REIT report sees disconnect' in capital markets.AEW AEW Airborne Early Warning AEW Air Expeditionary Wing AEW Airborne Electronic Warfare AEW Agr' Eau' Wat (Canadian agricultural consultant) AEW Amckerns Explosion Wars (Half Life community) Capital Management L.P., a Boston-based real estate investment advisory firm, has released the latest AEW REIT REIT See: Real Estate Investment Trust REIT See real estate investment trust (REIT). Report, the firm's semi-annual analysis of REIT market trends. The report focuses on the conditions that precipitated the two-year decline in REIT share prices, the factors that continue to buffet the sector today, and the possible catalysts that might trigger a rebound. The report also takes note of the fact that the REIT market decline has occurred during a period when the underlying property markets have been quite healthy; when REIT earnings growth has been reasonably strong and predictable; and when values in the private property market have been increasing. "There is today a clear disconnect between the public and private real estate capital markets," according to the report, "not unlike the disconnect that occurred earlier in the decade to the advantage of publicly traded real estate." The clearest evidence of this "disconnect" is the fact that most REITs today are trading at significant discounts to the aggregate value of their underlying real estate assets. As of the end of December 1999, the typical large REIT was trading at a discount to net asset value of roughly 17 percent. This discount to net asset value, along with P/E P/E See: Price/earnings ratio multiples and current yield, are the key measures combined to produce the AEW REIT Relative Value Index, a measure developed by AEW to assess the value of REIT shares relative to other types of investment assets. The latest index values, as reported in the AEW REIT Report, indicate that "REITs are valued less dearly today relative to other assets other assets Assets of relatively small value. For financial reporting purposes, firms frequently combine small assets into a single category rather than listing each item separately. than at any point during this decade." "Given the high level of relative value in the market today, REITs should outperform the other three asset markets (large cap equities, fixed-income and private real estate) over the next 12-18 months," said Douglas M. Poutasse, managing director of AEW Research, which prepares the AEW REIT Report. "In our opinion, the companies that will lead the REIT sector out of the current doldrums are those companies that are today positioning themselves to take advantage of several secular trends sweeping the global economic stage: securitization Securitization The process of creating a financial instrument by combining other financial assets and then marketing them to investors. Notes: Mortgage backed securities are a perfect example of securitization. May also be spelled as "securitisation. , technological innovation, further globalization globalization Process by which the experience of everyday life, marked by the diffusion of commodities and ideas, is becoming standardized around the world. Factors that have contributed to globalization include increasingly sophisticated communications and transportation , deregulation Deregulation The reduction or elimination of government power in a particular industry, usually enacted to create more competition within the industry. Notes: Traditional areas that have been deregulated are the telephone and airline industries. and demographics." |
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