Real Estate Investment Trusts, or REITs, outperform the S&P 500 Index in April. Learn more about this and other real estate market trends.
U.S. REITs – the favorite alternative investment of high net worth investors – returned 5.8 percent in April – triple the 1.93 percent returned by the S&P 500 Index over the same period, according to NAREIT, an industry trade group representing the real estate investment trust industry.
“It was a very strong month for REITs,” Brad Case, senior vice president of research and industry information for NAREIT. “I have noticed that we’ve been seeing declines in the correlation between REITs and the broader stock market.”
REITs – a pooled investment returning 90 percent of income to shareholders in the form of taxable dividends – have gained 15.44 percent through April, while the S&P has returned 12.74 percent. “People have been talking about a recovery of the stock market, but, actually, REITs have outperformed the stock market so far during the first one-third of the year.”
REITs are the preferred alternative investment product of high net worth investors, those with $5 million up to $25 million to invest, according to a financial product ownership study completed by Spectrem’s Millionaire Corner in the fourth quarter of 2012. More than one-third (36 percent) of the high net worth own REITs and their average investment is $225,000. The products attract investors seeking dividend income and hard assets in “search of safe havens from broader economic concerns,” David Toti, senior managing director with Cantor Fitzgerald, said in a statement.
Retail REITs outperformed other REIT sectors with a return of 9.81 percent in April, and this week a retail REIT known as Macerich has become the first REIT to be added to the S&P 500 Index in four years, according to NAREIT. A health care REIT known as Ventas joined the S&P in March 2009, and Health Care REIT Inc. was added in January 2009. A total of 17 REITs are now listed on the benchmark index.
“There are many investors that only want to invest in S&P companies, so it just clearly broadens the appeal to the investment community,” Arthur Coppola, chairman and CEO of Macerich, said in a statement.