Now that the public equity and debt markets are welcoming real estate investment trusts, the publicly traded REITs have "solved a lot of balance sheet problems," said Anthony Paolone of JPMorgan Chase, interviewed on Bloomberg Television. Many REITs are well positioned to take advantage of buying opportunities presented by falling property values, he said.
As a group, equity REITs are paying out their highest dividend yields since 1990. REITs carrying relatively low amounts of debt that are able to cover dividends with cash from operations remain promising opportunities.
The economy will not begin recovering from the subprime mortgage crisis by the end of the year, says the latest Federal Reserve Beige Book, a report based on anecdotal information from economists, bank directors, market experts and other sources. According to the Atlanta Federal Reserve president, the economic sector under the greatest amount of stress is commercial real estate, and it is likely that this industry's struggles will complicate efforts to stabilize the banking system and credit markets.
JPMorgan analyst Anthony Paolone is expecting more problems for REITs in 2009. As he changed ratings for 13 companies, however, Paolone said the sector will not be as hard hit as it was in 2008, when REITs lost 38% on average.