9-7-00                                                                                           Vol. 3: No. 9 RealtyStocks’ Observer If you're not receiving this free monthly e-newsletter, please register. Monthly Feature: The REIT Rally May Be Low On Gas A. Low On Fuel B. Election Influence C. Tech Corner D. Large Cap REIT Performance E. Equity REIT Performance F. Mortgage REIT Performance G. Realty Corporations H. Real Estate Mutual Funds (REMFs) A. LOW ON FUEL Now about six months old, the REIT Rally sputtered a bit in the dog days of August. Although REITs have outperformed about 90% of the industry sectors this year, and still have some momentum and upward potential, fuel to propel this rally may be getting low. The future of the REIT Rally is subject to numerous factors. Focusing on some of these near term items, REITs are negatively correlated to the performance of NASDAQ and technology stocks. It has become almost uncanny how REITs drop when tech stocks go up and vice versa. The overall REIT decline of -2.5% in August may be largely attributed to the comeback in technology shares this past month. However, should tech stocks weaken, it should provide more coasting distance for REITs and increased gains. The main negative factor is that REIT dividend yields are dropping to the low levels attained near the peak in the last REIT Rally a couple years ago. Many REITs have the potential to boost their yields by increasing the proportion of their payout. If this is commonly done, it may extend the REIT Rally for a while. But as the rally continues, yields under 6%, and especially less than 5%, may endanger the lure of REITs. After all, with earnings and FFO growth seldom above 10 or 11 percent, REITs are not big growth stocks. Their main appeal is still their dividend yields. If these yields drop too low, that appeal can dissipate.   Top B. ELECTION INFLUENCE A much more controversial and subjective issue with regards to the REIT Rally will be the impact of the presidential elections. With only another couple of issues to bring this issue up in advance, a timely question is raised: Is Bush or Gore better for REITs? There may not be an overwhelming difference, but one candidate may be better for REITs than the other. Traditionally, many feel that Republican presidents are better for the stock market, although surprisingly to some, statistics prove a bit to the contrary. Critics of Gore claim that he will increase government spending, especially with regards to health care, and provide less stimulus to government expansion. Should these points be valid, the short-term effects could be more negative to health and technology stocks and REITs could become beneficiaries at first. If you have a view on whether Gore or Bush is better for REITs, simply e-mail us with Elections in the Subject, mention Gore or Bush under comments, and make any comments that you desire. If there is sufficient response, we'll post the results of this poll in the October or November issue. Take a minute and let us know your opinion!   Top C. TECH CORNER The doldrums for the stocks of onsite tech or service providers (OSPs) real estate technology, and, to a lesser extent, internet companies (RETICs), continued in August. Despite the poor public market reaction to RETICs, venture capital money from some well respected VCs are flowing into some of these start-ups. An example includes iBuilding, financed by Benchmark Capital and 12Entrepreneuring. Recent privately held RETICs in the news are REpipeline.com which expects to merge with Photonics (PHOX.OB), iPlace which presents at a Roberston Stephens Internet Conference this coming week, MyContracts.com announced a licensing agreement with CB Richard Ellis, Bid4real.com in partnership with Equifax announced an improved Web site, and the management teams have been strengthened at eOriginal which has a patented electronic original document process, and FacilityPro.com. Velocity HSI (VHSI.OB) was recently spun off from BRE Properties and is now public. With the passing of Labor day, real estate technology conferences are on the horizon. NAR is sponsoring Transact 2000 (www.4transact.org) in Chicago next week, September 14-15. Next month, PikeNet Expo (www.pikenet.com/expo/index.htm) will be held at the New York City Hilton, October 23-24, and Inman's Real Estate Connect (www.inman.com/connect/) will be held at the Santa Clara Convention Center on October 25-27. If your interested in real estate technology, these conferences are the best way to get up-to-date. You still have time to plan for the October conferences to get savings on air fares, lodging and registration.   Top D. LARGE CAP REIT PERFORMANCE For August, the 20 largest REITs, measured by capitalized market value, decreased -3.5%. This is more than double the average for all Equity REITs. The best performing large cap REITs were Equity Residential Properties Trust (EQR), rising 12.0%, and Spieker Properties (SPK), increasing 5.7%. The laggards were Simon Debartolo Group (SPG), down -12.9% and Post Properties, Inc. (PPS) down -9.2%. (Please see Large Cap REITs.)   Top E. EQUITY REIT PERFORMANCE August was nearly a complete reversal from a month earlier. All of the property groups were down, instead of up, and Equity REIT prices were off -3.61%, which negated the gain from the prior month. The worst performing group, with a loss of -9.69%, was Retail Factory Outlets. The best performing Equity REITs for August were Income Opportunity Realty Trust (IOT) and U.S. Restaurant (USV), up 40.7% and 19.9%, respectively. The worst monthly performers were LTC Properties, Inc. (LTC) and Boykin Lodging Company (BOY), down -30.9% and -30.3%, respectively. The best performers YTD were Wellsford Residential Property Trust (WRP) and Income Opportunity Realty Trust (IOT), up 125.0% and 68.9%, respectively. The worst performers for the year were Meditrust (MT) and MGI Properties (MGI), down -58.0% and -56.0%, respectively. Please see Equity Gainers and Losers.).   Top F. MORTGAGE REIT PERFORMANCE With interest rates declining, a more positive environment continued for Mortgage REITs. All property groups pushed into positive territory in August with overall price increases of 1.68%. Residential & Commercial Mortgages posted the best mark with a 2.13% gain. The worst performing Mortgage REIT group was Residential Mortgages with a l.05% gain. The best performing Mortgage REIT for August was Novastar Financial, Inc. (NFI), up 21.6%. The worst monthly performers were Imperial Mortgage Holdings, Inc. (IMH) and Apex Mortgage Capital. (AXM), down -24.6% and -17.9%. The best performer YTD is Capstead Mortgage Corp (CMO) up 104.5% YTD. The bottom YTD performers are Dynex Capital (DX) and American Residential Inv. Trust (INV), down -77.7% and -41.8%, respectively. Please see Mortgage Gainers and Losers.   Top G. REALTY CORPORATIONS Realty and Housing Corporations gained 4.7% for August. This sector was brought up largely by the strong monthly gains of Home Builders, up 21.4%. The group losing the most for the month was OnSite Services (OSPs) , down -5.10%. The best individual monthly performer was Intuit Inc. (INTU) with a large gain of 76.1%. The worst monthly stocks are Lending Tree. (TREE) and Internet Pictures. (IPIX), down -39.7% and -76.6%. The best performers YTD were SBA Communications Corp (SBAC), up 138.0% and SpectraSite Holdings (SITE), up 115.6%. For the year, the worst performers were Mortgage.com (MDCM) and Homeseekers.com (HMSK), down -83.9% and -79.5%. Please see Realty Corp. Gainers and Losers.   Top H. REAL ESTATE MUTUAL FUNDS (REMFs) The hot realty fund sector faltered in August, cooling an average of -3.39% for 108 funds. For the year, REMFs still continue to post very attractive total returns averaging 18.34 %. The top monthly performers include Alpine U.S., up over 7%, followed by Third Avenue, gaining 4.13%, and Security Capital European, up 3.02%. The best performers for the year include Kensignton Strategic, Third Avenue and SSgA Tuckerman, all up more than 24%. Please see REMFs.   Top Stock Changes - within RealtyStocks: A spinoff of BRE Properties, Velocity HSI (VHSI.OB) is now public and listed under Onsite Tech. The symbol AIC changed to ANL.   Top Note: All gains or losses regarding Realty Stocks are price changes only; dividends are excluded. 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. The author may have equity positions in some of the companies covered in RealtyStocks, which may change from time to time, and will divulge such information upon request   Top InRealty Sponsors Inquire about our special advertising banner promotions! E-MAIL: stocks@inrealty.com Copyright © 1999, WebVisers Inc. All rights reserved .