2-8-00   RealtyStocks’ Observer     Vol. 3: No. 2 Monthly Feature: Bricks and Clicks for Realty Stocks NOTE: All gains or losses mentioned in RealtyStocks are price changes only; dividends are excluded. A. Bricks & Clicks B. A Change Forthcoming C. Equity REIT Performance D. Mortgage REIT Performance E. Realty Corporations F. Real Estate Mutual Funds (REMFs) G. Tech Corner A. BRICKS AND CLICKS After ignoring technology for years, real estate companies are becoming more aware of the Internet. They want clicks with their bricks. Not only are many realty firms beginning to implement technology, some are also creating vehicles for investing in it. At a recent Real Estate 2000 Outlook conference in Los Angeles, the chief executives of several large REITs were constantly referring to "dot.coms " and explaining strategies to utilize and partner with technolgy. Just several months before at a mid-year conference, most of these same executives never mentioned the dot.com phrase, and seemed to be afraid of technology rather than ready to embrace it. A few property service companies, (Marcus & Millichap, Insignia and Kennedy and Wilson) have also announced investments in real estate tech start-ups. Others are forming partnerships with new companies and are even changing their investment strategies. An example is AMB's relationship with WebVan and its announcement that it would concentrate on industrial rather than retail properties. The motivators to change public realty companies are to become part of e-commerce rather than separate from it, to grow rather than stay static, to provide a way to retain and attract top employees, and to have a more favorable image to both investors and advisors resulting in higher stock prices. An indication of this trend occurred at BancAmerica Securities Technology 2000 conference last week where it was announced that their real estate group is starting to focus on e-real estate. Since REIT investment banking activity has slowed, this new direction in real estate will also help increase their business.   Top B. A CHANGE FORTHCOMING. What does the "bricks and clicks" really mean for real estate stocks? In a Wall Street Journal article dated Febuary 9, 1999, page C-1, the focus on this term was on traditional companies increasing or adding a technolgy focus. Examples included spin offs and tracking stocks with such companies as Barnes and Noble, Sprint and DLJ. This could also be a new trend for realty stocks. Changes in REIT regulations to allow separate operating entities effective the first of next year could also help propel this trend. Also, the traditional measures in analyzing some REITs and other real estate companies may begin to change. Although FFO growth rates in measuring REITs will not disappear, they could become less important. Since FFO rates are slowing industry wide, finding some spark for increased growth is timely. Of course, not all real estate firms will play the technology game, but those that do will learn it increases the risk - reward spectrum. Therefore, look for a new technology trend to emerge this year with some existing real estate stocks, and an increased number of new real estate technology and internet companies (RETICs) - some of which will go public soon. We plan to revise our "white paper" on RETICs within the next couple of months.   Top C. EQUITY REIT PERFORMANCE For January, Equity REIT prices were in the negative with a -0.23% return. Most property type groups, however, posted gains with only nine groups registering losses. The groups leading the way were Retail Regional Malls and Specialty, gaining 5.91% and 3.01%, respectively. The downers were the most interest rate sensitive groups, Retail Factory Outlets and HealthCare, falling -7.76% and -3.30%, respectively. The best performing Equity REITs for January were Dynex Capital (DX) and Pennsylvania R.E.I.T. (PEI), gaining 34% and 16.7% respectively. The worst performers were Omega Healthcare Investors Inc. (OHI) and Meditrust (MT), down -38.9% and -34.1%, respectively. (Please see Equity Gainers and Losers.)   Top D. MORTGAGE REIT PERFORMANCE Mortgage REITs pushes January into negative territory at -1.84%. Residential & Comc'l Mortgages posted the best mark with a 7.08% gain. The worst performing Mortgage REIT is Residential Mortgages with a loss of -5.65%. Commercial Mortgages also had a negative loss of -4.68%. The best performer YTD is Dynex Capital up 34% YTD. The bottom YTD performers are American Residential Inv. Trust and Clarion Commercial Holdings, down -19.8% and -17.7%, respectively. (Please see Mortgage Gainers and Losers.)   Top E. REALTY CORPORATIONS Realty and Housing Corporations had a loss of -2.31% in January. The best performing group is Tech Co's, up 9.10%. The groups losing the most for the month are Builders, off -8.11%, and Lodging, down -5.18%. The best individual monthly performer came from the Tech Co's group; Homeseekers.com which scored a strong gain of 58.1%. Two other tech companies, Vista Info Sol and Homestore.com, are the next best performers with respective gains of 34.5% and 31.4%. The monthly worst stocks are Sunterra Corporation and Boardwalk Equities, off -69.6% and -29.8%. Sunterra experienced recent problems with their receivables and was downgraded by both rating agencies and security firms. (Please see Realty Corp. Gainers and Losers.)   Top F. REAL ESTATE MUTUAL FUNDS (REMFs) For the first month of the new Millennium, the top fund is Phoenix-Seneca Real Estate up 4.5%. The average REMF has a total return for January, 2000, of 1.96%. Unfortunately, nearly all of this gain was registered in the first week of the new year. Within the last couple of weeks, REMFs have slowly given back much of their early gains. Although most REMFs are still investing mostly in REITs, a few are begining to invest in RETICs and other non-REITs. For example, Cohen & Steers has accumulated a position in Reckson Realty Services (RSII) which helped make one of their funds a star performer in 1999. (Please see REMFs.)   Top G. TECH CORNER The merger of Bamboo (BAMB) and IPIX is now official and the new name of the combined company is Internet Pictures (IPIX). An IPO is scheduled later this month for a ImproveNet and possibly OnSite, both new RETICs. Several other new RETICs have raised over $50 million in financing each and include HomeGain, LoopNet, PropertyFirst, RealPulse, MyHome, MakeAnOffer, etc. Some of these companies may go public later this year. Rising interest rates and some negative privacy issues has adversely affected both E-loan and Mortgage.com recently. Most other RETIC stocks have performed well in the beginning of this year, especially VistaInfo (VINF) and Homeseekers. Stock Changes: Bamboo (BAMB) has been delisted having merged with IPIX. IPIX has changed its name to Internet Pictures and its symbol from IPIXD to IPIX. Reckson Realty Services (RSII) has been added to the RETIC group. AmeriVest Properties changed its symbol from AMVP to AMV.   Top Disclaimer: The material provided herein should not be taken as endorsements or recommendations to invest in a stock, fund, a group of stocks or other securities. No guarantee can be made as to the expected performance of such investments. Investors should consult all available information, including data external to RealtyStocks and associated Web sites, and exercise own best judgement before making any investment decisions. Of the issues covered in RealtyStocks, the author has some equity positions (under $20,000 each) in Chateau Properties and VistaInfo.   Top InRealty Sponsors Inquire about our special advertising banner promotions! E-MAIL: stocks@inrealty.com Copyright © 1999, WebVisers Inc. All rights reserved .