Ahhh, fall. Can you feel it in the air? Swirling autumn breezes, skittering leaves and the sound of football fans cursing at the television set. And, most importantly, a flurry of real estate transactions that should climax in a very merry Christmas.

Yes, it’s already time to start thinking about Christmas and the lovely Santa Claus effect. Why, you ask, should visions of sugarplums be dancing in your head so early? Simple. Real estate stocks stand to have the best Christmas in many years.

The numbers look good all around. While speculation is swirling around the fates of undulating telecommunication and high-tech stocks, real estate investment trusts are looking up, up, up. And with a down market offering value prices right now, by the time St. Nick visits real estate investors should be quite happy.

Lodging stocks have been particularly hot lately, and for good reason. Case in point: FelCor Lodging Trust Inc. (NYSE: FCH), one of the nation’s largest hotel REITs, expects its third-quarter funds from operations (FFO) per share to exceed consensus analyst estimates by at least 8 percent.

First Call estimates for FelCor currently are $1.04. But the company’s own preliminary estimates are for FFO per share of $1.12, a 23 percent increase over the 91 cents in third-quarter 1999. The positive results for the quarter reflect continued strength across the FelCor portfolio and higher than anticipated RevPAR growth of approximately 7 percent over the prior year.

“FelCor continues to benefit from the renovation programs during the last couple of years and the stronger than expected RevPAR growth for the hotel industry,” said Thomas Corcoran, Jr., FelCor's president and CEO.

And ‘tis the season for big deals. Duke-Weeks Realty Corporation (NYSE:DRE) has teamed up with affiliates of J.P. Morgan Investment Management Inc., and General Motors Asset Management on a mammoth $789 million joint venture. The three entities will 129 buildings totaling 21.8 million square feet in seven markets. The venture also includes more than 300 acres of undeveloped land, with an estimated development potential of more than 5 million additional square feet.

The venture expands an existing $248 million joint venture between Duke-Weeks and J.P. Morgan Investment that was formed in 1995. The new venture has been financed with approximately 50 percent leverage. Duke-Weeks' net proceeds from the venture totaled $370 million.

“The venture completed today is a new milestone in our nearly 15 year partnership with J.P. Morgan Investment and marks the beginning of an important new relationship with General Motors Asset Management,” said Thomas Hefner, Duke-Weeks' chairman and CEO. “Each is an accomplished and long-term investor in real estate whose sponsorship of this venture is a testament to the institutional quality of the Duke-Weeks portfolio, the capability of our people and our dominant market positions.”

In this calendar year, including the proceeds from this venture, Duke-Weeks has raised more than $700 million of equity capital for reinvestment, exceeding its $500 million annual target.

And speaking of exceeding goals, Kennedy-Wilson, Inc. (Nasdaq NM:KWIC), continues stepping up its presence in Japan. The company has recently completed the acquisition of three Japanese commercial properties with an aggregate value of approximately $30 million.

All three interestingly named assets - The Sunshine II Building, The Kyowa Nishi Kanda Building, and The Intelligent Plaza Akebonobashi Building - are located in prime submarkets of Central Tokyo and were bought by Kennedy-Wilson from local sellers or directly from banks. Kennedy-Wilson Japan will also asset manage these properties, bringing the firm's total asset management portfolio in Japan to seven buildings with an aggregate value of over $200 million.

“These transactions are in line with our strategy of purchasing well-located, prime real estate throughout Japan at prices which we believe reflect the bottom of the market,” said Richard Mandel, president of Kennedy-Wilson's Commercial Group, which is based in New York. “The Japanese real estate market holds tremendous upside potential for investors and these properties offer very stable income streams with the ability to increase their value in the coming years as current leases expire. In addition, our ability to finance the transactions with yen-denominated debt will greatly enhance our return on the properties.”

Occupancy rates in Japan are incredible. These three properties, which total about 75,000 square feet of space, have average occupancy of 98 percent.

Other American companies might do well to watch the strategy in Japan, where highly leveraged buildings still are being snapped up at bargain-basement prices. And wouldn’t it be fun to see the Japanese panic about massive foreign real estate ownership someday, after the U.S. scare of the 1980s?

Published: October 6, 2000

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