The U.S. REIT market is riding high on a wave of incredible two-year growth after the financial crisis. The Vanguard REIT Index ETF was up a jaw-dropping 132% for the two years ending July 9. So it would stand to reason that global REITs (including the U.S.) would also be surging. The SPDR Dow Jones Global Real Estate index (RWO) was up nearly 25% for the two years ending in early July, running almost neck and neck with the S&P 500.

Part of that surge is the rocket-launch-perfect conditions. As the global economy has come back up from its horrible 2009 plunge, rising rents in supply-constricted cities have yielded lots of higher cash flows for REIT investors in many sectors. It's a nice turnaround from three years ago, when REITs found themselves with depreciated assets, too much debt, poorer renters and in turn lower operating cash. Many had to cut their hallowed dividends.

But even though international REITs have performed well, many investors are gun shy. After all, going into the international real estate market means facing a Marco Polo journey through the great and the ruined, the abysmal and the hopeful, the cyclical and the perennially depressed. Europe is suffering from the malaise of debt crises erupting from the countries rimming the Mediterranean. Tokyo and Dubai are choked up with much too much empty office space. Hong Kong is suffering from highly inflated office assets as investors seek in their buildings a kind of CD to park their money amid low interest rates-and rents are just starting to decline there. Australia's economy is in good shape, but some managers insist that Australians are spending their money overseas, which augurs bad signs for retail rent.

Europe is one of the biggest worries. As banks there try to recapitalize, they will likely be lending less, and that spells trouble for capital-intensive businesses like property. Europe's woes-as well as unfamiliar tax landmines and overall herky-jerky price movements-have many investors thinking of a staycation. If that weren't enough, the appreciating dollar cuts a lot of these foreign-currency-denominated investments off at the knees.

The landscape looked dicey enough that it prompted David Blain, president and CIO of D.L. Blain & Co, a wealth manager in New Bern, N.C., to palm off his international REIT exposure last December. And he likes global real estate.

"We reduced our exposure to foreign assets in general," Blain says, "and looking at the strength of some of the U.S. REITs, we just decided to take our whole REIT allocation and stick with the U.S."

"Right now," says Jeanie Wyatt, the CEO and CFO of South Texas Money Management in San Antonio, "we're just much more comfortable having stateside managers that can buy internationally, and I think the place right now to invest is in U.S. REITs." For example, in Europe, she says, "We see huge demand for European real estate REITs. [But] I still think the euro [faces] further declines, further weakness relative to the dollar. Why should we go over there and pay a 25% premium for distressed properties?"

Jim Holtzman, an advisor with Legend Financial Advisors in Pittsburgh, similarly says his firm has no direct exposure to international REITs right now because the central banks are propping up the house of cards that is the European economy. He calls it "central bank risk."

One simple way to cut the Gordian knot is to simply buy American and let domestic REITs do the foreign land buying for you at their leisure. Simon Property Group, for example, recently bought into huge French mall operator Klepierre, which gives the U.S. REIT a huge footprint on the Continent. Taubman Centers, which develops and leases malls, bought a real estate consultancy in China last year and is reportedly closing in on its first mall development there. Industrial REIT Prologis is also expanding in Asia and recently announced it would develop a new e-commerce hub in Japan (the company has 600 million square feet in 22 countries).

"Even though you might be buying a U.S. company, you have to look through what the assets are," says Marc Halle, managing director and head of global real estate securities at Prudential Real Estate Investors. "You might already be getting global exposure and not know."

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