Article by Michael Lester
Stan Ross, Chairman of the board of the University of Southern California Lusk Center for Real Estate, peered into his crystal in the March issue of REITStreet magazine: "My forecast is continued uncertainty," Ross told the magazine. "As a result of that, we'll have less new development. We'll probably have a big spread between the bid and the ask, so we'll have fewer transactions closing. On the other hand, I don't see a major decline."
When asked specifically about real estate securities, Ross said, "I'm bullish on the REIT market. They're sitting with seasoned, income-producing properties. Their balance sheets are strong and cleaned up, their leverage ratios are down, and their interest rates are at the low end.... They've been very disciplined and controlled, and most of them have been making their budgets."
According to REITStreet, Ross believed REIT same-store and new development growth will flatten out this year, but he predicted REITs still may see 2 percent to 4 percent growth. And he had advice for investors looking for the diamonds among REIT stocks in 2002. "The individual investor has to really understand the difference between the types of real estate investments they can make and then the differences between the companies," he explained. Portfolio-wise, good REITs have "geographic diversification and a good, proven track record to give [investors] a high-comfort feeling." Ross advised investors to be careful about investing in REITs that are pursuing new development, smaller REITs that have yet to prove themselves and those REITs invested in "some of the more exotic stuff, like prisons or healthcare."