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No. of Recommendations: 5
Is there a good Internet website for REIT valuation models and supporting data? For non-REIT stocks, I have become a fan of the "Fed Model" as a yardstick for forming an opinion on the present undervaluation/overvaluation of the S&P 500 (S&P's yield, based on forward expected earnings, compared to ten-year Treasury yield), and the charts and current data for that are all easily accessible (for free)at the Ed Yardeni/Prudential investor site (http://www.cm1.prusec.com/yardweb.nsf/(YardeniHome)?OpenAgent).

I am hoping that sometting similar exists for REITs, either free or not-too-expensively priced.

I have allocated a large portion of my portfolio to REITS this year, mainly looking for stability and income, and I'm happy I've done so. (I have made a similar but smaller shift into the energy master limited partnerhips.) I love REITs long-term, but I'm thinking it may be time to consider reducing my present hefty allocation, maybe over the next six to twelve months, as interest rates rise.

I am particlalry concerned about the lower-growth/higher dividend REITS, which I think might be more sensitive to rising rates. My concerns at the moment are that (i) REITS have had a good run since early 2000, with interest rates mostly low or falling, (iii) dividend and AFFO yields on REITs have fallen, as prices/interest-rates have risen fatser than AFFO/dividends, (iii) the Fed will start raising rates in mid-2004 or earlier, possibly pushed along by increasing pressure on the U.S. dollar, and(iv) as the economy picks up momentum, and interest rates rise, REITs can have a rough patch, as they seem to have done in the early-middle stages of the last recovery, when rates started rising in 1994.(There's always the 1998-1999-style bear market to look out for as well, but I don't think we are yet close to that frenzy of dumping steady-yield investments for alleged hyper-growth investments).

I've seen commentators, on this board and elsewhere, use or refer to at least three REIT models, such as (i) Dividend Yield compared to an average historical spread over 10-year Treasuries, (ii) AFFO Yield compared to historical spread over Treasuries (or historical multiples of AFFOs), and (iii) ratio of property NAV to market price of REIT shares. (I would welcome comments about additonal yardsticks/models).

I'm not looking to any of these models as a crystal ball. They each seem to have some value. I just want to have some ongoing indicators and yardsticks as to how fully REITs are priced ..... based on historical prices and yields. Right now, I intuitively feel, in my humble amateur opinion, that REITs prices can't rise (or long-term remain) beyond some reasonable minimum spread of REIT yields (perhaps measured by the expected forward year's AFFO) over 10-year Treasury yields, but I don't have any charts or hard data to back that up. It also seems like some of the faster-growing REITs, like Centerpoint (CNT) which is one of my favorites, have done better during times of rising rates and economic growth, but I would like to find some valuation models to test that theory as well.

(I've seen a lot of commentary that hotel and office REITs will do better in a growing economy, in the same way as cyclical stocks, but I'm trying my best to stay away from all highly cyclical shares).

The NAREIT website has some useful historical information on the didvidend yield of the NAREIT index, but nothing approaching the undervaluation/overvaluation charts and data available for the "Fed Model" for non-REITs stocks, at places like the Yardeni/Prudential site.

I'm just an ordinary investor, and not an analyst or a statistician. I need to find or pay for good research. With the increasing interest in REITs, I have to believe belive that this information is available to the public somewhere. Every day, my email inbox is inundated with multiple offers for paid subscriptions to every conceivable type of valuaton-model or timing-indicator for non-REIT stocks. Where is the data on REIT models and valuations?

EOM











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