Despite a lukewarm performance from REIT stocks overall, total returns for the 20 largest real estate investment trusts are up more than 14 percent since the beginning of the year.

According to RealtyStocks.com, these 20 top players are up 11.7 percent without dividends. This is significantly higher than the broader equity REIT market, which is up only about 6 percent since Jan. 1, and up only 3.49 percent without dividends.

RealtyStocks has determined that recent strength of the REIT stock rally lies not only among the large cap equity REITs, but also in specific property type groups. In particular, large office REITs have scored significant gains. For example, such as Spicker (NYSE: SPK), Kimco (NYSE: KLM), CarrAmerica (NYSE: CRE) and Boston Properties (NYSE: BXP) each have gained more than 17 percent on the year.

On the opposite end of the spectrum, mortgage and smaller REITs are not so hot. Although lodging stocks are performing better, resorts, construction and realty Internet stocks are languishing, according to RealtyStocks.

In April, equity REITs gained 6.49 percent excluding dividends, and showed exceptional breadth with all 14 equity REIT property groups increasing. Four of these groups enjoyed double-digit monthly gains.

“With these strong monthly gains, REITs are one of the best-performing industry groups thus far in 2000; some of these stocks are even attracting momentum investors,” said Ried Schott, president of WebVisers Inc., the owner of RealtyStocks. “But for the REIT rally to continue, it needs a broader base.”

And in the continuing saga of JDN Realty Corp. (NYSE: JDN), two of the company’s largest tenants have reaffirmed their existing leases and sales agreements. Anchor tenants Wal-Mart and Lowe’s, which obviously have a strong stake in their current, carefully-chosen locations, are sticking with JDN, which obviously has an even stronger stake in not losing these retailing giants.

In a scandal that has rocked the company and shaken-up management, JDN has been forced to restate its financial statements for the years 1994 through 1998, reducing net income and funds from operations. The company originally expected to restate its financial for 1998 and 1999 after being accused of concealing more than $5 million in executive compensation, engaging in at least 21 undisclosed related-party transactions and overstating net income by at least $5 million.

The tumult caused the company's stock to nosedive more than 40 percent, resulting in several shareholder lawsuits.

Restatement of financial results for the five-year period resulted from leases with Wal-Mart and Lowe's. “Discrepancies” were found regarding these transactions, “potentially exposing the company to claims from these two tenants,” a statement from JDN reads.

But this week’s statement from JDN says, “This agreement settles all current and potential future claims related to possible discrepancies underlying certain leases and real estate sales contracts, the discovery of which the company had previously announced.”

JDN also has established amended, restated credit agreements with its bankers.

“We are pleased to resolve the outstanding issues with the cooperation and support of our major tenants,” said Craig Macnab, CEO of JDN Realty Corporation. “Together with the amendments to the existing bank agreements and the conclusion of the special committee's investigation, we can refocus our energies on our development pipeline and our existing portfolio of operating properties.”

The stock has experienced a small dead-cat bounce, as shares have risen and hovered in the $10 and $11 range. But JDN stock still stands significantly lower than its range of $15 to $20, its standard pre-scandal pricing.

Long-term, the settlements with Wal-Mart and Lowe’s likely will overshadow additional bad news announced this week – JDN’s quarterly dividend dropped from the previous 39.5 cents to 30 cents. Still not a company I’d want to own a piece of.

Published: May 26, 2000

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