The Markets October 10, 2011

REITs Outperform S&P 500 in 2011

The U.S. REIT market continued to outperform the broader equity market in the first nine months of 2011, in spite of losing ground to the S&P 500 in the third quarter, according to the National Association of Real Estate Investment Trusts.
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In the third quarter, the total return of the FTSE NAREIT All REITs Index was down 14.62% and the FTSE NAREIT All Equity REITs Index was down 15.07%, while the S&P 500 was down 13.87%.  

NAREIT reported the total return of the FTSE NAREIT All REITs Index was down 6.14%, and the FTSE NAREIT All Equity REITs Index was down 6.05% in the first nine months of the year, ended September 30. By comparison, the S&P 500 was down 8.68% in the same period.  

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Substantial REIT dividends (REITs must pay out at least 90% of their taxable income to shareholders as dividends) accounted for much of the total return advantage over the S&P 500 in the first three quarters of 2011, according to a press release. The FTSE NAREIT All REITs Index’s cash dividend yield at September 30 was 5.23% compared to 2.13% for the S&P 500.  

On a 12‐month basis ended September 30, the FTSE NAREIT All REITs Index delivered a total return of 1.06% and the FTSE NAREIT All Equity REITs delivered 0.93% compared with 1.14% for the S&P 500.  

Top performing sectors of the REIT market in the first nine months of the year were manufactured homes, up 12.55%; self‐storage, up 10.42%; and apartments, up 1.84%. The same sectors led the REIT market on a 12‐month trailing basis ended September 30, with manufactured homes up 18.35%; self‐storage up 16.69%, and apartments up 12.73%.  

While REIT capital raising declined to $7.9 billion in the third quarter from $13.7 billion in the second quarter, the $43.4 billion raised by REITs in public equity and debt offerings in the first nine months of 2011 kept the industry on track to match or surpass the $47.5 billion raised in all of 2010.

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