ING Investment Management (ING IM) expects 2011 to be a positive year for global real estate investment trusts (REITs), despite the pressures from recent global events, including the earthquake and tsunami in Japan, continuing turmoil in the Middle East and the sovereign debt crisis in Europe.
"We continue to expect the primary driver of real estate company total return in 2011 to be growth in cash flow per share, although acknowledge that patience will be required at this point in the recovery, particularly given recent global macroeconomic developments," ING IM said in a report.
Earnings releases over the fourth quarter of 2010 suggested that economic recovery continued to flow through to property company earnings, resulting in improving real estate fundamentals, continued access to capital markets, strong balance sheets, moderate expansion of development pipelines and increased management confidence, the company said.
"The first quarter represents a positive step forward in reaching our projected 2011 total return guidance. We put forth a projection of positive total returns for the year in the eight to 12 per cent range, anchored by steady and growing dividends yielding approximately four per cent," ING IM said.
Asia Pacific REITs were negatively impacted by the Japanese earthquake and tsunami.
Japanese property companies were down almost 13 per cent in March, a consequence of reactions to potential property damage and uncertainties surrounding damage to nuclear power plants.
But ING IM estimates the direct damage to physical assets to be minimal, because only between one and two per cent of the assets were located in the affected areas.
Indirectly, expectations are that near term economic weakness will be made up for by heavy infrastructure spending by the Japanese government, the group said.
