SOURCE: Globe Street

Just when we thought there was something positive happening in the REITs market B...

After recently giving multifamily REITs a marketweight rating, analysts at Banc of America Securities have downgraded the sector to underweight. The reason, according to locally based BofA analyst Dustin Pizzo, is that current valuations are no longer taking into account the potential pitfalls, so there is a chance apartment REITs may give back the tremendous gains they’ve enjoyed so far this year.

On the investment front, deals could continue to lag as sales volume declines and financing becomes less available and buyers opt to utilize debt assumptions and seller financing. "Over the next 12 months we believe asking prices will increasingly begin to reflect the new capitalization structure, increasing financing costs and pricing," says Pizzo. And with stock cap rates on the rise, any operating weakness or deterioration in financing will have a negative impact.

Read full story »