A Skeptic’s View of REITs and ETFs

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The modern investor, ever eager to mistake speculation for virtue, finds in real estate investment trusts (REITs) a peculiar solace. Here, at last, is an instrument that promises the dignity of landownership without the vulgar inconveniences of plumbing emergencies or tenant disputes. A dividend, you see, paid monthly or quarterly-proof positive that one has transcended the grubby world of bricks and mortar into the rarefied realm of passive income. How very civilised.

These trusts, which trade like common equities yet purport to represent tangible assets, offer a particularly British sort of hypocrisy: the illusion of solidity maintained through relentless financial engineering. One may buy or sell them with a broker’s flourish, avoiding the tiresome rituals of estate agency, while congratulating oneself on having “diversified.” A gentleman’s portfolio, no doubt, but with all the moral hazards of a landlord who’s never met his tenants.

The REIT Paradox

Consider the peculiar alchemy at work. By law, these entities must distribute 90% of their taxable income to shareholders. A mandate that transforms them into dividend-dispensing automatons, their very existence dependent on perpetual payout. This compulsion, dressed up as investor benevolence, resembles nothing so much as a Ponzi scheme with better tailoring.

  • Historical performance: A ledger of selective triumphs. Yes, REITs have occasionally outpaced the S&P 500 over inconveniently long periods (20 years! 52!), though one wonders whether this reflects real estate’s virtues or the stock market’s periodic humiliations.
  • Volatility: Allegedly tamer than equities, though this calm may owe more to the sluggishness of property valuations than any inherent stability. Markets dislike uncertainty; REITs merely postpone it.
  • Specialization: From data centers to self-storage units, these niches reveal our era’s pathologies. Who needs cathedrals when we have warehouses for forgotten possessions?

Mortgage REITs-those shadowy speculators in debt rather than brick-deserve particular scorn. Their “high yields” often mask leveraged gambles on interest rates. A prudent income strategy, or a wager at Ascot with one’s trousers on fire?

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Curated Delusions

Permit me to present some specimens for your consideration:

Realty Income (O 0.51%)

This purveyor of retail cathedrals-vacant strip malls, mostly-pays dividends monthly, as though frequency might compensate for the creeping decay of its assets. The 5.6% yield sparkles like a mirage in the desert of Main Street.

Federal Realty (FRT 0.99%)

Fifty-eight years of dividend increases! A record achieved by clinging to increasingly irrelevant strip malls. One suspects their persistence owes more to inertia than strategy.

NNN REIT (NNN 0.50%)

Triple net leases, where tenants bear all costs, sound ideal until one considers the tenants themselves: struggling retailers who’ll abandon ship at the first sign of trouble. The 6% yield compensates, generously, for this charming uncertainty.

  • Vici Properties (VICI 0.78%): Casinos! Where optimism goes to die, paying 6.2% for the privilege.
  • Prologis (PLD 1.05%): Warehouses for the e-commerce age. A necessary evil, yielding a modest 3.1%.
  • American Tower (AMT 0.65%): Monetizing the air itself. 3.9% for betting on humanity’s digital claustrophobia.

The ETF Illusion

For those who prefer their delusions diversified, exchange-traded funds offer a smorgasbord of REIT exposure. Spread your capital across dozens of dubious properties! Vanguard’s VNQ and its ilk promise “broad exposure” to real estate-a sector that, historically, has required neither haste nor diversification to thrive. One might as well diversify one’s wine collection against the risk of sobriety.

In conclusion: REITs remain a testament to financial ingenuity’s capacity to transform dirt into dividends, if not gold. Whether they build wealth or merely rearrange it is a question best pondered over a second martini. 🏦

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2026-01-02 15:04