Investors Enjoy REIT Stability, Dividends
12/12/2012 | by Allen Kenney

Brian Jones, senior vice president and portfolio manager with Neuberger Berman, joined REIT.com for a video interview at REITWorld 2012: NAREIT's Annual Convention for All Things REIT at the Manchester Grand Hyatt in San Diego.

Neuberger Berman is an independent asset management firm that has been in business since 1939. The firm has $203 billion in assets under management and offer services for both individuals and institutions.

Jones said investors continue to be attracted to REITs because of their stability.

"REITs have performed very well over the past two to three years, but when we consider the prospects for REITs over the next few years, we believe commercial real estate fundamentals are likely to improve and that cash-flow growth within the REIT sector will remain strong," he said.

As REITs are likely to pass through cash-flow growth to shareholders in the form of higher dividends, Jones said investors will continue to embrace the REIT structure over the next few years.

 In 2012 he said that the biggest story has been the continuation of strong fundamentals within commercial real estate despite the economy's modest growth pace. REITs have been able to generate attractive levels of cash-flow growth, which Jones said "pleasantly surprised" investors.

Currently Jones is bullish on apartment REITs, adding that the sector potentially offers attractive long-term returns.

"There are a few demographic factors that support strong performance of the apartment rental space. The echo boom generation is in their mid-20s at this point, and that's a prime rental age," he said. "Additionally, it's still difficult to qualify for a mortgage to purchase a new single-family home."

While apartment REITs have underperformed in 2012, Jones said the strong underlying fundamentals, along with recent share price underperformance versus other sectors suggests that apartment REITs are positioned to potentially perform well in 2013.