At the end of the year, business journals all over the country began evaluating the performance of REITs in the 2009 markets, and forecasting what is to come in 2010. The Wall Street Journal published an article predicting that 2010 will be a more stable year for real estate markets, and noting that REITs (real estate investment trusts) continued to do well in 2009, showing their strongest performance since 2006. The Seattle Times called REITS "some of the decade's best investments." Forbes, as well, weighed in, noting in mid-December that while REITS were risky, careful investors could still do well. Over the weekend, the New York Times jumped on the bandwagon as well.
Most analysts quoted in the media have recommended self-storage as one of the least risky REIT options available going into 2010. Analysts also recommended REITs focused on apartment buildings, shopping centers, and hotels. Toward the year's end, two California-based REITs took the advice of analysts and added more self-storage facilities to their own portfolios. Late in December, Bancap Self Storage Group brokered the sale of a Hesperia self storage facility, and Strategic Storage Trust, Inc. (SSTI) bought two Pittsburgh self-storage facilities.
Talking to Times reporter Robert Hersey, Mike Kirby (the chairman and research director of Green Street Advisors, which specializes in REITs), characterized the 2009 REIT market as follows, "We went from a near-death experience to a shocking investment recovery." The improvement in the market was good news for entrepreneurs running self-storage businesses, but not such good news for investors hoping to buy at low prices.
Kirby and other analysts talking to the Times noted that REITs may no longer be available at bargain prices, but they are still a good investment. Kirby called the market "on the pricy side of a fair range." Analysts advised, though, that investors approach REITs with caution. "Be very selective," says Scott Robinson of New York University, who teaches about real estate markets. He advised investors to "look for management teams that have been around for a few recessions."
Analysts are also recommending that investors choose newer REITs over older ones. Many of the older REITs are overleveraged and may have a difficult time refinancing their debts. REITs together carry some $1.5 trillion in mortgage debt. All of it will be coming due within the next four years.
Investors can buy shares of REITs directly, if they choose to. However, for individual investors, it may be safer to invest in mutual funds and exchange-traded funds that buy REITs. Because these funds also buy other kinds of shares, the REITs in their holdings subject the fund investors to less risk. Public funds and REITs also typically will offer individual disclosures of their property holdings.