The income certainty of real estate investment trusts could make them attractive again as the yield squeeze eases and questions remain about direct property.
Better times could be coming for real estate investment trusts as a worsening economic outlook raises the appeal of defensive stocks, according to Macquarie analysts.&
But there could also be opportunities if the macroeconomic environment turns for worse, Macquarie analysts have written in a client note. “Provided a recessionary event does not coincide with a material widening of credit spreads, this should result in a reduction in borrowing costs, aiding the performance of the real asset classes such as REITs, in our view,” Macquarie analysts wrote.Property stocks with greater earnings certainty, such as shopping mall owner Vicinity Centres, industrial powerhouse Goodman and childcare centre landlord Arena REIT are favoured by Macquarie.
Jefferies picks include mall owners SCA Property and HomeCo Daily Needs REIT along with office landlord and fund manager Dexus, given its exposure to the Sydney office market, its stock’s heavy discount and its take over ofWith all the uncertainty over growth in earnings and asset values, investors and analysts will be paying extra heed to balance sheet strength, free cash flow, and debt costs during the upcoming reporting season.
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