Investing January 2, 2004

REITs Return 37.5% in '03

January 2, 2004 (PLANSPONSOR.com) - With a 37.5% return for 2003, the SNL Equity REIT Index has outpaced the S&P 500 for the third consecutive year.
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The stellar performance turned in by Real Estate Investment Trusts (REIT) represents the highest total return number in over 12 years for the Index; far outpacing last year’s 4% total return and besting the previous annual return record – 1996’s 35.9%.   The SNL Equity REIT Index also beat the S&P 500 Index on a price-only basis, appreciating 28.8% in 2003 versus the S&P’s 26.4% rise, according to a news release.

However, the Russell 2000 Index outperformed the SNL Equity REIT Index, returning a total of 47.3%.

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Delivering the strongest returns were health-care REITS, with an index total return of 56%. Aside from generally improving investor sentiment regarding the sector, SNL attributes much of the rise to the resolution of outstanding problems at several companies.

Following health-care REITs, were retail REITs that were buoyed by enclosed mall developments.   The SNL Retail REIT Index returned a total of 47.5% and the Enclosed Mall REIT Index returned a total of 53.5%. Other winners for 2003 were:

  • multifamily REITs – up 25.6% in 2003, compared to a decline of 5.8% in 2002
  • office REITs – up 33.4%, compared to a decline of 4.2% in 2002.

SNL points to investor pursuit of yields as the main reason for strong fund flows in 2003.   The average yield on the SNL Equity REIT Index at the end of 2003 was 5.8%, down from 7.4% a year ago. However, when compared to minuscule yields across fixed-income investments in the current low interest rate environment, REITs looked like a good bet, the company said. .

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