TORONTO — The beaten-up REIT sector got a ringing endorsement last Wednesday from Ben Stein, the author, actor and economist best recognized for his role as the humourless high school teacher in Ferris Bueller’s Day Off.
“I’m buying all [the REITs] I can get my little paws on. These are God’s gift to retirees,” Mr. Stein said in a keynote speech at CIBC World Markets Inc.’s annual North American Real Estate Equities conference in Toronto.
Despite their depressed market values, many U.S. and Canadian REITs are generating good yields, something that is becoming more critical as the wave of baby boomers in North America nears retirement, said Mr. Stein, whose career also includes stints as an economist at the U.S. Department of Commerce, a lawyer at the U.S. Federal Trade Commission and teaching posts at various U.S. universities.
The bulk of Americans do not have pension plans or adequate retirement savings, and should be looking at this “best income producing, most-fabulous” asset class while the REITs are a bargain, he added.
The S&P/TSX Capped REIT Index has bounced back from a low hit in January, but is down 4.6 per cent year-to-date, and 18.3 per cent from a year ago.
While Wall Street has taken on the atmosphere of a “casino” as of late, long-term investors who are buying trusts for income rather than capital appreciation shouldn’t be scared off the markets, Mr. Stein said in an interview following his speech.
During his presentation, Mr. Stein also lambasted U.S. politicians and regulators for the “nightmare” in the U.S. subprime mortgage and credit markets. Deregulation of the financial industry is the culprit behind the current credit crunch, and also the root of the tech bubble, the U.S. savings and loan crisis and the collapse of the junk bond industry, he said.
While the bail-out of Bear Stearns Cos. Inc. was necessary to protect investors, it should also spark greater regulation of industries, including investment banking and hedge funds, he said.
Sophisticated investors are now likely eyeing products such as structured investment vehicles (SIVs) and collateralized debt obligations (CDOs), Mr. Stein said.
“They are so oversold and there is so much money to be made from them,” he said.
Mr. Stein said he’s guessing one investor eyeing these assets could be billionaire Warren Buffett. On one visit to the Oracle of Omaha’s office Mr. Stein said he saw a collection of framed notes, which Mr. Buffett told him he had made during his failed attempt to purchase collapsed hedge fund Long Term Capital Management in the 1990s.
Mr. Buffett likely would have made billions on that portfolio, and a similar opportunity could now exist in the asset-backed securities sector, Mr. Stein said.
Click here for an updated list of Mortgage REITs, including current yields
Click here for an updated list of Apartment REITs, including current yields
Click here for an updated list of Office REITs, including current yields
Click here for an updated list of Retail REITs, including current yields
Click here for an updated list of Industrial REITs, including current yields
Click here for an updated list of Storage REITs, including current yields
Click here for an updated list of Healthcare REITs, including current yields
Click here for an updated list of REIT dividends being paid in stock, including current “yields”