9/5/2018 | By Sarah Borchersen-Keto
REIT returns in August outpaced gains seen the month before, with health care REITs posting the largest advances among all property types.
The total returns of the FTSE Nareit All REITs Index rose 2.3 percent in August, while the S&P 500 rose 3.3 percent. In July, the FTSE Nareit All REITs Index rose 0.8 percent. The total returns of the FTSE Nareit Mortgage REIT Index gained 0.2 percent in August, while the yield on the 10-year Treasury note was flat.
Matt Werner, portfolio manager at Chilton Capital Management, said REIT fundamentals continue to look “quite good…[and] point to a very solid couple of years in all property types.” He noted that “supply is pretty well in check.”
Turning to specific property types, returns for health care REITs rose 7.1 percent in August.
Edward Jones analyst Matt Kopsky noted that health care REITs performed well for a few reasons, including a drop in the 10-year Treasury rate, improving sentiment that senior housing and skilled nursing fundamentals are near a trough, and strong private capital interest in medical office and senior housing assets. The sector also benefitted from the fact that trade war concerns have no impact on health care REITs, he added.
Meanwhile, Kopsky noted that retail REITs benefitted from an improving retail environment with less bankruptcies, strong retailer earnings, and high consumer confidence. Returns for free standing, or net lease, REITs gained 4.5 percent in August. Returns for shopping center REITs rose 3.4 percent during the month.
Werner added that even class B retail properties have rebounded, noting that “sentiment had gotten so negative. It needed stabilization.”
Among other property types, returns for manufactured home REITs gained 6.4 percent in August.
Kopsky noted that self-storage REITs underperformed in August due to a few analyst downgrades, “rich” valuation levels, and supply that is showing no signs of abating. Returns in the sector fell 1.7 percent in August.