Video - September 2025The Bullish Case for REITs in a Falling Rate Environment
Transcript
Christian Kansler:
In September, the Federal Reserve cut the fed funds rate, marking a pivotal shift in monetary policy. What is the effect of a lower interest rate environment on real estate investment trusts? Portfolio Manager Eric Rothman of the Cromwell CenterSquare Real Estate Fund explains how lower rates will likely be positive for REITs.
Eric Rothman:
Expectation for rate cuts is a good thing for the REIT market. It should impact REITs. Lower interest rates, should be specifically good for, REIT earnings. It's good for the sentiment around REITs and lower interest rates should also be good for property values. Lower interest rates mean, lower risk free rate, which means more positive impact on the residual value of real estate.
It means that, more investors are going to be looking for yield-oriented investments. And in the case of REITs today, they, yield about a 4% yield. That yield actually should be growing.
And in fact, as interest rates more broadly come down, it out of the margin helps REIT cash flows from the impact of a little bit lower refinancing rates. So it's should be a pretty big positive.
Christian Kansler:
In September, the Federal Reserve cut the fed funds rate, marking a pivotal shift in monetary policy. What is the effect of a lower interest rate environment on real estate investment trusts? Portfolio Manager Eric Rothman of the Cromwell CenterSquare Real Estate Fund explains how lower rates will likely be positive for REITs.
Eric Rothman:
Expectation for rate cuts is a good thing for the REIT market. It should impact REITs. Lower interest rates, should be specifically good for, REIT earnings. It's good for the sentiment around REITs and lower interest rates should also be good for property values. Lower interest rates mean, lower risk free rate, which means more positive impact on the residual value of real estate.
It means that, more investors are going to be looking for yield-oriented investments. And in the case of REITs today, they, yield about a 4% yield. That yield actually should be growing.
And in fact, as interest rates more broadly come down, it out of the margin helps REIT cash flows from the impact of a little bit lower refinancing rates. So it's should be a pretty big positive.
Dividend yield calculates how much a company pays out in dividends each year relative to its stock price.