REITs Outshine Equities in First Nine Months of 2010

REITs also performed well for yield-seeking investors in the first nine months of the year. The cash dividend yield of the FTSE NAREIT All REITs Index on September 30 was 4.55% and the cash dividend yield of the FTSE NAREIT Equity REIT Index was 3.78%, compared to a 2.52% yield for 10-year U.S. Treasuries and 2.03% for the S&P 500.

A primary factor driving the share performance of REITs, NAREIT said in a statement, “is the fact that the REIT industry significantly recapitalized itself through its access to the public equity and debt markets in 2009 and through the first nine months of this year—sources of capital that were unavailable to private equity real estate funds.”

REITs raised $34.7 billion in 130 equity and debt offerings in 2009 and $32.5 billion in 131 offerings through the first nine months of this year, including $14.9 billion this year in 69 secondary equity offerings and another $1.6 billion in eight IPOs. REITs have used the proceeds of the offerings to pay down debt and begin to make strategic acquisitions of properties. The debt ratio of the FTSE NAREIT Equity REIT Index (debt as a percentage of total market capitalization) currently stands at 43.5%, down approximately one-third from 66.3% at the REIT market’s trough in March 2009.