Real-estate investment trusts, which have roared nationwide during the last five years, have slumped this month.
The Standard & Poor’s REIT Composite Index, a basket of 100 funds that invest in real estate, is down 4.5 percent since the end of the first quarter.
That compares with a 1 percent gain for the S&P 500 index during the same stretch.
Colorado’s three largest REITs – ProLogis, Archstone-Smith Trust and Apartment Investment & Management Co. – are in that index and have similarly slumped.
REITs invest in or own real-estate properties such as apartment buildings, shopping centers and hotels. The funds delivered a 13.9 percent average return during the first quarter, trailing only gold and international funds, according to fund researcher Lipper Inc.
But with a cooling real-estate market and some investors looking to lock in profits, REIT funds may be overvalued, said Joseph Janiczek, chairman of Greenwood Village-based Janiczek & Co.
“We’ve sold out of them completely,” said Janiczek. “There’s no data that suggests from a risk-reward standpoint” that REITs should be purchased.
But Andrew Clark, a senior analyst with Lipper in Denver, said some REIT funds are poised to move higher.
“As strange as it sounds, REITs are still cheaply priced,” said Clark. “There’s been growing concern about overbuilding, but people have been saying that for 12 months now.”
Clark described the recent dip as temporary and “entirely interest-rate-related.” He said if rates were to reverse course, that would bode well for REITs.
The Federal Reserve released a report Tuesday suggesting it was near the end of its interest- rate increases. The Fed has raised rates 15 times since June 2004, putting its benchmark fed-funds rate at 4.75 percent.
Several of Colorado’s largest REIT funds have declined recently since reaching multiyear highs in late March.
Denver-based ProLogis, with a market capitalization of $12.4 billion, is off 5 percent this month. The company owns and operates industrial-distribution facilities in North America, Europe and Asia. Shares of ProLogis have soared from $17.08 five years ago to $50.80 at Tuesday’s close.
Archstone-Smith Trust, with a market capitalization of $9.9 billion, is down 4.8 percent this month. The Denver-based trust owns apartment buildings throughout the U.S. Shares of Archstone-Smith have surged from $17.96 at 2001’s start to close Tuesday at $46.44.
Apartment Investment & Management Co., with a market capitalization of $4.3 billion, has declined by 3.8 percent in April. The Denver-based trust owns apartment buildings. Shares of the company have increased from $33.71 at the start of 2001 to $45.14 on Tuesday.
Robert McMillan, a REIT analyst with Standard & Poor’s Equity Research Services in New York, said apartment REITs such as Archstone-Smith and Apartment Investment & Management Co. are the most susceptible to a decline. He said hotel REITs were the strongest plays.
Staff writer Will Shanley can be reached at 303-820-1260 or wshanley@denverpost.com.
