7 Office REITs: Recent Performance And Dividend Rates

 |  Includes: ARE, BDN, BXP, CUZ, DEI, EQC, OFC
by: Zvi Bar

REIT investors tend to invest in the asset class to gain exposure to real estate as a hard asset that is not highly correlated to the general stock market, and for the dividend income stream that the REIT model necessitates. By law, REITs must distribute at least 90% of their taxable income in order to eliminate the need to pay income tax at the corporate level.

This is a review of the recent performance and present yield for seven REITs that primarily own and offer office space. Office REITs are sensitive to economic cycles, the strength of the U.S. consumer, entrepreneurial production and several other factors. Companies offering such space also have geographic and population density factors to consider, as well as possible state and local tax/regulation issues.

Over the last several quarters, office space has broadly suffered from excessive supply and anemic demand. Leaseholders are now more capable of negotiating better terms as leases expire, because owners are concerned that a lost business tenant may be difficult to quickly replace. Landlords usually prefer low office vacancy, even at a reduced price per square foot, but are also more likely to provide reduced duration leases with any sweetheart deals.

Below are seven REITs primarily and/or exclusively within the office business. I have included their current yields as well as their 1-month, 3-month and 2011-to-date performance rates.

Alexandria Real Estate Equities Inc. (NYSE:ARE)

  • Yield: 2.8%
  • 1-month: 1.62%
  • 3-month: 0.32%
  • 2011-to-date: -9.34%

Boston Properties Inc. (NYSE:BXP)

  • Yield: 2.1%
  • 1-month: 5.62%
  • 3-month: -3.70%
  • 2011-to-date: 10.49%

Brandywine Realty Trust (NYSE:BDN)

  • Yield: 6.7%
  • 1-month: 3.97%
  • 3-month: -5.61%
  • 2011-to-date: -22.98%

CommonWealth REIT (NYSE:CWH)

  • Yield: 12.1%
  • 1-month: -10.02%
  • 3-month: -15.58%
  • 2011-to-date: -35.28%

Corporate Office Properties Trust (NYSE:OFC)

  • Yield: 7.6%
  • 1-month: -3.16%
  • 3-month: -12.53%
  • 2011-to-date: -37.90%

Cousins Properties Inc. (NYSE:CUZ)

  • Yield: 3.0%
  • 1-month: 4.11%
  • 3-month: -9.51%
  • 2011-to-date: -27.10%

Douglas Emmett Inc. (NYSE:DEI)

  • Yield: 2.9%
  • 1-month: 1.46%
  • 3-month: 2.79%
  • 2011-to-date: 8.92%

A continued economic downturn will undoubtedly weaken the demand for office space, as businesses will not expand and fewer new ones will be attempted. Conversely, improving economics could bolster expansion and entrepreneurial endeavors. Inflation is often weathered well by such companies, as rent escalation is built into long-term leases, but this does take some time to occur.

Disclaimer: This article is intended to be informative and should not be construed as personalized advice as it does not take into account your specific situation or objectives.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.