Credit Suisse: We're 'Still Bullish On REITs'

In a new report, analysts as Credit Suisse took a look at real estate investment trusts (REITs) and updated their outlook for the space. Overall, analysts remain bullish on REITs and feel that many still offer a compelling valuation at current prices.

Prospect Of Rising Interest Rates

Many REITs have underperformed in the past few months as the market increasingly anticipates a Fed rate hike. The group has lagged the S&P by 6 percent and bank stocks by 10 percent.

Analysts are not surprised to see profit-taking from REIT investors in early 2015 following big gains in 2014. Many REITs began the year at or near all-time highs from a valuation perspective.

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Rate Hike Fears Overblown

Analysts believe that REIT investors shouldn’t be worried about the Federal Reserve.

“While we acknowledge the impact of higher rates on REIT equities, we continue to believe that the current stock prices do not appropriately reflect the strength of private market real estate values/the amount of sovereign wealth/institutional capital which continues to drive down return hurdles in the public market,” analysts explain in the report.

Good Entry Point

Credit Suisse sees the recent REIT selloff as a buying opportunity for investors. As a group, the REITs currently trade at a 10 percent discount to net asset value (NAV) compares to their historical discount of only 1 percent.

Credit Suisse names Simon Property Group Inc (NYSE: SPG), Prologis Inc (NYSE: PLD), Boston Properties Inc (NYSE: BXP), Camden Property Trust (NYSE: CPT), DDR Corp (NYSE: DDR) and RLJ Lodging Trust (NYSE: RLJ) as their top REIT picks.