November 3, 2010

REITs Continue to Outperform

The sector's YTD total returns triple those of the S&P 500

Building on previous momentum, REITs continued their strong rally through October, according to the National Association of Real Estate Investment Trusts (NAREIT). The trade group reports REIT total returns year-to-date through Oct. 31 were triple those of the broader market for the same period.

The total return of the FTSE NAREIT Equity REIT Index was 24.7% and the total return of the FTSE NAREIT All REITs Index was 23.9% for the first 10 months of the year compared to 7.84% for the S&P 500. In October, the FTSE NAREIT Equity REITs Index gained 4.7% and the FTSE NAREIT All REITs Index gained 4.56%, compared to 3.8% for the S&P 500.

On a year-to-date basis through Oct. 31, all but one sector of the REIT market delivered double-digit returns. Among the top performing sectors:

  • Apartments (up 38%)
  • Lodging/Resorts (up 30.52%)
  • Shopping Centers (up 28.28%)

On a 1-year basis through Oct. 31, the FTSE NAREIT Equity REIT Index delivered a total return of 42.84% and the FTSE NAREIT All REITs Index delivered a return of 40.88% compared to 16.52% for the S&P 500.

REITs continued to tap the public equity and debt markets in 2010, raising $35.3 billion through October, compared with a total of $34.7 billion in all of 2009. REITs raised $19.8 billion in equity offerings in the first 10 months of 2010. REITs have used equity raised in 2009 and 2010 to de-leverage. The debt ratio of the FTSE NAREIT Equity REIT Index at June 30 was 43.5 percent, down one-third from 66.3% at the REIT market’s trough in March 2009.

REITs also continued to reward income investors in the first 10 months of 2010. The FTSE NAREIT All REITs Index cash dividend yield was 4.41% and the FTSE NAREIT Equity REIT Index cash dividend yield was 3.61% at the end of October, while the S&P 500’s dividend yield was 1.96%.

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