Yesterday TheStreet.com published an excellent article by Miriam Marcus Reimer summarizing analysis by Keefe Bruyette & Woods about publicly traded equity REITs.
KBW expects publicly traded REIT total returns to average 9%-11% in 2011. Actually, that range sounds fairly conservative to me, since the REIT industry is in the bull-market part of the real estate cycle right now, whereas 11% is the long-term average total return for publicly traded REITs through bear markets as well as bull markets. In fact, during each of the last two REIT bull markets, total returns averaged more than 20% per year for more than seven years.
Indeed, the article quotes KBW's Sheila McGrath as saying
The article also quotes Greg Genovese, President & CEO of Pacific Valley Realty Capital, on the REIT industry's upside potential.REITs are back on offense and all eyes are on growth: growth prospects for core portfolios, growth from acquisitions and growth in dividends.
The article details KBW's thinking on eight REITs that they consider "top picks" for 2011:
- Alexandria Real Estate Equities (ARE)
- AvalonBay Communities (AVB)
- DCT Industrial Trust (DCT)
- Glimcher Realty Trust (GRT)
- Hersha Hospitality Trust (HT)
- Lexington Realty Trust (LXP)
- Ramco-Gershenson Properties Trust (RPT)
- Rayonier (RYN)
It's really a very good article.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
Additional disclosure: Author is long Vanguard REIT Index Fund.