The relative underperformance of UK property stocks, particularly the Reits, since January 1, is not really a reflection on Reit conversion itself. The sector had a strong run in 2006 leading up to conversion, and the economic benefits of Reits were understood and priced in by the market before the turn of the year (although some analysts had not adjusted their NAV estimates for the conversion charge until then). The recent underperformance is really a factor of increased investor caution about the underlying property market, such as the widespread belief that yield shift has run its course and concerns about the impact of rising interest rates on the direct market.
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