Operating performance for self-storage real estate investment trusts (REITs) is up 11 percent, according to the FTSE NAREIT All Equity REITs Index first-quarter performance report.
FTSE is an independent company jointly owned by The Financial Times and the London Stock Exchange. The Index Series presents investors with a comprehensive family of real estate investment trust performance indexes spanning the commercial real estate space across the U.S. economy, offering exposure to all investment and property sectors.
According to the report, U.S. REITs continued to outperform the broader equity market in the first quarter of 2011. The total return of the FTSE NAREIT All Equity REITs Index was up 7.50 percent in the quarter, and the FTSE NAREIT All REITs Index was up 6.80 percent compared to 5.92 percent for the Standard & Poor’s (S&P) 500.
REITs delivered their first-quarter gains in spite of slightly negative returns in March. The Index was down 1.28 percent in the month, and the FTSE NAREIT All REITs Index was down 1.38 percent, while the S&P 500 was up 0.04 percent.
On a 12-month basis ending March 31, the total return of the FTSE NAREIT All Equity REITs Index was up 25.02 percent and the FTSE NAREIT All REITs Index was up 24.34 percent, significantly outpacing the S&P 500’s 15.65 percent gain in the period.
The U.S. REIT industry’s gains in the first quarter came on top of near 28 percent gains in both 2010 and 2009, years in which the S&P 500 gained approximately 15 percent and 26 percent, respectively. At the end of this year’s first quarter, equity REITs were up 205 percent from their market cycle trough in March 2009, but still remained 18 percent below their peak in February 2007.
The equity market capitalization of the U.S. REIT industry stood at $429 billion at the end of the 2011 first quarter, up 10.28 percent from $389 billion at year-end 2010. Income-seeking investors also continued to benefit from REIT dividend yields. The yield of the FTSE NAREIT All REITs Index at the end of the first quarter was 4.20 percent, while the FTSE NAREIT All Equity REITs Index’s yield was 3.46 percent. By comparison, the dividend yield of the S&P 500 was 1.91 percent.
The public equity and debt markets continued to provide REITs with a significant amount of fresh capital in the first quarter of 2011. REITs raised a combined $23.3 billion in 59 equity and debt offerings in the period. The amount raised put the industry on track to surpass the $47.5 billion in public equity and debt it raised in 2010, the second largest annual amount raised in the industry’s history after the $49 billion raised in the record year of 2006.
REITs have used the capital they’ve raised to de-leverage, helping to reduce the industry’s debt ratio by more than one-third from its high of 66.3 percent at the end of February 2009 to 39.8 percent at year-end 2010, near its historical average. Their strengthened balance sheets also have provided REITs with the financial firepower to become the commercial real estate industry’s most active acquirers of properties in the past year.
“Today, REITs are both financially and strategically well-positioned to continue their track record of building long-term value for their investors,” said Steven A. Wechsler, president and CEO of the National Association of Real Estate Investment Trusts. Wechsler noted that REIT returns have outpaced those of the S&P 500 for the past 1-, 3-, 10-, 15-, 20-, 25-, 30-, and 35-year periods, and that REITs delivered double-digit returns in seven of those eight periods.
Almost all sectors of the U.S. REIT market delivered strong returns in the first quarter of 2011, and three sectors provided double-digit returns. The timber REIT sector was up 24.61 percent in the period, while the industrial sector gained 11.17 percent, and self-storage REITs were up 11.03 percent.
Among other major segments of the REIT market, office REITs gained 7.61 percent in the quarter and apartments were up 6.87 percent. The retail sector was up 4.51 percent, led by the regional malls segment, which was up 6.30 percent.