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%.
REIT investors worried about the link - and it's a close one of late - between interest rates and the value of REIT stocks (they go down when rates rise, up when rates fall) might want to take a look at non-U.S. REITs, where the correlation is far lower, says AllianceBernstein's Eric Franco.
Another advantage of non-U.S. REITs - their ratio of cash flow yield to bond yields is well above the long-term average, i.e. they're cheap. The ratio for U.S. REITs is right at the long-term average.
Comparing "round-trip total returns" on 34 non-traded REITs with those of their publicly-listed peers, Green Street Advisors found the non-traded vehicles lagged the public ones by an average of 360 basis points per year.
It turns out the key selling point of non-traded REITs - since they're not priced on a regular basis (sometimes for years at a time), they lack volatility, and therefore allow investors to sleep better at night - is actually their weakness.
"The institutional investment community has convinced itself that the short-term volatility that necessarily accompanies liquidity equates to higher long-term risk," says Green Street. "In other words, liquidity is a bad thing ... Logic like that would conclude that the best way to avoid unpleasant medical news is to never visit the doctor.”
The FTSE Nareit All REITs Index posted a total return of 16.14% in H1 and offered a 4.03% dividend yield as of June 30. Equity REITs were up 16.25% with a dividend yield of 3.52%. The S&P 500, by comparison, had a total return of 7.14% and a dividend yield of 2% on June 30.
The top-performing equity REIT sector was the apartments with a 23.54% total return, while Office REITs delivered 17.78%. Closely behind were Health Care REITs and Lodging/Resort REITs at 17.59% and 17.26%, respectively, then Retail REITs at 15.97%.
The Mortgage REITs Index was up 17.73% in H1, with commercial financing up 14.03% and residential up 19.28%.
The iShares Global REIT ETF (REET) will comprise of real estate investment trusts across developed and emerging markets.
The iShares Currency Hedged MSCI EMU ETF (HEZU) will offer investors exposure to the eurozone without the risk of currency fluctuations between the dollar and the euro by tracking the MSCI EMU 100% Hedged to USD Index and investing its assets in iShares MSCI EMU ETF (EZU).
REET will feature an expense ratio of 0.14%, while HEZU will charge 0.51%; both funds will launch tomorrow, July 10th.
FlexShares, the ETF branch of Northern Trust Corp. (NTRS), recently released the FlexShares Global Quality Real Estate Index Fund (GQRE); the firm's first real estate focused ETF.
This new fund, with an expense ratio of 0.45%, will provide investors with and REIT portfolio that provides exposure to the inflation-hedging qualities and long-term capital growth potential of global real estate.
“Research shows that a high-quality, value-focused portfolio of real estate securities may offer attractive returns with less volatility compared to traditional capitalization-weighted global real estate indices,” said Shundrawn Thomas, head of Northern Trust's FlexShares ETF Group, in a press release.
Rising interest rates have brought 4 years of easy gains for the REIT market to a halt and have advisers honing their bets. The board NAREIT All Equity REIT Index is up about 8% this year, not just paling in comparison the S&P 500's 24% gain, but REITs had been up 15% early in 2013 before rates started rising.
On the idea of higher rates hitting relatively-highly levered REITs the most, Andrew Ahrens is looking for REITs with less relative debt on their books. On favorite is the iShares Retail Real Estate Capped ETF (RTL). He's also putting money into foreign-leaning funds such as Cohen & Steers' Global Realty Majors ETF (GRI).
Cohen & Steers portfolio manager Chip McKinley suggests - unlike the U.S. - overseas REITs are only just now beginning to become popular. U.K. real estate companies are up more than 20% this year; Japan more than 40%. Up and comers include Germany and Australia. "Both markets are home to high-quality developers with attractive portfolios that are priced well-below the value of their underlying properties."
Paul Curbo - co-manager of the actively-managed PowerShares Active U.S. Real Estate Fuind (PSR) - likes REITs with shorter-term leases as well as retail operators with more flexibility in setting lease rates.
iShares International Property ETF (WPS)announces quarterly distribution of $0.4984. 30-day SEC yield of 1.73% (as on 05/31/2013). For shareholders of record June 27. Payable July 02. Ex-div date June 25.
International REITs? Like $IFGL or $WPS? Forget it. Too thinly traded, no option chains.
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