Robertson Stephens Forecasts a Modestly Positive Q3 for REITs and REOCs

SAN FRANCISCO-With a flood of third quarter earnings reports on the way, locally-based investment bank Robertson Stephens is forecasting modestly positive returns in the third quarter from real estate investment trusts and real estate operating companies.

Managing director and senior REIT/ROEC analyst Jay Leupp is estimating annual FFO/share growth of between 9% and 10%, driven by same store NOI growth of between 4% and 4.5% and external growth of an estimated 2% or 3%. The effect of financial leverage will make up the difference, says Leupp.

“We are expecting above-average same store NOI growth in the apartment and CBD office sectors, average same store NOI growth in the suburban office, industrial, lodging and retail sectors, and below-average NOI growth in the manufactured home community, specialty and self-storage sectors,” says Leupp. “Assuming a stable interest rate environment and 2.5% to3.0% annual GDP growth throughout the balance of the year, we remain confident that our total return prediction of 21% to 23% for real estate equities in 2000 will come to fruition.”

Near term, Leupp sees the most promising investment opportunities in the apartment sector, the retail mall sector and the diversified sector. His Strong Buy and Buy rated stocks in these sectors include: AIMCO (NYSE: AIV), Equity Residential Trust (NYSE: EQR), Simon Property Group (NYSE: SPG), Mills Corp. (NYSE: MLS), Glenborough Realty Trust (NYSE: GLB), and Crescent Real Estate Equities (NYSE: CEI). Leupp’s leading recommendation in the real estate services sector is Cendant Corp. (NYSE: CD).

For the record, Robertson Stephens has been a managing or comanaging underwriter for or has privately placed securities of AIMCO and Glenborough Realty Trust within the past three years.