REITs End Roller-Coaster Year on a High --- Benchmark Index Is Up 31% This Year, After 38% Decline in 2008; Sector Is Seen as No Longer a Safe-Haven Play
Real-estate stocks took investors on a wild ride in 2009 and ended the year with strong gains. Don't count on so much excitement in 2010.</br></br>The Dow Jones Equity All REIT Total Return Index is up 31% this year, reversing a 38% decline in 2008. The most recent performance outpaced the 25% return posted by the Standard & Poor's 500-stock index and was the strongest performance since 2006.</br></br>"It's been very much a roller-coaster ride this year. And we're about to end this year on a high note," said Alexander Goldfarb, an analyst with Sandler O'Neill & Partners LP. "If you go back to the beginning of 2009, the market was staring into the abyss," he said, adding that sentiment began to change as the stock market rebounded, credit spreads tightened and the recapitalization wave began.</br></br>For real-estate investment trusts, or REITS, sentiment swung from dismal to ecstatic. Early in the year, many investors were reading the funeral rites for large numbers of REITs as credit dried up amid the recession. By March 9, the Dow Jones REIT index had tumbled 76% from its high in February 2007.</br></br>REITs survived by tapping the stock market and using the proceeds to pay down debt. Other cash-preserving measures included dividend cuts. Others paid dividends by using stock instead of cash. By year's end, only one large property-owning REIT, mall company General Growth Properties Inc., filed for bankruptcy protection.