David Henry, retired vice chairman, president and CEO of real estate investment trust Kimco Realty and co-founder of Peaceable Street Capital, last month said that the future of the REIT industry "looks very bright."
Henry's remark came even as some REIT observers were expressing concern over the Federal Reserve's decision to raise interest rates. These observers say that the increased cost of borrowing will slow the development and sales of property. There are also concerns about tax reforms that could affect REITs.
But the rate increase and possible tax changes are unlikely to leave deep wounds. Many REITs hold some of the world's most valuable properties. Moreover, REITs have the ability to thrive in times of economic uncertainty more than other investments.
The recent inclusion of real estate as the eleventh sector to be traded underscored REITs' rising status and increased awareness among investors. Henry said that the industry has benefited from strong management and solid assets.
"I think there is a number of reasons REIT investments will continue to be strong," said Henry. "The basic case for REITs remains the same: We invest in hard assets, which -- even if inflation comes back -- we want hard assets as an inflation hedge. We are very transparent; you can pick up most REIT annual reports and look at every single property they own. The address is right there. The balance sheets are very conservative; most REITs are leveraged less than 50%."
Henry added: "Getting the generalists in would give all of us a lift on our multiples."