03/05/2013 | by
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REIT Investors More Confident in Health Care, Mortgage Sectors in February
U.S.REITs posted gains of 1.29 percent in February with the commercial mortgage and health care sectors having the strongest returns for the month.

In a video interview with REIT.com, Brad Case, NAREIT’s senior vice president for research and industry information, discussed February REIT returns as well as whether or not the REIT industry will be affected by the recent federal budget cuts.

Sector wise, health care REIT returns were up 5.35 percent in February, 9.59 percent in 2013 so far and Commercial mortgage REITs up 6.71 percent in February, according to the FTSE NAREIT All REIT Index.  

"When it comes to health care I think investors had some uncertainty about whether what’s going on in Washington would affect health care REIT revenues going forward," he said. "But health care REITs have really shown that their revenues don't depend on government actions the way that investors used to think that they did."

However, he explained that commercial mortgage REITs outperformed due to a different scenario. Consumer confidence has increased in both the home financing and commercial financing portions of the mortgage market. He says investors in this segment of the market appear to be more comfortable.

"I think in particular it was a real puzzle for a few years that REITs didn't seem to be in favor with investors, although they weren't affected the way that mortgage originators were during the liquidity crisis," he said. 

Case said that mortgage REITs have had "spectacular" dividend yields for several years, yet investors seemed to be afraid of that segment because he said it had the word 'mortgage' or 'financing' in it. 

Additionally, Case said that with the recent budget cuts announced by the federal government on March 1, he doesn't anticipate that it will have too much of an impact on REITs.

"The major concern about the budget cuts is that it might suppress the recovery or even tip the economy back into a recession. I don't think those fears are well founded," he said. "I think the recovery will continue and REIT earnings, no matter which segment you're looking at, will likely be driven by increases in operating fundamentals and their access to capital."