REITs Continue to Rack Up Solid Returns

August 15, 2002 ( - Real Estate Investment Trusts (REITs) proved to be a solid investment last year - and beat out the broader US equity markets for the second straight year, according to a new study.

According to the study by Prudential Real Estate Investors (PREI), Prudential Financial’s real estate investment and advisory unit, equity REITs delivered total returns of 14%, according to the NAREIT equity REIT index, well ahead of the 7.4% for private real estate – not to mention the negative returns for most major public market indices.

The study considers properties in the United States that are at least 50% owned by REITs or REOCs.

Despite that trend, the amount of property owned by the public markets fell in a variety of property types last year.  In fact, the Prudential Real Estate Investors study found that losses at both real estate investment trusts (REITs) and real estate operating companies (REOCs) ranged from a 0.3% decline in apartment unit ownership to a 1.4% drop in retail mall properties.

The only category enjoying an increase in public ownership in 2001 was office properties with a slim 0.2% hike.
Market dynamics largely kept public real estate companies on the sell-side of the transactions market in 2001, where they took advantage of the strong capital inflow to selectively sell assets.

The acquisition of public companies by private firms contributed to the continued decline. Five takeovers during 2001 took properties from public-side ownership. Acquisitions included the Calwest acquisition of the Cabot Industrial Trust, along with the US Retail Partners purchase of First Washington Realty Trust.

Management buyouts of Vinings Investment Property Trust, Westfield America and Sunburst Hospitality also removed properties from the public side.