REITs.com

A new article out of Australia shows that Australian REITs have been the worst performing within the REITs worldwide industry in 2008. Other performances they mention come to these ranks:

1. Australia:  -48.71 %
2. Japan: -40 %
3. United Kingdom: -40 %
4. United States: -20 %
5. South Korea: +5.71 %

An article by ETFGuide.com explains how many REITs can offer shelter in the current economic downturn.

One interesting point in the article is that many investors fail to include exposure to international REITs in their portfolio.  International real estate can be a good hedge for American real estate.

“The SPDR DJ Wilshire Real Estate ETF (AMEX: RWX – News) contains exposure to top worldwide real estate markets including Australia,France,Japan and the United Kingdom.”

To be qualified as a REIT in the US under IRS guidelines, a company must invest at least 75 percent of total assets in real estate; derive at least 75 percent of gross income as rents from real property or interest from mortgages on real property; and make annual distributions of at least 90 percent of taxable income in the form of shareholder dividends.

The falling housing market and resulting impact on the financial market continues to take its toll on Real Estate Investment Trusts. 

Today, General Growth Properties Inc. traded down as much as 50%, leading REITs lower again, according to the Bloomberg article “General Growth Leads REITs Down on Debt Concern“.

The difficulty in obtaining credit, falling real estate values and concern over the slowing U.S. economy have sparked declines in real estate investment trusts over the past year. High gas prices and job cuts by employers have left analysts concerned over retailers and mall operators and led to a 40 percent drop in the 27-member Bloomberg REIT Retail Index over the past year through yesterday. The index fell as much as 7.7 percent today.

While the REITs performance is bad, the entire S&P index lost 5.74% today, as well.  The contagion has not been limited to real estate related securities.