October was a volatile month for stocks in general. But REITs fared well, and were driven in part by strong earnings announcements. This month, through Oct. 29, the FTSE NAREIT All REIT Index was up 6.94 percent. That compares with a 0.4 percent drop in the Dow Jones Industrial Average, 0.62 percent increase in the S&P 500 Index and 1.24 percent increase in the Nasdaq Composite Index.
Fueled by strong market fundamentals and a favorable interest rate environment that has facilitated growth, the largest REITs announced strong third-quarter earnings that have met or beat expectations. Boston Properties, for instance, reported $1.46/share of funds from operations, handily beating the $1.37/share it was expected to post. Others that beat expectations include Equity Residential and AvalonBay Communities in the apartment sector, industrial REIT Prologis, Kimco Realty Corp. in
the retail sector and healthcare REIT Ventas Inc.
Meanwhile, REITs in several sectors provided investors with healthy total returns, including dividends and stockprice appreciation, for the month. Those in the manufactured-housing sector, for instance, provided a 10.2 percent return.
Those in the industrial sector provided a 9.79 percent return and those in the healthcare sector provided a 9.77 percent return, while retail REITs provided a 9.43 percent total return. Behind those were hotel REITs, with an 8.93 percent total return; apartment REITs, with an 8.89 percent return; self storage, 8.85 percent, and office, 8.4 percent.
Mortgage REITs, meanwhile, which are highly sensitive to changes in interest rates, posted a 3.7 percent return during the month. For the year so far, REITs have provided investors with a total return of 21.55 percent.
The Fed shrugged off this month’s stock market volatility and voted late in the month to end its bond buying program. The move was widely expected and led to a small drop in stock prices as investors believe that the end of economic stimulus will lead to higher interest rates. REITs were affected more than most other companies.
Although the Fed emphasized its plan to maintain its benchmark short-term interest rate near zero for “a considerable time,” investors are on alert for the first hints that rates will move higher. It is widely thought that the Fed will start allowing rates to increase by the middle of next year, but it has noted that its time-frame will depend on its employment and inflation objectives.
Fueled by strong market fundamentals and a favorable interest rate environment that has facilitated growth, the largest REITs announced strong third-quarter earnings that have met or beat expectations. Boston Properties, for instance, reported $1.46/share of funds from operations, handily beating the $1.37/share it was expected to post. Others that beat expectations include Equity Residential and AvalonBay Communities in the apartment sector, industrial REIT Prologis, Kimco Realty Corp. in
the retail sector and healthcare REIT Ventas Inc.
Meanwhile, REITs in several sectors provided investors with healthy total returns, including dividends and stockprice appreciation, for the month. Those in the manufactured-housing sector, for instance, provided a 10.2 percent return.
Those in the industrial sector provided a 9.79 percent return and those in the healthcare sector provided a 9.77 percent return, while retail REITs provided a 9.43 percent total return. Behind those were hotel REITs, with an 8.93 percent total return; apartment REITs, with an 8.89 percent return; self storage, 8.85 percent, and office, 8.4 percent.
Mortgage REITs, meanwhile, which are highly sensitive to changes in interest rates, posted a 3.7 percent return during the month. For the year so far, REITs have provided investors with a total return of 21.55 percent.
The Fed shrugged off this month’s stock market volatility and voted late in the month to end its bond buying program. The move was widely expected and led to a small drop in stock prices as investors believe that the end of economic stimulus will lead to higher interest rates. REITs were affected more than most other companies.
Although the Fed emphasized its plan to maintain its benchmark short-term interest rate near zero for “a considerable time,” investors are on alert for the first hints that rates will move higher. It is widely thought that the Fed will start allowing rates to increase by the middle of next year, but it has noted that its time-frame will depend on its employment and inflation objectives.
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