REITs: What Does the Future Hold?

It is generally accepted that Real Estate Investment Trusts (REITs) move inversely with interest rates. This is due to the notion that they are alternatives to fixed income securities because by definition REITs must pay out most of their earnings in dividends.

This has some folks worried because many believe the Federal Reserve will be raising interest rates relatively soon, inciting a flight of capital from REITs to bonds. Some disagree, however.

Critics would argue that interest rates are just one of many factors that play into REIT pricing, and in a healthy economy (which includes rising interest rates) these factors would wash out any negative effects of interest rates. Occupancy across all property types is at record highs, demand is strong and NOI across all property types is expanding. The total average return for real estate stocks in 2014 was 32.3 percent, the highest since 2006, compared to a relatively meek S&P return of 14.9 percent. Of course, we won’t know what the future holds until it’s behind us, but many factors point to continued growth in real estate and real estate securities. 

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Nick Banks

Nick created Front Street Commercial Real Estate Group in 2002 and spent the first eight years developing and acquiring office and retail projects in South Florida as well as North Central Florida. In 2010 the focus of the firm was shifted to primarily serve third party clients and perform brokerage, property management and mortgage banking functions. Nick has personally developed and acquired nearly 200,000 square feet of office and retail properties in markets throughout Florida. Prior to founding Front Street, Nick was the Director of Finance and Dispositions for Stiles Corporation in Fort Lauderdale where he financed and sold over $500 million in commercial real estate. Before joining Stiles, Nick was an Associate Director at GE Capital Real Estate where he sourced over $200 million in financing throughout Florida. Nick is a graduate of the University of Florida with a degree in Finance and a concentration in Real Estate. He serves as a board member and current vice-chair for the United Way of North Central Florida where he also chairs the Development Committee. Nick is actively involved with the Gainesville Area Chamber of Commerce where he serves as a board member and committee member for the Council for Economic Outreach. He is also a recent graduate of Leadership Gainesville which is a year long leadership program hosted by the Chamber. He is a member of Grace United Methodist Church where he has served as finance chair and as a member of the leadership council. Nick serves as an advisory board member of the University of Florida Bergstrom Center for Real Estate Studies. Nick was recently named chair of the Gainesville committee for the North Florida chapter of Urban Land Institute (ULI). He is a licensed real estate broker in the State of Florida and is a long time member of the International Council of Shopping Centers.

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