Real estate investment trusts continue to outperform other stocks in the US. The FTSE NAREIT All Equity REITs index was up 7.5% over the first quarter of 2011, and the FTSE NAREIT All REITs Index was up 6.8%. This is compared to a 5.92% growth in the S and P 500 Index.
The positive 1st quarter growth enjoyed by REITs was surprising to many, given the slightly negative returns in March. The FTSE NAREIT All Equity Index fell 1.28% on the month, and the All REITs Index fell 1.38%. This was against a 0.04% increase in the S and P 500.
The yearly figures are even more impressive for REITs. Figures show that both the aforementioned FTSE NAREIT indices grew strongly over the year. The All Equity REITs Index recorded a 25.02% growth. And the All REITS Index grew 24.34% during the period, while the S and P index recorded the still-respectable 15.65% during the year.
We are left with no option but to call recovery on the US commercial property market. The strong growth in the REITs in the first quarter follows the impressive growth seen in 2009 and 2009, when the indices combined grew 28% per year. Meanwhile the S and P 500 grew 26% and 15% respectively. We can also see in the figures that equity REITs were up 205% compared to the March 2009 trough, taking them to just 18% below the February 2007 peak.
Another positive indicator is the fact that REITs are finding it increasingly easy to raise finance from the public equity and debt markets. In the first quarter REITs raised a combined 23.3 billion USD in 59 equity and debt offerings. This leaves the sector on track to beat the 47.5 billion USD it raised in 2010, which was the second largest amount ever raised in the industry, second only to the 49 billion raised in 2006.
The money raised has largely been used to deleverage, a much-needed opportunity. At the end of February 2009 the industry's debt ratio stood at 66.3%. This had been reduced to 39.8% by the end of 2010, which is close to the long-running average. Armed with these strengthened balance sheets, REITs have become the commercial property industry's most active buyers in 2010.
"REITs are both financially and strategically well-positioned to continue their track record of building long-term value for their investors," said NAREIT president and chief executive officer Steven Wechsler.
Wechsler noted that REIT returns have outpaced those of the S and P 500 for the past one, three, ten, 15, 20, 25, 30 and 35 year periods, and that REITs delivered double digit returns in seven of those eight periods.
- Tuesday 17 May 2011