dividend increase follows a 3.5% increase for the first quarter of 2004 for an aggregate 6.8% increase so far during 2004. The Company had an aggregate dividend increase of 16% during 2003. More REIT Links
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