Updated with correction
The largest REIT managers had another great year, with worldwide assets under management soaring 69% to $270 billion in the 12 months ended June 30, according to Pensions & Investments' annual survey of the largest real estate money managers.
Assets invested in real estate securities was up 29% in last year's survey, after falling 44% in the survey taken in 2009. However, managers acknowledge that recent stock market slump could end up cutting a chunk out of these most recent gains.
Assets of firms that managed real estate investment trusts and other real estate securities for U.S. institutional tax-exempt clients also increased by a whopping 64% during the 12-month period to $71.6 billion.
A large part of these gains could be attributed to REIT returns. The FTSE NAREIT All REITs index, which includes both equity and mortgage REITs, returned 32.86% for the 12 months ended June 30. The FTSE NAREIT All Equity REITs index, which excludes mortgages, was up 34.09%, according to data provided by Washington-based National Association of Real Estate Investment Trusts.
Global real estate securities also fared well during the period. The FTSE EPRA/NAREIT Global Real Estate index earned 33.36%. North American securities were up 35.30%; Asian real estate securities were up 22.83%; and the Europe sector was up 54.88%.
“Before you let managers take too many bows for dramatic increases in assets under management, the fact is that a majority of this rise came from market appreciation,” said Ted Bigman, New York-based managing director at Morgan Stanley Investment Management and head of global real estate securities investing. “That's the thing with publicly listed securities, there is some volatility in returns — some for the better, some for the worse.”
By June 30 of this year, REITs recovered everything they lost in the liquidity crisis, which had started with the collapse of Lehman Brothers in 2008, said Brad Case, senior vice president of NAREIT.
But the gains in REIT managers' assets under management were not all from returns, Mr. Case said. During the financial crisis, real estate equity managers that had capital but couldn't spend it because sellers were asking more than buyers wanted to pay used REITs as a “parking place,” he said. As real estate equity managers become more active in the real estate market, some of this capital may move out of REITs into private real estate in the future, he said.
Many of the top REIT managers had stunning increases in assets under management during the survey period — some more than 50%.
BlackRock Inc., up 52% to $45.99 billion, and Cohen & Steers Capital Management Inc., up 76% to $32 billion, again held first and second place for assets invested in REITs. Vanguard moved to third place from fifth, with a 69% increase to $20.9 billion, while Morgan Stanley retained the fourth spot with total REIT assets increasing by 50% to $20.7 billion.
The REIT business of ING Clarion/ING Real Estate, which was ranked second among REIT managers in last year's survey, was sold to CB Richard Ellis during the survey period. However, CB Richard Ellis did not include those assets because the deal did not close until July 1, one day after the survey period, stated Pam Barnett, spokeswoman in an e-mail in response to questions.