REITs Ready to Climb Out of Basement? Maybe

Real estate investment trust, or REIT, stocks are down nearly 20% this year on average--prompting one prominent bearish analyst to become a bull.

Lehman Bros. Inc.’s Steve Hash, who has been ranked as one of the top REIT analysts by several industry publications, said Monday that the worst is over and that based on historical measures, REITs are poised to rise.

REIT shares have historically rallied when the stocks traded at 9.5 times earnings or less. They are now trading at 8.3 times earnings.

The last times REITs traded at such low levels were November 1995 and October 1990. In the 12 months after, they rallied 34% and 18%, respectively.

And the average REIT dividend yield of about 8.2% is dramatically higher than the 4.7% yield on 10-year U.S. Treasury notes, compared with the historical average “spread” of 1.8 points between those two yields.

“The group has reached traditional support levels, which should serve as a catalyst for out-performance,” Hash said.

Some of Hash’s top picks are apartment owner Equity Residential Properties Trust (ticker symbol: EQR), Manhattan office building investor SL Green Realty Corp. (SLG) and hotel company Starwood Hotels & Resorts (HOT).

Starwood shares are off 47.8% from their 52-week high; Equity and SL Green, about 27%.

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