Looking for a way to invest your money? Real estate could be the answer.
An index of equity real-estate investment trusts (REITs) kept by the National Association of Real Estate Investment Trusts delivered a stunning total return - 21.6 percent - in the year's first quarter.The six open-end real-estate mutual funds returned 15.2 percent, on average.
Between November 1990, the bottom for REITs, and March 31, NAREIT's index soared 102 percent.
Can REITs keep it up? Short term, perhaps not.
Over the longer term, though, some experts believe the REIT game hasn't even reached halftime.
Samuel Lieber, manager of Evergreen Global Real Estate, contends that REITs as a group are selling at 25 percent to 30 percent more than the value of the properties they hold.
Share prices anticipate a recovery in rents and values that may not be realized for years, he says.
Declares Barry Greenfield, manager of Fidelity Real Estate fund: "Real estate in 1993 is where stocks and bonds were in 1982," when the great bull market of the '80s got under way.
Fundamentally, there are two compelling arguments for REITs.
First, a long decline in real-estate values seems over - or just about over.
Second, REITs can buy bargains today because most of their competitors for property are on the sidelines.
With banks, thrifts, insurers, limited partnerships and foreigners out of the way for one reason or another, "REITs are taking non-distressed real estate away from distressed sellers," says analyst Burland East of Kemper Securities.
REITs are picking up properties so cheaply that their immediate yields from rental income exceed their cost of capital.
REITs are sold by brokers and traded on the stock exchanges.
The six real-estate mutual funds include Cohen & Steers Realty (one-year total return, 42 percent; 800-437-9912), Evergreen Global Real Estate (36 percent; 800-235-0064), Fidelity Real Estate (34 percent; 800-544-8888), PRA Real Estate (41 percent; 800-441-6580), Templeton Real Estate (18 percent; 800-237-0738) and United Service Real Estate (7 percent; 800-873-8637).
As with any sector fund, real-estate funds carry above-average risk. In 1990 these funds lost anywhere from 9 percent to 24 percent.