The MarketsOctober 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.

Reported by Rebecca Moore

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.

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.