Could it be time to buy REITs?

Zac Bissonnette ponders that question today on BloggingStocks.com however the issue remains that many REITs are focused on the commercial real estate sector, where problems may still be in the early stages -- even if residential real estate is close to a bottom.  Let's review the article and throw out some REITs to consider such as Russell Real Estate Securities (RRSCX), Vornado Realty Trust (VNO) and SL Green Realty (SLG).

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Back to Zac's article on BloggingStocks.com -- Jim Cramer can't seem to make up his mind on where housing is going. In his email newsletter, author and fund manager Whitney Tilson writes this:

I can't figure out what Cramer's saying on housing prices. Today he wrote "Housing-price stabilization isn't in the cards at all," but yesterday he wrote "I am thinking of calling the housing decline over right now on this data. There are very few regions that haven't bottomed."

Cramer's theatrics aside, many investors are looking to buy back into real estate investment trusts (REITs), whose stock prices have been absolutely hammered over the past two years. Even if home prices aren't done falling, the sub-liquidation valuations assigned by the market to many of these companies could make them good investments.

REITs were up 28% in April as bargain-hunters swooped in. And more good news for investors: As REIT prices rise, the secondary offerings they do to raise cash for more acquisitions and balance sheet stability will become less dilutive.

The problem is that many REITs are focused on the commercial sector, where problems may still be in the early stages -- even if residential real estate is close to a bottom. With retailers filing for bankruptcy and closing stores, they may have trouble filling vacancies: It's still not clear who will move into the big boxes vacated by the failures of companies like Circuit City and Steve & Barry's. Here's the main thing to look for in REITs right now, aside from the usual low vacancy rates, solid cash flow, strong balance sheet, good yield, solid properties, good corporate governance, etc.:

If the company is involved in commercial real estate, make sure that it doesn't have short-term debt that will need to be rolled over anytime soon. The commercial lending market remains very tight and even companies whose operations are rolling along nicely can descend into bankruptcy if they can't refinance. Look up General Growth Properties for more on this.

Companies with too much short-term debt may not, no matter how great their long-term prospects are, be able to survive the recession. Companies with no pressing need to borrow money might suffer from lousy results for a few more quarters but if you buy them cheap enough, you'll still make a lot of money.

So what REITs can you invest in?

Russell Real Estate Securities (RRSCX), which employs multiple managers and invests across an array of residential, commercial, retail and other offerings.

Many investors are familiar with the bigger REITs such as Vornado Realty Trust (VNO) and Simon Property Group (SPG).  Other to consider include Mack-Cali Realty (CLI), Digital Realty Trust (DLR), SL Green Realty (SLG) and First Potomac Realty Trust (FPO).

REITs Tickers Alone:
RRSCX  VNO  SLG  SPG  CLI  DLR  FPO

Overview as of 6/3/2009:

Name	Symbol	Last price	Change	Mkt cap	Volume	Open	High	Low
Russell Real Estate Secs C	RRSCX	22.01	-0.43 (-1.92%)
Vornado Realty Trust	VNO	47.95	-0.32 (-0.66%)	8.34B	1.70M	47.83	48.79	47.09
SL Green Realty Corp.	SLG	25.20	+0.36 (1.45%)	1.44B	1.44M	24.37	25.68	24.32
Simon Property Group, Inc	SPG	53.74	-0.50 (-0.92%)	13.71B	2.37M	54.02	54.74	53.43
Mack-Cali Realty Corp.	CLI	25.25	-0.07 (-0.28%)	1.94B	389,712.00	25.18	25.41	24.8
Digital Realty Trust, Inc.	DLR	36.10	-0.87 (-2.35%)	2.75B	688,498.00	36.65	37	35.97
First Potomac Realty Trust	FPO	10.99	+0.10 (0.92%)	301.74M	65,529.00	10.81	11.1	10.81

SOURCE: http://www.bloggingstocks.com/2009/06/03/time-to-buy-reits-maybe-but-be-careful/#continued