Institutions Beware: The Performance of Equity Real Estate Investment Trusts

Lodging REIT Performance and Comparison With Other Equity REIT Returns

“…Such research findings have indicated that when compared to relevant industry benchmarks on a risk adjusted basis, REITs have either exceeded the market (Kuble, Walther, & Wurtzebach, 1986), underperformed the market, (Wang, Erickson, Gau, & Chan, 1997;Goebel & Kim, 1989), performed slightly better or about the same (Glascock & Hughes, 1995;Smith, 1980;Smith & Schulman, 1976), or performed slightly worse than, or no better than the market portfolio (Sanders, 1998;Han & Liang, 1995;Howe & Shilling, 1990). On a nominal return basis, when compared to relevant industry benchmarks, the trend remains the same.…”

“…On a nominal return basis, when compared to relevant industry benchmarks, the trend remains the same. REITs have either underperformed the market (Chen & Peiser, 1999;Glascock & Hughes, 1995), displayed performance that was similar to the market (Wang et al, 1997), or performed about as well as, or no better than the market (Smith & Schulman, 1976). …”

“…Research conducted during the early years of REIT development and growth (during the 1960s and throughout the 1980s) appears to be in general consensus that the performance of REITs as indicated by their returns appear to be similar to the general stock market. For example, Smith & Schulman, (1976) compared the performance of equity REITs against common stocks during the period January 1963 to December 1974, and found that over the sample period, equity REITs performed the same, or similar to, but not better than common stocks, on both a risk adjusted basis and nominal basis. The exception was 1974, when the underperformance of equity REITs was attributed to overall poor market conditions.…”

“…For example, early studies on long run performance of REITs, conducted between the 1960's through the 1980's suggest that REIT returns are similar to or about the same as those of the stock market (Smith & Schulman, 1976;Smith, 1980). More recent studies however do not support such findings, and instead portray REIT performance as less impressive than previously indicated.…”

The structure and performance of US hotel real estate investment trusts

“…In general, previous studies on REIT performance have arrived at one of four conclusions. Such research fi ndings have indicated that when compared to relevant industry benchmarks on a risk-adjusted basis, REITs have either exceeded the market ( Kuhle et al ., 1986 ), underperformed the market, ( Goebel and Kim, 1989 ;Wang et al ., 1997 ), performed slightly better or about the same ( Smith and Schulman, 1976 ;Smith, 1980 ;Glascock and Hughes, 1995 ), or performed slightly worse than, or no better than the market portfolio ( Howe and Shilling, 1990 ;Han and Liang, 1995 ;Sanders, 1998 ). On a nominal return basis, when At least 90 per cent of the REIT's taxable income (this was changed by the REIT modernisation Act of 1999 from 95 pe rcent) must be distributed to shareholders on an annual basis.…”