A Fresh Look at REITs
Commercial real estate has been broadly embraced by the institutional investment community. At the same time, equity REITs have lagged institutional acceptance, despite having matured and grown well beyond the “small-cap” generalization contained in many academic studies. Indeed, a recent study of realized investment performance of over 200 pension funds showed equity REITs have consistently delivered competitive total returns and handsomely outperformed private real estate funds over the past 20 years. REITs own and operate diversified portfolios of commercial property which house businesses, people and things, a proven vehicle to capture real estate returns over the long term. REITs are required to distribute 90% of their taxable income to protect their pass-through status, thus providing a premium dividend yield. Why now? With the Global Financial Crisis a decade past and low-to-negative interest rates prevalent across the globe, a “fresh look” at the benefits of an institutional REIT allocation is warranted.