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SHOULD INVESTORS’
ENTHUSIASM FOR PUBLICLY
TRADED REAL ESTATE BE
DAMPENED BY THE PAST TWO
DIFFICULT YEARS? ▼
See You in
2010
Holly Daly, SNL Financial: while Reits saw declines
in value, most have wisely heeded the advice to
look within their organizations. they’re reinvesting in
their properties, smoothing out any management issues
and stemming the development pipeline; in effect,
they’re strengthening their core.
all of these actions create a stronger base for responding to a flat
or slow turnaround. Some investors see this period as an opportunity to
buy Reits at a low price, figuring that prices and returns can only rise.
For more of Daly’s insights on the Reit market,
check out “Four Quick Questions”
U.S. real estate investments
should reach the bottom
of the current downturn in 2010,
according to LaSalle Investment
Management.
According to LaSalle’s
Investment Strategy Annual for 2009,
the worldwide financial crisis has
pushed commercial real estate into
“a vicious cycle of value destruction, along with virtually every
other asset class.” However,
that means bargains are coming,
according to the report.
“Markets experiencing a genera-tional correction offer as many
opportunities as threats. For investors with capital and the confidence
to look through the downturn, 2009
will provide some fantastic opportunities; the strategic approach is to
distinguish between the assets that
are genuinely attractively priced
and those that should be even
cheaper,” said Jacques Gordon,
global strategist with LaSalle.
Stocking Up
REITs’ newfound ability to at their election temporarily offer shareholders
elective stock dividends through 2009, with at least 10 percent of the total
distribution paid in cash, has implications for performance measures, taxes and
financial reporting issues.
● Financial Reporting
REITs offering elective stock dividends can choose between two accounting
treatments for reported per share amounts:
• Restate any per share amounts of prior periods presented to reflect the
shares issued under the dividend arrangement; or
• Account for the stock portion of the dividend as if it was a stock issuance
rather than a stock dividend.
● Performance
Regarding the performance measures of the F TSE NAREIT U.S. REIT Index
and other leading indexes, elective stock dividends have a neutral effect on the
price return index and total return index. However, dividend yield calculations only
recognize the cash portion of an elective stock dividend. NAREIT is developing
an alternative dividend yield series to reflect the entire dividend distribution.
tablet S: peteR Dazeley/Getty imaGeS
● Tax Issues
In general, elective stock dividends are treated as cash distributions for federal
income tax purposes.
