Don’t Fall for This Real Estate Myth
Morris F. DeFeo, chair of Herrick's Corporate Department, spoke to Institutional Investor about Real Estate Investment Trusts (REITs) and how inflation and interest rates can affect how they are perceived by investors. The article explained that REITs are often thought to disappoint during periods of rising interest rates. The article stated that Morris "agreed that increasing interest rates aren’t necessarily an indicator of doom for REITs." He elaborated that "the view that REITs will rise and fall based on interest rates comes from investors who view REITs as yield plays — or a fairly stable way to generate income." Morris noted that this view is "fine" but inevitably "too narrow a view of REITs."
The article highlighted that many investors seek REITs as a way to diversify their real estate investments in the long-term and thus are not as concerned about interest rates. Morris reflected, "If you’re looking at it from the perspective of an investor who wants to invest in real estate, then interest rates are significant… but it’s also an opportunity to take advantage of growing markets and growing earnings as the economy shifts in a certain way and real estate goes along with it[.]"
Read the full piece in Institutional Investor here. Access may require a subscription.