Bernstein & Feldman, P.A.

Providing Personal Counsel
And Representation For Over
30 Years

Stock indices change real estate designation

On Sept. 1, 2016, two major stock indices set aside a separate class for real estate. Investors in Maryland and other states may be interested to discover that the new class includes all non-mortgage real estate investment trusts, real estate operating companies and other real estate products that were formerly grouped within the financial sector. Although experts say that the transition has generated understandable concern among some, the new eleventh sector was initially predicted to offer improvements for real estate investors.

Real estate's removal to a new category in the Global Industry Classification Structure, or GICS, is the result of indices like the MSCI and S&P Dow Jones acting on recommendations from analysts and investors. Industry observers suggest that this separation could minimize the perceived risk some investors have associated with real estate since the 2008 crash.

According to news sources, REITs possess a number of characteristics that have allowed them to perform better than other financial products. These include being forced to pay out more than 90 percent of their taxable income as shareholder dividends each year. Interestingly, the reclassification is the first of its kind since GICS was implemented in 1999.

For property developers and businesses, the ease of financing commercial real estate transactions varies in conjunction with broader market conditions. Investors who consider contributing to deals might base their decisions on their ability to raise capital and the risk associated with individual projects. Issues like land zoning, local service availability and other important factors can all impact the viability of a real estate project. Those who want to fund deals need to draft agreements that account for their specific circumstances, and talking to a lawyer may make it easier to determine what contracts ought to cover.

No Comments

Leave a comment
Comment Information