View from the Observation Deck

1. The FTSE NAREIT Equity REITs Index posted a price decline of 75.3% from its peak on 2/7/07 through the end of the bear market in stocks on 3/9/09, according to Bloomberg.
2. This period was accompanied by an 18-month recession, which lasted from December 2007 until June 2009, according to the National Bureau of Economic Research.
3. Since approximately 70% of all U.S. economic output is driven by consumer spending, any recessionary climate that drives the unemployment rate to 9-10% is going to negatively impact equity REITs.
4. The REIT sectors shown in the chart capture the serious tone of the last recession, as well the recovery underway. The brunt of the financial crisis was clearly felt in 2008.
5. As of 4/17/12, the FTSE NAREIT Equity REITs Index was priced 27.9% below its peak on 2/7/07.
6. Equity REITs have staged a nice recovery off their 2009 lows, but a good deal of potential value remains, in our opinion.
7. Investors considering initiating a position in equity REITs, or adding to an existing position, should take a moment to assess whether or not they believe the U.S. will continue to grow the labor force moving forward.