Over the past three years REIT stocks tended to rise when treasury yields fell, with a few exceptions
Real estate investment trusts are back. After a tough start to the year, share prices of New York’s leading 上海千花社区 public real estate firms have climbed steadily for five months.
SL Green Realty , which reported second-quarter earnings last week, saw its stock jump 43 percent since early February. Vornado Realty Trust’s stock is up 30 percent from its February low, Boston Properties is up 28 percent上海龙凤论坛sh1f and Brookfield Property Partners is up 26 percent. What’s behind the rally?
The “overwhelming driver,” according to John Kim, a REIT analyst at BMO Capital Markets, is the 10-year Treasury yield: Over the past three years, when the 10-year Treasury fell, REIT shares rose, and when the Treasury rose, REITs fell.
Low Treasury yields benefit REITs because they result in low interest r上海龙凤论坛sh1f ates across the economy. Cheap debt lowers REITs’ financing costs and increases overall demand for real estate, pushing up the value of their holdings.
As of Tuesday, afternoon, the 10-year Treasury yield had fallen to 1.56 percent, from 2.27 percent at the start of the year.
In last week’s earnings call, SL Green’s CEO Marc Holliday said he expects his firm to see an “extraordinary amount of savings” from low interest rates this year, in excess of the $30 to $40 million that had been anticipated. Meanwhile, low bond yields make real estate returns look more attractive in comparison, whic[……]