SOURCE: Rothman Research

Rothman Research

March 17, 2010 09:25 ET

Real Estate Investment Trust as Portfolio Option for Investors

JOHANNESBURG, SOUTH AFRICA--(Marketwire - March 17, 2010) - - What most new traders and even some seasoned investors don't know is that they can actually get involved with more confidence in the Financial sector's future through REITs or Real Estate Investment Trusts. Investors who trade REITs either purchase shares on an open exchange or through real estate mutual funds. Most of the time, REITs engage in commercial structures like hotels, apartments, buildings like shopping malls and commercial space. Occasionally, REITs will invest in one field of the real estate -- shopping malls as an example. However, REITs very often just focus on one area, region, or country. This set-up alone makes investing healthier for those who are interested in real estate. Most investors investing in REITs would say it is a liquid, dividend-paying means of participating in the real estate market. "We have given the finest appraisal to companies with strong balance sheets," states David Cowan senior analyst at, "they also offer a lower-risk profile for investors."

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Dividends and valuations are factors seen in REITs and make it strikingly attractive for investors. The REIT qualified companies have been gaining a lot of attention due to the fact that it has fewer capital commitments and strong balance sheets. With ownership of best balance sheet names, together with some bottom fishing for attractive values that may either have the potential for takeover or out-sized returns, investing in REITs is advocated as real estate debt capital markets improve. The Stronger capitalized groups in the sector are on a better position to pursue the ambitious roads for acquisition and business development strategies. Emerging markets and alternative investment sectors continue to offer significant potential for expansion for companies like Chimera Investment Corporation (NYSE: CIM) and RAIT Financial Trust. (NYSE: RAS). Direct & free downloadable reports on these companies are readily available by signing up now at or

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Chimera is in the business of purchasing residential mortgages and other Residential Mortgage Backed Securities with the goal of collecting interest payments and eventually selling these securities at a profit. The leveraging strategy didn't work out so well over the past several years as the value of mortgage securities dropped significantly. The bursting of the housing bubble along with the financial credit crisis had a profound negative effect on Chimera. The company's liabilities did not change with the crisis, but the value of its assets plummeted sending the stock from a high near $20 in early 2008 to a low near $1.50 at the height of the panic. Since that time, Chimera appears to have learned its lesson and is now operating with significantly less leverage.

Chimera currently holds 25% of their portfolio in agency MBS positions with the remainder in non-agency mortgages which carry more risk. But where there is risk, returns are usually higher.
At the same time, it is expected that the mortgage portfolio shall remain relatively stable and potentially incline. The low cost of funds may also allow the company to pick up additional investments at an attractive price while paying a low rate on debt.

RAIT Financial Trust manages a portfolio of real estate related assets, provides a comprehensive set of debt financing options to the real estate industry and invests in real estate related assets. 2009 was part of an ongoing transition period for RAIT as they continue to adapt their business to current economic conditions. RAIT have begun to see signs of stabilization in their commercial real estate portfolio because of increased leasing activity in their multi-family and office portfolios. Also, during 2009, RAIT expanded the operations of its registered broker-dealer, RAIT Securities, LLC, by growing its institutional fixed income sales and trading business and launching RAIT Advisory, a commercial real estate advisory business offering a range of services to financial institutions and other investors in commercial real estate loans and securities. Notwithstanding the financial crisis, company also sees opportunities to use their vertically integrated commercial real estate platform to generate new revenue streams.

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