REITs Outperform S&P 500 in 2011

The U.S. REIT market continued to outperform the broader equity market in the first nine months of 2011, in spite of losing ground to the S&P 500 in the third quarter, according to the National Association of Real Estate Investment Trusts.

In the third quarter, the total return of the FTSE NAREIT All REITs Index was down 14.62% and the FTSE NAREIT All Equity REITs Index was down 15.07%, while the S&P 500 was down 13.87%.  

NAREIT reported the total return of the FTSE NAREIT All REITs Index was down 6.14%, and the FTSE NAREIT All Equity REITs Index was down 6.05% in the first nine months of the year, ended September 30. By comparison, the S&P 500 was down 8.68% in the same period.  

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Substantial REIT dividends (REITs must pay out at least 90% of their taxable income to shareholders as dividends) accounted for much of the total return advantage over the S&P 500 in the first three quarters of 2011, according to a press release. The FTSE NAREIT All REITs Index’s cash dividend yield at September 30 was 5.23% compared to 2.13% for the S&P 500.  

On a 12month basis ended September 30, the FTSE NAREIT All REITs Index delivered a total return of 1.06% and the FTSE NAREIT All Equity REITs delivered 0.93% compared with 1.14% for the S&P 500.  

Top performing sectors of the REIT market in the first nine months of the year were manufactured homes, up 12.55%; self‐storage, up 10.42%; and apartments, up 1.84%. The same sectors led the REIT market on a 12month trailing basis ended September 30, with manufactured homes up 18.35%; selfstorage up 16.69%, and apartments up 12.73%.  

While REIT capital raising declined to $7.9 billion in the third quarter from $13.7 billion in the second quarter, the $43.4 billion raised by REITs in public equity and debt offerings in the first nine months of 2011 kept the industry on track to match or surpass the $47.5 billion raised in all of 2010.

IMHO: The IKEA “Experience”

We spent some time this past weekend getting my eldest daughter squared away in her new apartment.   

It’s her first, and as with nearly all first apartments, there is a lot you need to get that you never needed in your room at home or in your dorm away at college.  So we headed out to IKEA.

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Those who have never had occasion to visit an IKEA store should check it out at least once.  They are mammoth stores—big on the outside and seemingly even more massive on the inside.  It’s the kind of store you can easily get lost in (not to worry, they have their own food court inside), and yet it’s very hard to simply get from point A to point B, even if you know what you want to buy.  About the only way to get through the store is to wander along the winding path the IKEA folks have constructed that takes you—literally—through every display imaginable.1   

But the really interesting thing about the IKEA shopping process is that you not only have to find what you want, you must write down the part number(s), and—at the end of your journey through this mammoth store—you must assemble the requisite pieces/boxes in the warehouse.2 You not only have to make sure that you have each of your purchases, you frequently have to make sure that you have all the (separate) boxes into which your purchase has been divided.  Ironically, the consummation of that IKEA shopping experience is that you get to go home and put your purchases together.

Now, I’ve never met anyone who didn’t like the IKEA “experience.”  Oh, some might not care for the quality of the furniture, or the selection—and surely I’m not the only one who wonders why I have to do all the work (I understand that it’s supposed to be cheaper, but I haven’t found it to be cheap).  But it’s not for those in a hurry, and at the end of the night, I kept feeling like I should be able to present someone else with the bill!

As I was loading up the family van with our purchases, I wondered if this is how participants feel about the current structure of our voluntary savings system: one (still) fraught with a mind-numbing array of choices that have to be assembled at the point of enrollment by participants who want to do the right thing(s), but who find themselves stuck trying to follow an instruction manual they don’t quite understand, surrounded by people who seem to get it (but probably don’t, either), only to find themselves at the checkout counter wondering if they do, in fact, have everything they need—only to then have to go home and put it together themselves.

And I wonder if, when they tally up that bill, they too will observe that it’s probably supposed to be cheaper that way—but find that it’s not exactly cheap.

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 1 This turns out to be an interesting way to create the kind of “impulse” purchasing that most retail stores only have positioned at the checkout counter, as one continually wanders past interesting things that you hadn’t even thought you needed.  On the other hand, the maps posted along the way that purport to show you where you are were not exactly reassuring to those in a hurry.

 2 A place reminiscent of that last scene in “Raiders of the Lost Ark” (albeit with numbered shelves and aisles). 

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