WASHINGTON, DC-For the first ten months of the year, REITs have raised a total $59.53 billion in public equity and debt, according to NAREIT figures. That compares with a total of $51.28 billion raised for the entire year of 2011--the industry’s record year for capital raising. Indeed this theme of robust capital raising was on display at NAREIT's REITWorld trade conference underway in San Diego, where panelists described some of the pros and cons of inexpensive debt.
On the flip side—that is, the returns REITs deliver to investors—the numbers are strong as well year-to-date. For the first ten months of the year, the FTSE NAREIT All REITs Index was up 17.17% and the FTSE NAREIT All Equity REITs Index was up 15.80%, compared to the S&P 500's gain of 14.29%. As GlobeSt.com earlier reported, however, October was a lackluster month. On a total return basis, the FTSE NAREIT All REITs Index lost 0.33% in October and the FTSE NAREIT All Equity REITs Index lost 0.25%, while the S&P 500 lost 1.85%. Brad Case, NAREIT’s senior vice president of research and industry information, in a video interview earlier this month, attributed the decline to market qualms before the presidential election.
Timber and infrastructure, in particular, delivered strong double-digit returns for the first ten months of the year, at 33.65% and 26.19% respectively. Industrial was up 23.67%; retail was up 23.59%; office, 11.57%; and apartments 5.77%.
The strong returns delivered by specialty REITs—which is the category in which timber and infrastructure fall—was also noted separately in a recent report by SNL Financial. "Looking at the group as a whole, specialty REITs have built balance sheets with significantly lower leverage compared to the broader REIT market," it said. SNL noted that specialty REITs ended the third quarter with median debt-to-EBITDA of 4.22x, well below the all-REIT median of 6.08x. Specialty REITs also posted a median coverage ratio of 3.8x, compared to 2.8x for the broader REIT median. Furthermore, specialty REITs appear to be poised for more growth, with projected FFO increases of 15.47%, almost double the 8.27% estimated for the broader equity REIT sector.
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Erika Morphy
Erika Morphy has been writing about commercial real estate at GlobeSt.com for more than ten years, covering the capital markets, the Mid-Atlantic region and national topics. She's a nerd so favorite examples of the former include accounting standards, Basel III and what Congress is brewing.
