Faced with a down market earlier this year, REITs began authorizing billions of dollars' worth of stock repurchases from shareholders. Approximately 50 REITs, including high-profile companies such as Simon Property Group (NYSE: SPG) had authorized buybacks by the end of August, according to REIT analysts at BMO Capital Markets who have been tracking this year's repurchase activity. Firms announced north of $1 billion in authorized incremental repurchases during the latter half of 2007's second quarter alone. At the end of August, outstanding buyback authorizations stood at 2.2 percent of REIT equity market capitalization.
Repurchase programs aren't just a passing fad, according to BMO analyst Paul Adornato. "So long as the economics of buybacks work, we will likely continue to see buyback activity," Adornato says. "The correction in REIT stock prices has created an opportunity for many REITs to repurchase their stock so that it is accretive to earnings."
However, even though shareholders have generally reacted favorably to such programs, it's not certain that buybacks are a wise move for every REIT navigating the ebbs and flows of the market.
Full story at NAREIT.