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REITs Weaken Slightly Less Than Equities in August: NAREIT

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Real estate investment trusts fell along with the broader markets in August, though they fared slightly better, according to industry data.

The FTSE NAREIT All REITs Index, which includes equity and mortgage REITs, lost 5.7% in August on a total return basis. The FTSE NAREIT All Equity REITs Index fell 5.8% in the month, and the FTSE NAREIT Mortgage REITs Index was down 3.5%.

In comparison, the S&P 500 lost 6.0% on a total retrn basis in August.

For the year through Aug. 31, the total return of the FTSE NAREIT All REITs Index decreased 6.3%, the FTSE NAREIT All Equity REITs Index fell 6.5%, and the FTSE NAREIT Mortgage REITs Index dropped nearly 5.7%. The total return of the S&P 500 was down close to 3% for the year through August.

At the end of August, the FTSE NAREIT All REITs Index included 225 REITs with a combined equity market capitalization of $878 billion, according to NAREIT, the National Association of Real Estate Investment Trusts, which released its latest research on Thursday.

The FTSE NAREIT All REITs Index has a dividend yield of about 4% vs. 2.2% for the S&P 500.

The FTSE EPRA/NAREIT Global Real Estate Index total return decreased by 5.9% (in U.S. dollars) for 2015 through August; during this time, it had a dividend yield of nearly 3.8% as of Aug. 31.

The FTSE EPRA/NAREIT Europe Index delivered the best performance of any region, with a total return of 6.1% for the year through August, while Middle East/Africa delivered gains of 0.2%. The FTSE EPRA/NAREIT Americas Index declined 8.1% year to date, and the Asia/Pacific index is down 8.3%.

On a five-year basis, the average annual total returns of the FTSE NAREIT ALL REITs Index underperformed the S&P 500: 12.4% vs 15.9%, respectively. The same is true of the 10-year results, which are 6.6% for REITs and 7.2% for the S&P.

However, on a longer-term basis, REITs top their S&P counterparts. The 15-year average annual total return for the All REITs Index is 10.9% vs. 3.8% for the S&P 500. On a 20-year basis, REITs produced an average yearly total return of 10.7% vs. 8.5% for the S&P 500.

In August, NAREIT said that REITs’ second-quarter operating performance recovered sharply from declines in the past two quarters.

After dipping slightly in the last quarter of 2014 and falling another 3.5% in the first quarter of this year, funds from operations for all listed U.S. equity REITs recovered 16.6% to almost $13 billion in the second quarter, according to the NAREIT T-Tracker, which measures quarterly performance of the entire U.S. stock exchange-listed REIT industry.

After six months of subdued but positive year-over-year performance, FFO is up 16.5% in the second quarter, the group announced. “REITs are benefiting from the longer-term commercial real estate up cycle and from near-term strengthening of the U.S. economy this spring,” NAREIT President and CEO Steven Wechsler said in a statement at the time. “The economy has regained momentum with healthy demand growth following a sluggish winter.”

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