International REITs

[samclem]

Or . . . do we REALLY need another asset class to make rebalancing a bigger headache? Still, I'm throwing the idea out there. Factors:

International: Many investors are seeking to increase their exposure to markets outside the US, believing that the these markets either hold better long-term growth potential than the US, or at least they may be sufficiently low correlation to US equity prices as to reduce the overall portfolio volatility. Also, owning foreign equities/properties valued in foreign currencies may be good thing when the dollar falls (of course, this would have been a good inspiration to have BEFORE the dollar fell--but we're talking about long-term investing here)

Real Estate: In general, a good thing to own, and a good inflation hedge. And, with the international RE markets having been battered a little over the last year or so, at least one wouldn't be buying in at the very top.

Structural Factors favoring appreciation of the asset class: The REIT model is new to many countries outside the US, and some analysts believe foreign RE prices will climb as new capital flows into the market-looking to buy RE through the vehicle of REITS in these nations. So, getting in early (now) might be a good thing.

So, opinions are solicited on this asset class/category/thang. Is it worth making an effort to get 5% of holdings into it, or is it sufficient to own international stocks and know that there'll be a few property ownership corporations in that basket. Can someone point me toward a source on correlations of this asset category with other common asset classes?

Here's a blurb on International REITS from Frank Armstrong's latest newsletter. http://www.tinyurl.com/22jl4r

This source provides information on correlations between developed-world international RE and US RE. The correlations are fairly low, so it doesn't appear that owning US REITs is a substitute for owning foreign REITs. http://www.tinyurl.com/3xqlz7

If I wanted to buy into this class, I'd probably go with Fidelity' International Real Estate (FIREX). A .96 ER, which doesn't strike me as outrageous (for an international fund that is managed). And, while it was up 42% in 2006 , it was down over 8% in 2007 and almost 5% in January 2008 alone . There's still time to jump on the plummeting elevator!

[ESRBob]

SamClem,
I love the idea of international REITs and will definitely be looking into them more with an eye toward investing in them.

Still I get a little put off by the high prices of some of these markets -- India, which you might expect would have low-cost real estate turns out to be pretty expensive.

btw, I wouldn't call it a new asset class yet, but just a way of diversifying the REIT asset class further. But I guess if stocks asset classes can be both US and international, then REITs probably could too....

Until there is a lot of data on them, though, it will be hard to back up the decision with anything more than gut instinct and a few scattered data points. So decent correlations would take years to get enough data for. No reason not to own a few %, though!

[Texas Proud]

Quote:

Originally Posted by ESRBob Still I get a little put off by the high prices of some of these markets -- India, which you might expect would have low-cost real estate turns out to be pretty expensive.

I was told by someone (so who knows if it is true)... that the reason India is 'high' is because women build the buildings (yep, that is what I was told) and they carry most of the material... not much in the way of heavy equipment...

AND (this sound more reasonable, but from the same guy who dealt with India RE).... you have to have all the other 'stuff', like cafeterias to feed everyone... and back up generators that can run your whole building for a good amount of time... but I have heard that 6x6 cubes are used, or even smaller...

[ladelfina]

Regardless of how they are built.. I'd imagine productive business-ready real estate is what they're investing in.. hotels and office buildings and shopping centers.. commercial properties with good utility service and transportation opportunities; probably a small part of all RE in India.

[innova]

I split my REIT stake (which is 10% of equities) into 5% domestic and 5% international.

For the domestic I use VNQ (ETF version of Vanguard REIT index, VGSIX) and for the foreign I use FIREX as mentioned.

On the domestic side, remember that many of the indicies do already contain some REITS.. thus my choice to have 5% as a separate allocation.

More info here:
Bogleheads :: View topic - REIT Percentages Revealed!

[HFWR]

I've owned IGR for about 3 years. Currently yielding 9.3%, and for the past two years has returned a bit more in the form of special dividends and return of capital. ER is 1-ish...

[Rich_by_the_Bay]

I tried to fix the links in SamClem's original post by removing the duplicate http:// but they still don't work - adding www. didn't help either.

Sam, can you verify and re-post the links?

[innova]

I'm on it.

Global Real Estate ETFs - Correlation to U.S. Market - Seeking Alpha
INVESTOR SOLUTIONS - THE STRATEGIC ADVANTAGE

[Disappointed]

Alpine Dynamic has been one of the best performers in this area, EGLRX. They have been doing Internation RE for a long time. Also AWP (CEF), also from Alpine. I own some AWP, bought recently. AWP is still selling at discount. Hi yield as well.

[Animorph]

I have the same 5% FIREX and 5% VNQ (except it is now RWR to harvest a tax loss last year).

Dan