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REITs Outperform S&P 500 in First Quarter

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U.S. REITs continued to outperform the broader equity market in the first quarter of 2011. The total return of the FTSE NAREIT All Equity REITs Index was up 7.50% in the quarter, and the FTSE NAREIT All REITs Index was up 6.80% compared to 5.92% for the S&P 500.

REITs delivered their first-quarter gains in spite of slightly negative returns in March. The FTSE NAREIT All Equity REITs Index was down 1.28% in the month, and the FTSE NAREIT All REITs Index was down 1.38%, while the S&P 500 was up 0.04%.

On a 12-month basis ended March 31, 2010, the total return of the FTSE NAREIT All Equity REITs Index was up 25.02% and the FTSE NAREIT All REITs Index was up 24.34%, significantly outpacing the S&P 500’s 15.65% gain in the period.

The U.S. REIT industry’s gains in the first quarter came on top of near 28% gains in both 2010 and 2009, years in which the S&P 500 gained approximately 15% and 26% respectively. At the end of this year’s first quarter, equity REITs were up 205% from their market cycle trough in March 2009, but still remained 18% below their peak in February 2007.

The equity market capitalization of the U.S. REIT industry stood at $429 billion at the end of the 2011 first quarter, up 10.28 percent from $389 billion at year-end 2010.

Income-seeking investorsalso continued to benefit from REIT dividend yields. The yield of the FTSE NAREIT All REITs Index at the end of the first quarter was 4.20%, while the FTSE NAREIT All Equity REITs Index’s yield was 3.46%. By comparison, the dividend yield of the S&P 500 was 1.91%.

The public equity and debt marketscontinued to provide REITs with a significant amount of fresh capital in the first quarter of 2011. REITs raised a combined $23.3 billion in 59 equity and debt offerings in the period. The amount raised put the industry on track to surpass the $47.5 billion in public equity and debt it raised in 2010, the second largest annual amount raised in the industry’s history after the $49 billion raised in the record year of 2006.

 “Today, REITs are both financially and strategically well-positioned to continue their track record of building long-term value for their investors,” said NAREIT president and CEO Steven A. Wechsler, in a statement. Wechsler noted that REIT returns have outpaced those of the S&P 500 for the past 1-, 3-, 10-, 15-, 20-, 25-, 30-, and 35-year periods, and that REITs delivered double-digit returns in seven of those eight periods.