Bears Emerge at REIT Convention

At the annual National Association of Real Estate Investment Trusts convention in Chicago, it's easy to find people bullish on REITs for the long haul. But a growing number of pundits are turning bearish for the short term, as the biggest scares for the sector continue to be rising interest rates and high valuations.

It's the "most uncertain time for REITs in five years," said Ken Rosen, chairman of real estate hedge fund Rosen Real Estate Securities, in a morning session Thursday. He said it is likely REIT stocks will decline 20% on average in 2006, hurt by rising long-term interest rates.

Rosen projects the yield on the 10-year Treasury could hit 5.5% or 6% by the end of next year. He recommends investors start hedging their real estate positions by either selling short or selling off some holdings. His hedge fund is currently 20% short residential mortgage REITs and homebuilders (which are not REITs) and 80% long apartment and office REITs. ...