Commercial Service: Analysts See Reason to Be Cautious About Investing in Apartments.(multifamily real estate investment trusts)(Brief Article)

Contrary to a lot of other research sources, Morgan Stanley Dean Witter is now "less bullish" on multifamily REITs, believing that "much of the rationale for owning multifamily assets during a slowing economy has already been priced into the REIT stock prices."

They are still recommending retail mall REITs, but acknowledging that "the slowing economy is making for a tough retail environment."

Speaking at a recent New York Society of Security Analysts' Real Estate Investment Trust (REIT) conference, Gregory Whyte, managing director, Morgan Stanley Dean Witter (MSDW), said that the overall REIT sector's fundamentals are "unlikely to get much better" and REIT valuations "still look slightly compelling," though REIT performance is likely to be affected by relative market performance.

The REIT sector in general is likely to yield a 9-12% total return this year, MSDW believes.

In terms of different property sectors, MSDW recommends an overweighting of central business district office, industrial and regional mall properties; market weighting of suburban office, multifamily, manufactured housing, and mini-storage; and underweighting of healthcare, strip shopping centers, and manufacturers outlet centers.

Specific REIT stocks recommended by MSDW are: AMB Property Corp, Boston Properties, BRE Properties, Duke-Weeks Realty, Equity Residential Properties, Rouse Company, Simon Property Group, Crescent Equities, and Equity Office.

MSDW is concerned about multifamily REIT sector "valuation levels" and believes that there is a threat of "sector rotation to cheaper sector. In addition, the Wall Street firm is concerned that development risks have increased for multifamily REITs.