Real Estate Weekly
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Debt & Equity

Equity REITs outperform broader market

U.S. Equity REITs outperformed the broader equity market in September, the third quarter of 2015, and the first nine months of the year, the National Association of Real Estate Investment Trusts (NAREIT) reported.

September was the third straight month in which Equity REITs outperformed other equities.

Photo by Rafael Matsunaga/ Flickr
Photo by Rafael Matsunaga/ Flickr

The FTSE NAREIT All REITs Index, the broadest benchmark of the stock exchange-traded U.S. REIT industry containing both Equity and Mortgage REITs, gained 1.87 percent in September and 0.76 percent in the third quarter on a total return basis, while the FTSE NAREIT All Equity REITs Index gained 2.13 percent for the month and 0.99 percent for the quarter.

The FTSE NAREIT Mortgage REITs Index was down 2.37 percent in September and 2.96 percent for the third quarter.

In comparison, the S&P 500 declined 2.47 percent in September and 6.44 percent in the third quarter. The S&P Composite 1500, which, like the REIT market, includes large-, mid- and small-cap stocks, was down 2.57 percent in September and down 6.69 percent in the third quarter.

“Equity REITs’ improved returns in September and the third quarter may reflect growing investor perceptions that REITs have been undervalued,” said NAREIT President and CEO Steven A. Wechsler.

“Investor concerns about the impact of rising interest rates on REITs helped depress REIT share prices earlier this year, which may have helped set the stage for their third-quarter rebound.

“REITs continue to benefit from an improving U.S. economy, which boosts demand for real estate, as well as a favorable supply situation,” Wechsler said. “Across all property sectors, demand continues to exceed supply.”

For the year through September 30, the total return of the FTSE NAREIT All REITs Index decreased 4.52 percent, the FTSE NAREIT All Equity REITs Index was down 4.51 percent and the FTSE NAREIT Mortgage REITs Index was off 7.90 percent. The total return of the S&P 500 decreased 5.29 percent for the year through September and the S&P Composite 1500 was down 5.23 percent.

REITs continued to deliver solid dividend yields for income-seeking investors.

At September 30, the dividend yield of the FTSE NAREIT All REITs Index was 4.44 percent; the yield of the FTSE NAREIT All Equity REITs Index was 3.97 percent; and the FTSE NAREIT Mortgage REITs Index yielded 12.00 percent.  In comparison, the dividend yield of the S&P 500 at September 30 was 2.28 percent.

In the full year 2014, U.S. REITs paid out approximately $46 billion in dividends to their shareholders.

Almost all sectors of the U.S. Equity REIT market delivered gains for investors in September. The Self-Storage sector led the market with a 6.19 percent total return for the month. The Apartment sector was second with a 5.46 percent gain and the Manufactured Homes sector was third, gaining 5.21 percent.

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