Credit Crisis, Weak Economy Drag REIT Returns Down In Line With Broader Market In '08

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The REIT market was down in line with the broader market in 2008 as all sectors of the economy were affected by the credit crisis and global economic struggles, according to the National Association of Real Estate Investment Trusts (NAREIT).

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The REIT market was down in line with the broader market in 2008 as all sectors of the economy were affected by the credit crisis and global economic struggles, according to the National Association of Real Estate Investment Trusts (NAREIT). Consider the following points:

  • The FTSE NAREIT All REIT Index was down 37.34 percent for the year, through Dec. 31, following a near 16 percent rebound in December. The FTSE NAREIT Equity REIT Index was down 37.73 percent for the year after gaining 16.39 percent in December.
  • The broader market indexes also struggled in 2008. For the year, the NASDAQ Composite was down 40.54 percent, the Dow Jones Industrials was down 33.84 percent, the S&P 500 was down 37.00 percent, and the Russell 2000 was down 33.79 percent.
  • For 2009, the REIT market continues to face the same challenges as other industries: the need to revitalize the frozen credit markets enabling companies to refinance debt coming due, and weathering the uncertain and challenging economy.

Broader market fundamentals had a strong impact on how insulated or how badly hit specific REIT sectors were in 2008.

  • On the positive side, Self Storage REITs were up 5.05 percent in 2008. The relatively small sector is comprised of four companies that operate with very low leverage, a factor investors favored in the current credit climate.
  • While Home Financing REITs were down 20.02 percent for the year, the sector was up more than 14 percent in the fourth quarter, signaling that the worst expectations of the residential mortgage crisis may already have been discounted in the shares of these companies.
  • Health Care REITs, down 11.98 percent for the year, fared better than most other sectors as investors sought the positive, long-term fundamentals of companies catering to the country's aging population.
  • On the flip side, the slowdown in global manufacturing and decreased wholesale activity depressed the Industrial REIT sector (down 67.47 percent for the year).
  • Regional Mall REITs (down 60.60 percent) were affected by investors responding to the fear of a consumer spending shutdown and increasing retail store closings.
  • Lodging/Resort REITs (down 59.67 percent) faced the challenge of both vacationers and business customers curtailing travel plans due to the economy.

In spite of the fact that some REITs cut dividends in the second half of the year, both the All REIT and Equity REIT indexes posted their highest year-end dividend yields in nearly a decade.

  • The FTSE NAREIT All REIT Index dividend yield was 8.37 percent as of Dec. 31, 2008 (the highest since its 8.98 percent level of December 1999). The FTSE NAREIT Equity REIT Index dividend yield was 7.56 percent at the end of 2008 (the highest since its 8.70 percent level of December 1999).

The National Association of Real Estate Investment Trusts® (NAREIT) is the representative voice for U.S. REITs and publicly traded real estate companies worldwide. Members are real estate investment trusts (REITs) and other businesses that own, operate and finance income-producing real estate, as well as those firms and individuals who advise, study and service those businesses. Visit our Web site at REIT.com.

NAREIT does not intend this press release to be a solicitation related to any particular company, nor does it intend to provide investment, legal or tax advice. Investors should consult with their own investment, legal or tax advisers regarding the appropriateness of investing in any of the securities or investment strategies discussed in this publication. Nothing herein should be construed to be an endorsement by NAREIT of any specific company or products or as an offer to sell or a solicitation to buy any security or other financial instrument or to participate in any trading strategy. NAREIT expressly disclaims any liability for the accuracy, timeliness or completeness of data in this publication. Unless otherwise indicated, all data are derived from, and apply only to, publicly traded securities. Any investment returns or performance data (past, hypothetical, or otherwise) are not necessarily indicative of future returns or performance.

Contact: Ron Kuykendall or Matt Bechard
(202) 739-9400
1-800-3NAREIT

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