TSC Ratings provides exclusive stock, ETF and mutual fund ratings and commentary based on award-winning, proprietary tools. Its "safety first" approach to investing aims to reduce risk while seeking solid outperformance on a total return basis. Investors and analysts met with real estate investment trust companies at the National Association of Real Estate Investment Trusts REITWeek 2009 in New York this week and liked what they heard. For the five trading days ending June 4, the average real estate fund advanced 7.5%, excluding inverse funds that sell short the property market. The National Association of Realtors reported this week that April pending home sales jumped 6.7% as distressed sellers lowered prices to move foreclosed and pre-foreclosure properties. Residential construction even edged a bit higher, up 0.6%, as part of an overall construction increase of 0.8% partially due to the U.S. government's $787 billion fiscal stimulus package. The best-performing real estate fund this week is the LMP Real Estate Income Fund ( RIT) building an 18% return. Top holdings saw gains of 33% in Glimcher Realty Trust ( GRT), 26% in Macerich ( MAC - Get Report) and 22% in Extra Space Storage ( EXR - Get Report). CBL & Associates Properties ( CBL - Get Report) rose 19% as it successfully extended the maturities on some of its outstanding debt. Another NAREIT REITWeek presenter, Kite Realty Group Trust ( KRG - Get Report), up 15%, emphasized its geographically diverse asset base, high credit quality tenants and liquid balance sheet. The second-best performer, ProShares Ultra Real Estate ( URE), rising 18% on 200% leverage to the Dow Jones U.S. Real Estate Index, benefited from a 39% pop in First Industrial Realty Trust ( FR - Get Report) as it continued to deleverage by securing $154 million in new loans to retire debt coming due this month. Other winning positions include 34% from Strategic Hotels & Resorts ( BEE), 23% from CB Richard Ellis Group ( CBG) and 22% from LaSalle Hotel Properties ( LHO).
The only two real estate funds declining in value this week were the inverse funds betting against the industry members of the Dow Jones U.S. Real Estate Index. The ProFunds Short Real Estate ProFund ( SRPIX), rated C-minus, and ProShares UltraShort Real Estate, rated E-minus, fell 8.1% and 16%, respectively.
As the health of the financial-services industry improves and more financing becomes available to real estate investment trusts, a main source of investor concern should continue to diminish. For more information, check out an explanation of our ratings.