The FTSE NAREIT All REITs Index had a total return of 4.05% in Q1, more than quadruple the S&P 500's 0.95% total return. The dividend yields of REITs remain nicely higher at quarter's end than the broader market, averaging 3.80% vs. the S&P 500's 2.02%.
Further, the compounded annual return of the All REITs Index has outperformed the S&P 500 over the past 1-, 5-, 10-, 20-, and 40-year periods.
Leading the way in Q1 were the self-storage REITs (PSA, SSS, CUBE, EXR) with a total return of 9.16%. Lagging the most after strong outperformance over the past two years were the lodging REITs, falling 4.42% on a total return basis.
The FTSE NAREIT Mortgage REITs Index delivered a total return of 2.35%, with a dividend yield of 10.56% on March 31.
The FTSE EPRA/NAREIT Global Real Estate Index had a total return of 4.04% in Q1, with a dividend yield of 3.21% on March 31.
The Global X SuperDividend REIT (NASDAQ:SRET) will track the Solactive Global SuperDividend REIT Index which looks to hold 30 of the highest dividend-yielding REITs globally with features to reduce volatility.
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%).
Noting the U.S.-listed REIT index remains 15% below its 2007 peak, Blackstone's (NYSE:BX) property arm chief Jon Gray says the private-equity firm is on the lookout for REITs to take private.
It wouldn't be the first time for Blackstone, which busily bought up real estate - Sam Zell's Equity Office Properties in 2007 being notable - prior to the financial crisis, and made a fortune despite the crash.
The FTSE NAREIT All REITs Index gained 13.08 during the year's first nine months, and had a dividend yield of 4.31% as of September 30. The S&P 500 had a total return of 8.34% over the same period, and a dividend yield of 2.06%.
The big YTD performance comes even after a 2.63% decline in the just-ended Q3 (vs. the S&P's 1.13% decline).
Apartment REITs (EQR, AVB, ESS, PPS, UDR, to name a few) have been the biggest winner so far this year, with total return of 20.29% In second place at 16.76% are self-storage REITs (PSA, SSS, CUBE, EXR).
Mortgage REITs (REM, MORT, MORL) had a total return of 12.69%.
A check of 900 corporate and public defined benefit plans between 1998 and 2011 found listed equity REITs - with an average annual net return of 11.31% - edged out private equity (11.1%) as offering the highest net returns of any asset class, according to a soon-to-be-released report from CEM Benchmarking.
Coming in third were real assets other than real estate - infrastructure, commodities, natural resources - at 9.85%.
Why start in 1998? That's when CEM first began separating REITs from stocks in its surveys.
Costs are of key import. The average fee for REITs over the period was 51.6 basis points vs. 238.3 bps for P-E, and 102.6 bps for "other" real assets. U.S. broad fixed income had the lowest costs - just 17.3 bps - but produced an average net return of just 6.56%.