Skip to Content

News & Resources

Real estate investments placed in seperate class by S&P and MSCI

9/13/2016 | Real Estate Blog

Many investors in Pennsylvania and around the country still think of the 2008 mortgage crisis and subsequent financial meltdown when they consider putting their money into real estate, but several years of healthy returns have nurtured at least some confidence in the nation’s property markets. The real estate sector has outperformed most other notable benchmarks in recent years, and these investments were placed in a separate class by MSCI and the S&P Dow Jones Indices on Sept.1.

While mortgage real estate investment trusts will still be classified as financials, all other REITs will be better placed to attract potential investors in the new category. The newly packaged real estate operating companies will likely prove popular because they are required by law to distribute at least 90 percent of their taxable income to shareholders as dividends. The new classification will also draw more attention to the robust fundamentals of the current property market and the recent gains enjoyed in the office and apartment sectors.

The reclassification marks the first time that the Global Industry Classification Standard has been modified in a significant way, and observers say that the move indicates that real estate has grown to become a unique asset class and a mainstay of most modern portfolios after being after being little more than a fringe alternative investment vehicle for many years. The decision to classify residential and commercial real estate investments separately was made after studying financial data and listening to feedback from investors.

Investing wisely involves balancing risks and returns, but even strategies that seem sound on paper can run into trouble when disputes arise or regulatory problems crop up. Attorneys with real estate experience may assess the property portfolios of REITs to determine how vulnerable these assets could be to market fluctuations or legal conflicts.