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Featured Advisor

Srbo Radisavljevic
Managing Principal/Investment Advisor

Edge Portfolio Management


State: IL

At Edge, a low client to advisor ratio allows for personal and customized service for each individual.  Our goal is to work as a team for each client to provide not only portfolio management but wealth coordination and financial planning.  We make every effort to have frequent communication with our clients and to provide timely response to calls and emails.  I also enjoy spending time with my wife and three kids, following Chicago sports, enjoying ethnic cooking, and serving as a school board member for Norridge School District 80.

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Depressed Housing Market Boosts Apartment REITS

REITS gain while housing market struggles

Real estate investment trusts have outperformed blue chip stocks for the first five months of 2011, according to industry data that shows the FTSE NAREIT All REITs Index is up 12.96 percent from the beginning of the year, compared to 7.82 percent for the S&P500.

Double-digit gains were reported for all of the major REIT market sectors, led by the Self-Storage sector which realized an 18.4 percent gain since January 2011. The Office sector realized 17.81 percent gains, while Apartments delivered a 16.88 percent gain, said the National Association of Real Estate Investment Trusts. The Industrial sector was up 16.07 percent and the Retail sector, 12.97 percent.

Twelve-month gains were even more robust, with a 45.62 percent gain in the Industrial sector; a 38.7 percent gain for Apartments; a 34.5 percent gain for Retail; and a 29.26 percent gain for the Office sector.

REITs were created by Congress in the 1960s to give individual investors access to the commercial real estate market. REITS now own $500 billion of commercial real estate assets, about 15 percent of all institutionally owned commercial real estate. More than 140 REITS are traded on the New York Stock Exchange for an equity market capitalization of $451 billion.

Since 1972 REITS have returned 9.75 percent, outperforming the NASDAQ and Dow Jones Industrial average. The S&P 500 returned 10.14 percent over the same period.

REITs are corporations investing solely in real estate and are bound by special IRS rules conferring exemption from corporate taxes. REITS must distribute 90 percent of their income as dividends to shareholders. In addition to providing income, the trusts can serve as a hedge against inflation because their value tends to appreciate with inflation.

REITs are vulnerable to fluctuations in the economy and real estate market. Income can fall in times of high vacancy rates, and investments can lose value with declines in the with real estate market.

Apartment REITS have benefitted from a weak housing market. Depressed home prices and tight credit are causing young adults to delay buying a home and move into rental housing instead, according to NAREIT. Both vacancy and rental rates are up.