Will Abby Do More for REITS Than She Did For Tech Stocks? by Lesley Hensell
Earlier this month, the National Association of Real Estate Investment trusts (NAREIT) proudly proclaimed that REIT earnings accelerated in the fourth quarter of 1999. Finally, some good news for the REIT industry, which saw an average 12.3 percent increase in funds from operations in the last three months of the year. But the tide has again turned against the industry, and desperate companies are taking major steps to boost their stock prices. Unfortunately, the NAREIT index shows a year-to-date return of only 1.52 percent. And while the Dow Jones Industrial Average for the same period is just as unimpressive, the Nasdaq has soared. NAREIT continues to tout the industry, publicizing a March 28 CNBC interview during which Goldman Sachs market strategist Abby Joseph Cohen advised investors to turn to REITs and other overlooked investment opportunities to diversify their portfolios. But Associated Estates Realty Corporation (NYSE: AEC) is just one of many REITs undertaking major programs in hopes of boosting earnings and stock price. The company this week announced a plan to significantly reduce general and administrative costs by the end of the year. Louis Vogt, president and COO, said the plan would have a favorable impact on the company’s earnings of at least $3 million annualized. Expense reductions will result from streamlining Associated Estates by decentralizing property operations, which has taken place over the last year and a half. This streamlining process now will hit the corporate office. “In order to complete our decentralization process, we must maximize the use of our human and technology resources,” Vogt said. That means office closings. Associated Estates already has closed its Columbus, Ohio, and Chicago regional offices. Now the company plans to reduce its professional and consulting fees as well. “We are confident that the restructuring initiatives we undertook in 1999, combined with expense control and reduction, will lead to improved operating results,” Vogt said. And continuing the stock buyback trend we’ve monitored in this column, SC-U.S. Realty (NYSE: RTY) announced today the completion of its second $100 million share repurchase program. The company has bought back almost $11 million shares for about $200 million, representing 12.6 percent of outstanding shares. What’s more, the company now will undertake an additional $50 million buyback. If fully executed at current market prices, the new program would represent the purchase of an additional 3.125 million shares. The company’s aggregate share repurchase objective has now been increased to $250 million, or 16.2 percent of shares outstanding at the initiation of the program. SC-U.S. Realty’s investments as of the end of 1999 included ownership positions and commitments to six U.S. REITs with a combined market capitalization of approximately $8.4 b | 
