- Equity REITs had a nice run after bond yields peaked last year and began declining, but, says a now-cautious John Authers from the FT, that rally has turned into a stampede. And while the U.S. has led the way, U.K., European, and global REIT indexes have also had big gains.
- Since October, the S&P 500 REITs index is up 19% vs. 1.4% for the S&P 500, and a 22.5% loss for the Alerian index of MLPs.
- Valuation has now become a concern, with every REIT sector covered by SNL Securities trading at a premium to NAV (not the mortgage REITs though). Healthcare REITs - HCP, MPW, HTA, UHT, LTC, SBRA, OHI, HCN come to mind - are at a 25% premium.
- SNL's Jason Lail dismissed some concerns, noting REITs trade at a 12.% premium to NAV, well within the 20% above and below NAV they typically range between. Also, fundamentals remain sound, with supply still constricted in many areas.
- JPMorgan's Jason Ko notes pockets of value, particularly office REITs which trade a minimal premium. Boston Properties (BXP -0.1%) is a particular favorite. Others in the sector include: EQC, WRE, CSG, FPO, HIW.
- Simon Property (SPG +0.2%) is Ko's biggest holding as mall bankruptcies and chain closings should leave the survivors stronger. His 2nd-largest holding is industrial player ProLogis (PLD +0.2%).
- ETFs: IYR, VNQ, WPS, VNQI, DRN, RWX, URE, SRS, ICF, SCHH, RWR, RWO, IFGL, KBWY, DRV, DRW, REK, FRI, GRI, IFEU, FTY, FFR, RWXL, PSR, IFNA, WREI, REET