A spate of real estate companies has decided to take advantage of eased restrictions on stock buybacks to shore up their issues' prices over the coming weeks, which are predicted to remain rocky as Wall Street suffers the aftermath of terrorist attacks on America.
The stock repurchase strategy has been a popular one for U.S. real estate companies over the past couple of years. Firms that believed their stocks to be undervalued have bought back shares, creating modest price gains and adding value for shareholders.
But last week, the U.S. Securities and Exchange Commission (SEC) opened the door for more companies to quickly and easily buy back their own shares. The commission used its emergency powers to suspend rules regarding volume of shares and timing of purchases. Current SEC rules prohibit companies from buying or selling more than a specific daily volume of their own shares or from trading in the opening or closing moments of the market.
So why the suspension of the rules? The SEC hopes that companies with extra cash on hand will pump more money into the market and prop up prices across the boards. Major firms in several industries have expressed interest in buybacks. For example, Internet networking giant Cisco Systems Inc., said it will repurchase up to $3 billion of stock over the next two years.
One real estate firm, Tarragon Realty Investors Inc. (Nasdaq: TARR) recently sold a building for a large profit. A portion of those dollars will be funneled into stock repurchases, which Tarragon already has been pursuing.
Monmouth Real Estate Investment Corporation (Nasdaq: MNRTA) launched a stock repurchase program on Monday. The company's board intends to spend up to $1.25 million to repurchase up to 2 percent of the company's common stock over the next year.
"This stock repurchase program demonstrates the confidence of the board of directors and management in the U.S. economy, the securities market and U.S. stocks," said Eugene Landy, president for Monmouth. "Upon completion of the stock repurchase program, the company may authorize additional repurchases."
Shopping mall giant The Mills Corporation (NYSE: MLS) also will launch a repurchase program under the SEC's emergency order. The company hasn't yet released details regarding its purchases.
And over at real estate investment trust Boston Properties, Inc. (NYSE: BXP), the board has authorized the repurchase of common stock worth $100 million at current market prices.
While the Dow Jones Industrial Average slid more than 685 points or 7.13 percent on Monday, the National Association of Real Estate Investment Trusts Index showed a drop of 3.5 percent. Hardest hit were equity issues, down nearly 5 percent, while mortgage REITs remained stable, losing less than 1 percent.