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The latest FactSet podcast with NAREIT addresses how REIT performance compares to the rest of the Real Estate sector

Wednesday, July 29, 2009

FactSet's last podcast in our series featuring NAREIT addresses the fluctuating performance of real estate investments. Meredith Despins discusses how REIT performance can be a leading indicator for the behavior of the sector as a whole.

In our third and final podcast with NAREIT, we sat down with Meredith Despins, Vice President, Investment Affairs and Investor Education for the organization. In the interview, Despins discusses the disparity between performance in REITs and performance in the real estate market in general, including the private markets.

Despins also discusses how the price swing we’ve seen during the recession mirrors the historical period in 1989 and 1990,

"There are some similarities between what we’re seeing today and what went on in the last major downturn in the commercial real estate market, when equity REIT prices peaked in August 1989, troughed in October 1990, then recovered fully by March 1991. Whereas on the private side prices peaked in the third quarter of 1990, didn’t trough until the fourth quarter of 1992, and then didn’t fully recover until the second quarter of 1995."

As REITs recover from their 72% price drop, Despins says the rest of the real estate market is likely to lag behind based on this historical trend,

“So what I mean by that is that REITs tend to complete their downturns very quickly and then recover very quickly, whereas on the private side of property values, property values tend to take a longer time to both reach their bottom and a longer time to recover from them. …In particular the private market tends to reach it peak roughly 12 months after the REIT market reaches its peak. And the private market tends to reach its trough not until about 30 months after the REIT market reaches its trough.”

Despins also addresses the ways that REITs and real estate investments can complement one another in an investment portfolio and addresses major trends in real estate performance over time.

Listen to the full interview to hear Despin’s comments on the way refinancing will occur moving forward and how other additional government programs can help the process. You can also listen to the podcast in iTunes. You can also read a full transcript of the call.

FactSet’s goal is to provide our users and the public with perspectives and insights into the topics that drive financial markets. Through our podcast series, we offer a range of interviews with experts both from inside our company and from among our clients and partners.

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