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Fund Managers Reflect on Benefits of REIT Approach to Real Estate Investment

06/15/2010 | By Jason C. Flynn

With banks tamping down lending, REITs should be promoting their favorable access to capital, according to Joseph Smith, managing director for ING Clarion Real Estate Securities.

Smith appeared on a June 11 panel at REITWeek 2010: NAREIT's Investor Foum® to discuss REIT investment management. He said that, in the short term, banks will continue to keep tight control over capital, making private real estate ventures less attractive. Conversely, REITs offer investors attributes that are beneficial in the current market, according to Smith.

"REITs are an enhanced and preferred way to invest in real estate. You have the transparency and liquidity," Smith said. "And you get it at a discount to what it would cost you in the private market."

Steven Brown, senior portfolio manager for American Century Companies, said investors should be reminded of the dependability of REITs in any long-term strategy. He also noted REITs' ability to remain active in a wide array of sectors, including health care, industrial, office, retail and hotels.

"Over the long haul, the last 20 to 30 years, the return characteristics of REITs—recurring income, dividend and diversification of income—have generally outstripped private real estate and many stock indexes," Brown said.

Joel Beam, portfolio manager for Forward Management, said that while REITs offer enhanced liquidity, they should be viewed as primarily long-term propositions.

"With REITs, long term, investors are getting a real estate-driven return," Beam said. "You have access to some of the best possible real estate and best possible stewardship of those assets."

William McIntosh, CIO of the Fund Evaluation Group, and David Brunette, senior research analyst with Russell Investments, also participated on the panel. For an audio replay of the session, CLICK HERE.