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REITs Roaring on Rising Rates: Pro

Tuesday, 11 Jun 2013 | 5:45 PM ET
REITs Roar on Rising Rates: Pro
Tuesday, 11 Jun 2013 | 5:16 PM ET
As U.S. Treasury yields soar to a 52-week high, real-estate investment trusts still stand to gain, Land and Buildings CEO Jonathan Litt says.

As U.S. Treasury yields soar to a 52-week high, real-estate investment trusts still stand to gain, Land and Buildings CEO Jonathan Litt said Tuesday.

"They're not bonds. Bonds are bonds, you get a fixed coupon," he said. "You own a REIT, you have a rising dividend, you have improving cash flows.

"The backdrop for real estate today is quite favorable – improving demand, little new supply, wide-open capital markets."

On CNBC's "Fast Money," Litt said that knee-jerk reactions to rising interest rates create buying opportunities.

"Historically, when the Fed is tightening, you want to own REITs, and you're going to generate returns that are competitive or better than the S&P 500 because of the growth in the underlying businesses," he said.

Litt argued that real estate remained a stronger investment than U.S. Treasuries.

"Today you can still get a much better yield on real estate than you can by investing in bonds," he said. "The spread is much wider. So, while the 10-year went to 1.6 percent, the yield on real estate never narrowed and got inside of where it was historically.

"The problem we had in '06 and '07 was that real estate was trading on top of Treasuries. Today, we still have an abnormally wide yield of 370 basis points, which is why this backup will easily be absorbed and probably won't even stop the pace of acquisitions of institutions, sovereign wealth, etc., of real estate."

Trader disclosure: On June 11 2013, the following stocks and commodities mentioned or intended to be mentioned on CNBC's "Fast Money" were owned by the "Fast Money" traders: Steve Grasso is funds long PAY; Steve Grasso is funds long HPQ; Steve Grasso is funds long MU; Steve Grasso is funds long NEM; Steve Grasso is funds long ZNGA; Steve Grasso is funds long DMND; Steve Grasso is funds long F; Steve Grasso is funds long GM; Steve Grasso is funds long TIVO; Steve Grasso is funds long QQQ; Steve Grasso is funds long SPY; Guy Adami is long C; Guy Adami is long GS; Guy Adami is long INTC; Guy Adami is long MSFT; Guy Adami is long AGU; Guy Adami is long NUE; Guy Adami is long BTU; Guy Adami's wife, Linda Snow, works at Merck; Dan Nathan is short XLU June 38/36 put spread; Dan Nathan is long XLF short June 38/36 put spread; Dan Nathan is long FB June/July 25 call spread; Dan Nathan is long INTC long July 24 puts; Dan Nathan is long XLE short June 80/76 put spread; Dan Nathan is long LULU July 65/70/75 call fly; Tim Seymour is long AAPL; Tim Seymour is long BAC.

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