Monday, February 12, 2007


Institutional investors with $11.9 trillion in assets have been net sellers of REITs since November, says State Street.

US REIT yields are at their lowest relative to Treasury Bonds since 1985.

The National Vanguard REIT Index 12 02 2007 ChartAssociation of REITs estimates that average yield on US REITs fell to 3.78% at end-January, 1.03 percentage points below the 10 year Treasury's 4.78% yield Friday. US REITs trade at 18.8x adjusted funds from operations according to The Leuthold Group, their highest level since 1997 and almost 50% higher than their average over the last ten years.

US REITs have led the S this year, returning 12%, while the Bloomberg Asia REIT index rose 34% in the last 12 months and the British FTSE All-Share Real Estate Index rose 45% in 2006. Asian REITs currently yield 3.26% and Western European REITs 3.4%, according to Bloomberg.

REIT prices have been driven by rising rents and land values, and M Land prices in Tokyo rose in 2006 for the first time in 15 years. Office rents in mid-town Manhattan rose 19% in the 12 months to November '06 according to CB Ellis, allowing Blackstone to sell 8 Equity Office buildings in Manhattan yesterday to private developer Harry Macklowe for $7 billion, and the Port Authority of New York to open discussions with private investors to sell the $3 billion Freedom Tower in the World Trade Center.