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US REITs outperform S&P 500 YTD through Q3

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US REITs outperform S&P 500 YTD through Q3

The SNL U.S. REIT Equity index remained solidly in the blackyear-to-date through Sept. 30 with a 12.4% total return, outperforming the 7.8%total return posted by the S&P 500.

Despite its strong first-half performance, the SNL U.S.Equity REIT index produced a negative 1.2% total return in the third quarter,compared to its 7.3% total return in the second quarter. The S&P 500 fared better, at 3.9%for the quarter, higher than its 2.5% total return in the previous quarter.

Industrial REITs were the only sector to beat the S&P500 during the third quarter, with a 5.1% market-cap-weighted total return.Nine out of the 10 industrial REITs posted positive total returns during thequarter, and PrologisInc., the largest industrial REIT by market cap, posted the highesttotal return of the group, at 10.1%.Year-to-date through Sept. 30, the SNL U.S. REIT Industrial index produced a29.3% total return.

The office and healthcare sectors also posted positive totalreturns for the third quarter, at 3.1% and 2.6%, respectively, and loggedrespective year-to-date total returns of 10.1% and 19.4%.

The self-storage REIT sector continued its decline in thethird quarter, with a total return of negative 12.16%. While the sector startedthe year off strong, closing the first quarter with a 10.9% total return, itstarted to dip shortly after and ended with a negative 8.2% year-to-date totalreturn as of Sept. 30.

Among the 171 U.S. REITs with a greater than $200 millionmarket cap at Sept. 30, regional mall REIT CBL & Associates Properties Inc. posted the highesttotal return of the quarter, at 33.2%. On Aug. 15, CBL announced that theindependent investigation into the company's handling of disclosuresto lenders found the company and its employees were free of any wrongdoing. Asthe investigation came to a close, CBL & Associates saw a steady increasein its share price, which peaked at $14.29 at the close of Sept. 7.

CBL & Associates recorded negative total return of 20.7%for the first half of the year, but produced a 5.6% year-to-date total returnthrough Sept. 30.

Out of the 17 publicly traded healthcare REITs with agreater than $200 million market cap, six were among the 25 top-performing U.S.REITs in the third quarter. Leading the pack was with a24.1% total return in the quarter. Universal Health Realty Income Trust and were the No. 2 and No. 3 healthcare REITs, with total returns of 11.4% and11.0%, respectively.

Three office REITs placed in the top 25 performers as well.NorthStar Realty EuropeCorp. was the top-performing office REIT, with a 20.3% total returnfor the quarter. Hudson PacificProperties Inc. and Empire State Realty Trust Inc. also made it into the top25, posting total returns of 13.3% and 10.9%, respectively, for the quarter.

The bottom two performers during the third quarter were thetwo prison REITs, CorrectionsCorp. of America and GEO Group Inc., which had total returns of negative58.8% and negative 29.1%, respectively. After the U.S. Department of Justice'sannouncement Aug. 18 that it plans to end the use of private prisons, prisonREIT stocks plummeted: GEO Group's stock dropped 39.6% on Aug. 18 to$19.51 per share and Corrections Corp.'s stock dropped 35.5% to $17.57 pershare. While GEO Group's price has rebounded slightly, rising 21.9% betweenAug.19 and Sept. 30 to $23.78 per share, Corrections Corp.'s downward slopecontinued, dropping an additional 21.1% to end the third quarter at $13.87 pershare.

All six data center REITs posted negative total returnsduring the third quarter. CoreSite Realty Corp. recorded the third-lowest totalreturn of all equity REITs with a greater than $200 million market cap, atnegative 15.9%. Favoring only slightly better were CyrusOne Inc., with the fifth-lowest total return atnegative 13.9%, and DuPont FabrosTechnology Inc., with a negative 13.2% total return.

Additionally, four out of the five self-storage REITs withmarket caps above $200 million fell into the bottom 25 performers of thequarter. Life StorageInc. was the worst performer of the self-storage REITs, with anegative 14.5% total return in the quarter. Other bottom-performers in thesector included Extra SpaceStorage Inc. and Public Storage, with total returns at negative 13.3% andnegative 12.0%, respectively.

Use SNL's Worldwide Real Estate Total Return Analysis excel template to calculate total returns across a specific time period for a chosen set of companies. Other templates are available in SNL's Template Library.