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Acquisition fever has swept the normally placid world of real estate investment trusts, sending the prices of many of the best buyout candidates on unusual speculative surges.
Simon Property Group
started the buyout ball rolling a couple of months ago when it announced the purchase of discount outlet mall operator
Chelsea Property Group
at a premium that shocked a lot of people. Then, last Friday,
General Growth Properties
moved the ball further forward when it announced that it would buy
for $67.50 a share, well above the $55 the well-diversified REIT had been trading around at the time.
This turn of events is remarkable when you consider these stocks had undergone an unprecedented crash back in April, when a surprisingly positive employment report made everyone think that U.S. economic growth was advancing so fast the
would have to quickly raise interest rates. The prices of REITs fell across the board, with many of the best reaching their long-term support for the first time in years. As I
at the time, in most cases the decline was based on a false premise and represented a terrific buying opportunity.
Those April and May lows attracted meaningful new money into the sector, and REITs have since risen both on the merits of their own internal growth plus their value as a relatively safe place to hide out from the tech storms. Since July 1, the Morgan Stanley REIT Index and the
have been virtual mirror images of each other, with the former up about 7% and the latter down 10%.
In past years, of course, investors have bought REITs mainly for their large dividend yields, with any capital appreciation possibilities serving as nice bonuses from time to time. But now the prices are rising like staircases in an office REIT skyscraper. Tuesday's trading saw investors favor mall operators in particular, sending shares of
(MAC - Get Report)
up 3.25% and shares of
up 3.25%. They yield 4.8% and 5%, respectively.