9-12-01                                                                                           Vol. 4: No. 9 RealtyStocks' Observer If you're not receiving this free monthly e-newsletter, please register. Rent a Condo for the 2002 Winter Olympics! See: ParkCityTownhome.com Monthly Feature: AFTER THE DEVESTATION A. America Under Attack B. Far Reaching Implications C. Real Estate Change D. Large Cap REIT Performance E. Equity REIT Performance F. Mortgage REIT Performance G. Realty Corporations H. Real Estate Mutual Funds (REMFs) A. AMERICA UNDER ATTACK The destruction of the World Trade Centers and an attack on the Pentagon, what seems to be something from a surrealistic disaster movie, is a catastrophe that has stunned and rocked our nation. Our heartfelt sympathies go out to friends and families who were victims of these senseless acts of terrorism. Unlike a very bad dream that is over upon awakening, this nightmare will not only remain, but has implications that will take weeks for us to grasp, and may profoundly affect us for years. There are many unanswered questions, including those specific to the incidents, but also further reaching. For instance, is this terrorism over? How will our daily lives change? Will our country become a more isolated and fearful country with less global influence?   Top B. FAR-REACHING IMPLICATIONS For a U.S. economy that has been teetering on the brink of an economic recession, the recent acts of terrorism may have pushed us over the edge. What may make the coming economic malaise more difficult is that very few of our past recessions have occurred simultaneously with other nations, a situation that is becoming more likely. Financial markets in most developed nations have declined about 30% so far this year, slightly more than the S&P 500, and are already in bear territory. Although the Dow Jones Industrial loss has held up much better, falling less than 10% through this past Monday, it is expected to come under more pressure. A very trying time is expected with markets, especially within the next few days. However, the reasonably good performance of foreign markets this morning and the generous liquidity provided by central banks should help provide some comfort when domestic financial markets open, probably tomorrow. Industries more exposed to selling pressure are expected to be insurance, airlines, financial institutions and possibly hotel and travel related firms. A few sectors viewed as more safe havens include defense and drug stocks, some commodities such as gold and oil, and U.S. Treasuries. With rates expected to fall even lower soon, it is believed that the relatively good yields still associated with REITs should provide some support for this sector. However, as in any recession, and as a result of the complete destruction of the largest buildings in the world, real estate will not be unscathed.   Top C. REAL ESTATE CHANGES It is most unfortunate to contemplate changes because of our national disasters, but we will probably be fooling ourselves into thinking that business (and life) will quickly return to "as usual" anytime soon. In the short term, firms that have some exposure to the recent catastrophe will be carefully scrutinized. In particular, these include the insurance carriers involved with the World Trade Center buildings. Also, it may also include companies that recently leased the World Trade Centers, Westfield America and Silverman Properties, and firms that provided significant financing, such as GMAC Commercial Mortgage. The financial situation with the Port Authority of New York and New Jersey, that was in position to receive a great deal of money from World Trade Center revenue, may be an issue as well. Despite the gloom associated with Manhattan office space, however, those firms with sizeable holdings in the New York City tri-state area may become more attractive. Security and surveillance firms may also benefit. In the longer term, changes upon real estate could be far reaching. The investment desirability of landmark office properties may now be different. Major corporations may also be less interested in leasing a large headquarters facility, not wanting to be too exposed in one particular building or even in one city. More emphasis may be given to teleconferencing and mobile / home work capabilities that could also lessen the desirability of office space in general. Ultimately, the viability of most other property types within our major urban areas and even our major cities could be tested. It may also make suburban office areas more desirable and even cause more out-migration from our largest cities. A great deal more contemplation will be given to the change our lives may have upon real estate. D. LARGE CAP REIT PERFORMANCE In looking at the performance of the largest REITs for August, they posted a positive price gain of 4.2%. This is larger than the overall gain for Equity REITs and makes the price appreciation for large cap REITs at 5.5% for the year. The best performer for August was Public Storage, Inc. (PSA) up 12.3%. The monthly loser was Crescent Real Estate Equities (CEI) with a drop of -2.4%, this was the only large cap to post a monthly loss. For the year, the best performers by far are still Public Storage (PSA) and Simon Debartolo (SPG) rising 36.4% and 22.1%, respectively. The biggest laggard was Boston Properties off -9.4% for the year. (Please see Large Cap REITs.)   Top E. EQUITY REIT PERFORMANCE Equity REIT prices were up 1.37% last month and only two groups were in the negative. The best performing groups for August were Self Storage and HeathCare, gaining 6.24% and 3.66%, respectively. The worst group for the month was Retail Factory Outlets dropping -6.81%. For the year, the best performing group is Health Care, up 43.99%, followed by Self Storage, Malls & Centers and Retail Regional Malls, all up between 24% and 28%. The best performing groups for August were from the HealthCare group, National Health Investors (NHI) and National Health Realty (NHR), up 25.2% and 14%, respectively. The worst monthly performers were Konvoer Property (KPT) and National Golf Properties (TEE), down -25.8% and -23.7%, respectively. The best performers Year-to-date (YTD) were Medtrust (DX) and National Health Realty (NHR), up 101.2% and 92.6%, respectively. The worst performers for the year were Banyan Strategic Realty Trust (BSRTS) and Konover Property (KPT), down -80.2% and -54.7%, respectively. (Please see Equity Gainers and Losers.).   Top F. MORTGAGE REIT PERFORMANCE Mortgage REITs posted a downward surge this month with a loss of -2.95% which makes their price for the year still positive at 45.37%. The best performing Mortgage REIT group was Residential & Commercial Mortgages down -1.56%. The best individual Mortgage REITs for August were Capital Trust (CT) and PMC Commercial Trust (PCC), up 8.7% and 8.2%, respectively. The worst monthly performers were Impac Commercial (ICH) and American Residential Inv. Trust (INV), down -25.4% and -16.6%, respectively. The best performers YTD were Novastar Financials, Inc (NFI) and Capstead Mortgage Corp. (CMO), up 170.7% and 142.1%, respectively. The worst performers for the year were Impac Commercial (ICH) and INMC Mortgage Holdings (NDE), down -66.1% and -10%, respectively. (Please see Mortgage Gainers and Losers.)   Top G. REALTY CORPORATIONS Realty and Housing Corporations underperformed REITs in August for the second time in a row with a decrease of -4.03%, but are still up 18.52% for the year. The best monthly performing groups included Developers, up 3.87% and , Property Services rising 1.7%. The worst performing group for August was OnSite Technology, down -17.40%. For the year, the Realty Corp groups vary considerably. The best groups YTD are Mobile Home Manufacturers and Construction and Engineering, surging 92.1% and 39.3%, respectively. On-Site Technology has the worst performance of any group, dropping -54.4% so far this year. The best monthly Realty Corp issues were New Mexico & Arizona Land (NZ) and US Realtel, Inc. (USRTE.OB), up 54.7% and 42.9%, respectively. The worst monthly performers were SpectraSite Holdings (SITE) and Homestore.com, Inc. (HOMS), down -49.7% and -40%, respectively. The best performers YTD were Champion Enterprises (CHB) and Cavalier Homes, Inc. (CAV), up 281.8% and 221.1%, respectively. The worst performers for the year were Tut Systems (TUTS) and Lodgian, Inc. (LOD), down -87.6% and -86.4%, respectively. (Please see Realty Corp. Gainers and Losers.)   Top H. REAL ESTATE MUTUAL FUNDS (REMFS) Real estate sector funds posted a total return average of 2.08% for the month of August. The best performers out of 122 funds were Lend Lease U.S. Real Estate, rising 3.51% and American Century Real Estate, up 3.44%. Since the beginning of the year, REMFs are at a gain of 9.23% . The best performers YTD were Kensington Strategic, Stratton Monthly Dividend and Cohen & Steers Equity with respective total returns of 24.96%, 22.85% and 17.47%. (Please see REMFs.)   Top Stock Changes - Stock Symbols Pinnacle Holdings Inc (BIGT), Franchise Finance Corp. of Am. (FFA), FrontLine Capital Group (FLCG) and Del Webb Corp (WBB) have been deleted. Stock Symbol Hudson Hotels Corporation (HUDS) changed to HUDS.OB, Interactiove Pictures (IPIX) changed to IPIXD, and Amresco Capital (AMCT) changed to AMCTE. Note: In reporting group percentage changes, stocks that were under $1 are excluded from our calculations. If a stock is under $1 for more than two months, it is subject to removal from our coverage. 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 judgment 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 ©1998-2001, WebVisers Inc. All rights reserved .