The State Of REITs: September 2024 Edition

Core Insights - The REIT sector experienced a fourth consecutive month of gains in August 2024, with an average total return of +2.11%, although it underperformed the S&P 500 which had a return of +2.4% [2][3] - Large cap REITs significantly outperformed small cap REITs, with a widening spread in 2024 FFO multiples, where investors are paying 41% more for large cap REITs [2][23] - 72.22% of REIT property types yielded positive total returns in August, with self-storage being the top performer at +9.34% [4][5] REIT Performance Overview - The average total return for different market capitalizations in August 2024 was as follows: Large Cap (+5.27%), Mid Cap (+3.51%), Small Cap (+0.84%), and Micro Cap (-3.03%) [3] - Year-to-date performance through August 2024 showed that large cap REITs outperformed small caps by 593 basis points [3] Year-to-Date Performance - Year-to-date total returns through August 2024 for various property types included: Data Centers (+26.25%), Advertising (+23.17%), and Health Care (+18.13%) [4][7] - Timber and Hotels were the worst performing property types year-to-date, with returns of -9.33% and -6.46% respectively [7] FFO Multiples and Valuation - The average P/FFO for the REIT sector increased from 14.2x to 15.0x in August 2024, with 83.3% of property types experiencing multiple expansion [7][23] - Data Centers, Land, Multifamily, Manufactured Housing, and Single Family Housing currently trade at the highest average multiples among REIT property types [7] Individual Securities Performance - American Healthcare REIT (AHR) led all REITs in August with a return of +29.36%, while Wheeler REIT (WHLR) faced a significant decline of -75.88% [9] - 68.39% of REITs had a positive total return in August, contrasting with a mere +0.56% return for the average REIT in the first eight months of 2023 [9] Dividend Yield Insights - High dividend yields remain a key attraction for investors in the REIT sector, with many REITs trading below their NAV, leading to attractive yield opportunities [11] - The highest dividend yield as of August 31, 2024, was 17.2% for Creative Media & Community Trust [12] NAV Premium/Discount Analysis - Large cap REITs trade at a premium to NAV (+3.80%), while small and micro cap REITs trade at discounts of -17.10% and -30.35% respectively [25] - The average REIT across all market caps trades at a discount of -6.51% to NAV [25]