Equity REIT funds fell 1.3%. VanEck's mortgage REIT fund hit a 52-week low
In the week ended Friday, September 11, the U.S. 10-year Treasury par yield climbed 18 basis points to 4.96% and Vanguard's U.S. real estate fund fell 1.3%.
VanEck's mortgage REIT income fund MORT fell 4.7% and closed at $9.35, matching its 52-week low. Vanguard's $73.1 billion U.S. real estate fund VNQ, which holds listed REITs and other U.S. real-estate companies, fell 1.3%. The S&P 500 fund SPY lost 0.8%.
About 90% of listed REIT debt is fixed-rate, with an average maturity of about six years, State Street Investment Management wrote at the end of August. Friday's 4.96% 10-year Treasury par yield does not reset those coupons. It reprices the equity. Mortgage REITs do not have that wall.
West Texas Intermediate crude rose 9.4%, from $91.48 on Friday, September 4, to $100.05 on Friday, September 11. Thursday's close was $102.48. Reuters tied a global bond selloff that pushed the 10-year toward 5% to oil and rate-hike fears. The Treasury's own par curve went from 4.78% the prior Friday to 4.96%. The two-year closed at 4.63% and the 30-year at 5.35%.
The bounce skipped mortgage REITs
The damage in listed property was concentrated on Wednesday and Thursday.
MORT kept falling Friday as VNQ bounced
- VNQ · 94.8
- MORT · 9.35
Friday's bounce in VNQ came as crude gave back 2.4%. The other U.S. equity-REIT index funds landed in the same place as VNQ.
Brokers and net-lease names did the selling
Inside VNQ, the week's drag was not the largest landlord. Welltower, a 9.9% line and the healthcare landlord that is still up 28.3% in 2026, fell 0.2%. The damage sat in businesses that live closer to transactions and to a long Treasury.
CBRE Group, the brokerage and services firm, fell 5.0% and cost VNQ 0.13 percentage points. It is a 2.6% holding there and a 4.3% holding in XLRE, where it was the single largest drag, at -0.21 percentage points. Schwab's REIT-only fund does not hold it, which is most of why SCHH lost 1.1% instead of 1.3%.
Realty Income fell 2.9%, Simon Property Group 2.2%, and Prologis 1.2%. Together those three, plus CBRE, account for the top of the week's hole in the broad U.S. funds. American Tower rose 1.1%, the rare large line that moved the other way. Equinix was barely positive. The listed property market did not sell every building type equally. It sold the ones whose cash flows look most like a long bond, and it sold the broker that earns fees when buildings trade.
Mortgage REITs are a rate book
Mortgage REITs are not landlords. They are leveraged portfolios of mortgage-backed securities, funded in short-term markets, wearing a REIT wrapper so the dividend can pass through. iShares' mortgage real estate fund REM fell 4.6%.
Annaly Capital, a 19.5% line in MORT, fell 4.0% to $21.90. The company last reported book value of $20.15 a share as of June 30. AGNC Investment, 15.2%, fell 4.7%. Arbor Realty, a smaller commercial-mortgage lender, fell 10.1%. The four largest detractors in MORT accounted for 2.0 percentage points of the fund's decline. Unlike Welltower or Prologis, these vehicles do not have a six-year fixed-rate wall standing between them and Friday's Treasury print.
MORT is a $347 million fund with a 0.43% expense ratio. It is a different product from SCHH or VNQ, not a cheaper or dearer way to own the same buildings.
A full SoHo office still sold
The buildings themselves kept changing hands.
On Wednesday, SL Green Realty, Manhattan's largest office landlord, agreed to sell 110 Greene Street, a 13-story, 223,000-square-foot Class A office in SoHo, to Natora Group for $226.0 million. The company said the building is at full occupancy and that the sale should throw off about $216.0 million of net cash, to be used to repay unsecured corporate debt, with a close expected in the fourth quarter. SL Green's stock still fell 4.5% for the week. A fully leased office can clear at a negotiated price while the listed landlord is marked to the 10-year.
The same morning, Independence Realty Trust and Centerspace said they would combine in an all-stock merger into a middle-market apartment company with an enterprise value of about $8.1 billion and more than 44,000 units across Sun Belt, Midwest, and Mountain West markets. Centerspace shareholders will receive 3.800 Independence Realty shares per Centerspace share; Independence Realty holders will own about 78% of the equity. The companies are aiming for a close as early as the end of the fourth quarter and cited about $24 million of annualized synergies. Centerspace rose 10.2% for the week, including 8.8% on the announcement. Independence Realty, the acquirer, fell 5.6%, including 4.3% that day. Scale is still worth a bid in apartments. Paying for it with stock, at a 4.96% 10-year, is not free.
Thursday's housing print did not help the for-sale side of residential. Existing-home sales ran at a 3.98 million annual pace in August, the National Association of Realtors said, with inventory at 1.62 million homes, the first reading above 1.6 million since November 2019.
The last four quarterly payments on VNQ, through the June 24 distribution, come to a 3.66% trailing yield on Friday's $94.80 price. The 10-year now yields 1.30 percentage points more than that payout. The coupons on the buildings have not moved. The next mark is whether Wednesday's Federal Reserve decision moves the Treasury, not whether Prologis refinances this month.
Frequently asked
Why did mortgage REITs fall so much more than equity REITs?
Mortgage REITs are leveraged portfolios of mortgage-backed securities funded in short-term markets, so they have no fixed-rate debt wall between them and a rising 10-year yield.
What drove the loss inside the broad real estate funds?
Brokerage CBRE Group and long-bond-like net-lease names such as Realty Income and Simon Property Group did most of the damage, while Welltower and American Tower held up.
Did the drop mean buildings themselves were repricing?
No, SL Green agreed to sell a fully occupied SoHo office for $226.0 million the same week its stock fell 4.5%.
How does VNQ's payout compare with Treasuries now?
Its trailing yield is 3.66%, about 1.30 percentage points below the 10-year.