LatAm Real Estate Zigs Higher As US REITs Zag Lower

ON the heels of real estate being reclassified into a standalone sector in August, it would appear that many investors elected to dump US REIT holdings (What Happens to Real Estate When the Fed Raises Rates?) – but Latin America real estate, especially REITs, have gone in the other direction. The reasons are both macro and specific to the asset class. Attractive valuations and yield plus favorable demographics, suggest that LatAm real estate could be on the verge of another mini-boom – but one that will take place not in the hallowed chambers of global private equity board rooms, but in the local secondary markets. The convergence of private and public returns shows no signs of slowing which means we’re likely to see more M&A, PIPEs and other PE-financed investing in the public space versus the traditional direct investment in real property.  The LARE Index has rallied over 14% since the start of June versus XLRE and VNQ which are down almost 3% and 2%, respectively. US REITs remain an attractive source of income but the resetting of interest rate expectations appears to be taking a toll.

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LARE Index versus XLRE and VNQ trailing 2 months as of 10/11/2016