NAREIT responded to a recent analysis in a Wall Street Journal article that predicted that total returns of exchange-traded Equity REITs during the next 10 years would average no better than the rate of inflation. 

The print and online editions of the WSJ published a Letter to the Editor from Brad Case, NAREIT senior vice president for research and industry information, responding to the online blog post by John Coumarianos.

“The long-run relationship between Equity REIT dividend yields and yields on Treasury bonds or corporate bonds suggests that REIT returns over the next 10 years may exceed inflation by around 8.9 percentage points per year on average,” Case wrote.

Coumarianos’s analysis was based on an estimate by investment research firm Research Associates that properties owned by institutional real estate investors are currently over-valued by about 20 percent.

According to Case, both Coumarianos and Research Affiliates failed to note that there seems to be a large discrepancy between valuations on the private and exchange-traded sides of the real estate market. As a result, the 20 percent overvaluation estimate derived from National Council of Real Estate Investment Fiduciaries (NCREIF) data is not appropriate for valuing REITs, Case said.

The Letter to the Editor also pointed out that there has never been a 10-year period during which total returns on exchange-traded Equity REITs failed to exceed the rate of inflation, as Coumarianos’s blog predicted.


(Contact: Brad Case at bcase@nareit.com)


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