Record-setting highs for the Dow Jones Industrial Average and solid gains for the S&P 500 mean a wide variety of equities are enjoying a good run during the first three months of 2013. But many commentators have pointed out that REITs, or real estate investment trusts, are particularly good investments thanks to the improving state of the real estate market and the returns a REIT investor receives, among a variety of other reasons.
REITs are federally obligated to invest only in real estate, including physical properties and mortgages. The rules stipulate that if they pay out at least 90 percent of their earnings they do not need to pay income taxes.
While the case can’t be made that REITs did better than the overall equitly market in the first quarter, they had a strong showing, according to GlobeSt.com, a real estate site that focuses on REITs (http://www.globest.com/news/12_579/national/reit/REITs-Make-Strong-Q1-Showing-331904.html). The FTSE NAREIT (National Association of Real Estate Trusts) All REITs index “delivered a 9.11 percent return” compared to the S&P 500’s return of 10.61 precent.
NAREIT President and CEO said in a statement: “REITs continued to reward their shareholders with all the benefits of real estate investment. They did so while also providing the advantages of liquidity and moderate leverage.”
The GlobeSt.com story also highlights the three REIT IPOs completed in the first quarter, noting that each outperformed the market since their offerings. Here are the three:
Carrollton, TX-based CyrusOne Inc. (Nasdaq:CONE, http://www.cyrusone.com/) is a data center REIT providing storage facilities for about 500 customers including 9 Fortune 20 and 108 of the Fortune 1000 companies. As of Sept. 30, 2012, CONE’s portfolio included 23 operating data centers in nine markets: Austin, Chicago, Cincinnati, Dallas, Houston, London, San Antonio, Singapore and South Bend. CONE posted a 25.24 percent return in Q1. It closed April 9 at $23.39, down 3 cents for the day, with a market cap of $512 million. Its trading range so far is $20.53-$24.49.
McLean, VA-based Gladstone Land Corp. (Nasdaq: LAND, http://www.gladstoneland.com/) is focused on U.S. farmland where tenants grow annual row crops such as berries, lettuce and melons. LAND also leases part of its Oxnard, CA farm to an oil company. LAND posted a 6.1 percent return in Q1. LAND closed April 9 at $16, down 9 cents for the day, with a market cap of $104.5 million. Its trading range so far is $14-$16.77.
Chicago-based Aviv REIT (NYSE: AVIV, http://www.avivreit.com/) has been in business more than 30 years and owns post-acute and long-term care skilled nursing facilities and other healthcare properties. It is one of the largest owners of skilled nursing facilities in the nation. AVIV commenced its IPO March 11. AVIV closed April 9 at $24.96, down 35 cents for the day, with a market cap of $1.2 billion. It’s trading range so far is $22.10-$25.45.