ING favors U.S. real-estate trusts despite crisis

U.S. real-estate investment trusts (REITs) enjoy strong investor support, despite the slump in U.S. property markets, because they have moved aggressively to repair their balance sheets, ING Real Estate said on Wednesday.

The U.S. REITs market is among the world's most favorable for institutional investors, able to raise equity at discounts of only 7-8 percent on current share prices, compared with 40-50 percent discounts in Australia, the UK and Singapore, it said.

Globally, REITs are tapping stock markets to bolster their balance sheets as property values fall and the world sinks into recession, but U.S. trusts have reacted aggressively, raising enough funds to cover years of debt repayments, ING said.

U.S. REITs have also placed most new issues with key investors, leaving only a minority of shares left over for a wider offering, said Chris Reich, portfolio manager for ING Clarion Real Estate Securities, part of ING Real Estate.

Typically, what they will do is bring several key shareholders over the wall, and try to lock up 70 to 80 percent of that placement in advance of making it more globally available, Reich told a media briefing.

That's allowed them to offer a much smaller discount.

U.S. REITs have also sold assets which, along with the funds raised from share issues, have generated enough capital to cover debt maturities stretching out to 2011 and 2012, he said.

Rather than raising incrementally, as was done in Australia where an equity raising was just enough to get them through to 2009, or maybe 2010, U.S. REITs are taking it out much further, Reich said.

On Australian REITs, Reich said the market was likely to consolidate through privatizations, liquidations or acquisitions.