Delaware REIT Fund


Delaware REIT Fund seeks maximum long-term total return, with capital appreciation as a secondary objective.


The Fund primarily invests in real estate investment trusts (REITs).

Fund information
Inception date12/06/1995
Dividends paid (if any)Quarterly
Capital gains paid (if any)November or December
Fund identifiers
Investment minimums
Initial investment$1,000
Subsequent Investments$100
Systematic withdrawal balance$5,000
Account features
Payroll DeductionYes

On Sept. 25, 2014, Class B shares of the Fund converted to Class A shares.

The performance quoted represents past performance and does not guarantee future results. Investment return and principal value of an investment will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance quoted.

Total returns may reflect waivers and/or expense reimbursements by the manager and/or distributor for some or all of the periods shown. Performance would have been lower without such waivers and reimbursements.

Average annual total return

as of month-end (06/30/2017)

as of quarter-end (06/30/2017)

YTD1 year3 year5 year10 yearLifetimeInception date
NAV (view definition)1.00%-3.47%6.56%7.94%5.24%11.05%12/06/1995
Max offer price-4.79%-9.05%4.48%6.67%4.61%10.75%
FTSE NAREIT Equity REITs Index2.70%-1.70%8.35%9.52%6.00%n/a
1 year3 year5 year10 yearLifetimeInception date
NAV (view definition)1.69%-3.47%6.56%7.94%5.24%11.05%12/06/1995
Max offer price-4.19%-9.05%4.48%6.67%4.61%10.75%
FTSE NAREIT Equity REITs Index1.52%-1.70%8.35%9.52%6.00%n/a

Returns for less than one year are not annualized.

Class A shares have a maximum up-front sales charge of 5.75% and are subject to an annual distribution fee.

Index performance returns do not reflect any management fees, transaction costs, or expenses. Indices are unmanaged and one cannot invest directly in an index.

Expense ratio
Quarterly total returns @ NAV
Year1st quarter2nd quarter3rd quarter4th quarterAnnual return
Portfolio characteristics - as of 06/30/2017FTSE NAREIT Equity REITs Index
Number of holdings46161
Market cap (median)$6.93 billion$3.26 billion
Market cap (weighted average)$17.45 billion$15.61 billion
Portfolio turnover (last fiscal year)111%%
Beta (relative to FTSE NAREIT Equity REITs Index) (view definition)0.96n/a
Annualized standard deviation, 3 years (view definition)14.41n/a
Portfolio composition as of 06/30/2017Total may not equal 100% due to rounding.
Domestic equities98.0%
Cash and cash equivalents2.0%
Top 10 equity holdings as of 06/30/2017
Holdings are as of the date indicated and subject to change.
List excludes cash and cash equivalents.
Holdings based by issuer.
Holding% of portfolio
Simon Property Group Inc.6.6%
Prologis Inc.5.2%
Welltower Inc.5.0%
AvalonBay Communities Inc.4.8%
Equinix Inc.4.7%
HCP Inc.4.5%
Equity Residential4.3%
GGP Inc.4.3%
Brookdale Senior Living Inc.3.7%
UDR Inc.3.5%
Total % Portfolio in Top 10 holdings46.6%

Equity sectors as of 06/30/2017

List excludes cash and cash equivalents.

Regional malls11.3%0.0%
Shopping centers9.2%0.0%
Self storage2.8%0.0%
Manufactured homes1.9%0.0%
Distribution history - annual distributions (Class A)1,2
Distributions ($ per share)
YearCapital gains3Net investment
Return of

1If a Fund makes a distribution from any source other than net income, it is required to provide shareholders with a notice disclosing the source of such distribution (each a "Notice"). The amounts and sources of distributions reported above and in each Notice are only estimates and are not provided for tax reporting purposes. Each Fund will send each shareholder a Form 1099 DIV for the calendar year that will provide definitive information on how to report the Fund's distributions for federal income tax purposes. The information in the table above will not be updated to reflect any subsequent recharacterization of dividends and distributions. Click here to see recent Notices pertaining to the Fund (if any).

2Information on return of capital distributions (if any) is only provided from June 1, 2014 onward.

3Includes both short- and long-term capital gains.

A nimble approach

The Real Estate Securities and Income Solutions team (RESIS) at Delaware Investments sits together, in one office in Philadelphia. This unique setup helps differentiate the team from many of its peers and enhances its decision-making process. [Runtime: 2:18]

Watch the video

Read video transcript

Bob Zenouzi

Bob Zenouzi 

Senior Vice President, Chief Investment Officer — Real Estate Securities and Income Solutions (RESIS)

Start date on the Fund: May 2006

Years of industry experience: 31

(View bio)

Damon Andres

Damon J. Andres, CFA

Vice President, Senior Portfolio Manager

Start date on the Fund: January 1997

Years of industry experience: 26

(View bio)

Scott Hastings

Scott P. Hastings, CFA, CPA

Vice President, Portfolio Manager

Start date on the Fund: July 2016

Years of industry experience: 14

(View bio)

You may qualify for sales-charge discounts if you and your family invest, or agree to invest in the future, at least $50,000 in Delaware Funds by Macquarie. More information about these and other discounts is available from your financial intermediary, in the Fund's Prospectus under the section entitled "About your account," and in the Fund's statement of additional information (SAI) under the section entitled "Purchasing Shares."

The table below describes the fees and expenses that you may pay if you buy and hold shares of the Fund.

Shareholder fees
Maximum sales charge (load) imposed on purchases as a percentage of offering price5.75%
Maximum contingent deferred sales charge (load) as a percentage of original purchase price or redemption price, whichever is lowernone
Annual fund operating expenses
Management fees0.75%
Distribution and service (12b-1) fees0.25%
Other expenses0.33%
Total annual fund operating expenses1.33%
Fee waivers and expense reimbursementsnone
Total annual fund operating expenses after fee waivers and expense reimbursements1.33%
This commentary is currently not available. Please check back later.

Delaware REIT Fund Quarterly commentary June 30, 2017

Market review

Risk assets continued to perform well in the second quarter of 2017 as strong first-quarter earnings fueled gains in equities. Bond yields declined, however, as inflation, wages, and oil failed to post gains and the rate of job growth began to slow. Although equity markets have risen since the election, the initial spurt was sparked by expectations that the Trump administration would cut taxes, reform healthcare, build new infrastructure, and reduce regulations. Thus far, however, with the exception of a reduction in regulations, the administration has accomplished little. While we still expect some tax cuts, wholesale tax reform looks less likely.

Global equities have continued to increase in value despite high valuations, global terrorism, and very low single-digit growth. Equities continued to gain even as the US Federal Reserve raised interest rates, China began gradually tightening monetary policy, and the European Central Bank said it may begin tapering its quantitative easing program later this year or in 2018. In the short term, rising interest rates are not a cause for concern, in our view, as credit spreads have continued to tighten. However, given the increasing global level of debt and the Trump administration’s desire to reduce taxes while funding an infrastructure program, rising rates would seem to be an impediment to future growth.

For the first six years of the current economic recovery, equity prices were driven largely by the Fed’s quantitative easing (QE) programs. Since the end of the last QE program in October 2014, earnings have been the principal driver. So far this year, equities have received a small boost from revenue growth as well. With price-to-earnings ratios currently at a high level, strong top-line growth will be required to continue this momentum. More than eight years into this recovery, with global central banks tightening monetary policy, and given high equity valuations and high levels of debit, in our view, it seems less likely that we are on a path to sustained reacceleration.

Within the Fund

Notes on the Fund’s relative performance at the sector level follow:

The Fund underperformed in the freestanding sector as many of the triple-net-lease companies have exposure to retail. A triple-net lease is an agreement in which the lessee agrees to pay the net real estate taxes on the leased asset, net building insurance, and net common area maintenance. Although, the retail companies in this sector — convenience stores, pharmacy chains, and restaurants — are considered less cyclical, the sector came under pressure. First, several tenants, including Gander Mountain, filed for Chapter 11 bankruptcy. Second, Spirit Realty Capital, which has had issues with credit in the past, experienced an 8% decline in earnings, a rare occurrence for a triple-net company. The announcement was a surprise, sending shares of several real estate investment trusts (REITs) down 15% to 20% in a single trading day, bolstering the concern that brick-and-mortar retail is dead. Fund performance was affected by its holdings in both Spirit Realty Capital and Vereit. We had mistakenly thought that Spirit Realty, selling at a funds-from-operations multiple of 8, was cheap enough. (Funds from operations is a measurement of cash generated by a REIT, which is used as an operating performance benchmark.) Given its earnings surprise, we felt the company did not have a firm enough understanding of its credit issues, and we decided to exit the Fund’s position. The Fund continues to hold Vereit, as we believe its valuation is compelling and the company seems to have a better understanding of the credit backdrop.

The Fund’s underweight and stock selection led to slight underperformance in the lodging sector. Limited-service and triple-net hotels outperformed. Most full-service hotels underperformed, however, as the sector continues to experience tepid growth in revenue per available room (RevPAR) given supply, competitive pricing, and lack of corporate business. The Fund’s strongest performer in the lodging sector was Sunstone Hotel Investors, up more than 5%. Sunstone has been adept at selling hotels into a strong market and taking advantage of pricing even as operations are not very firm, another indication in our view that low interest rates have distorted values across all asset markets. The Fund’s holding in Host Hotels & Resorts, a large full-service operator, underperformed as its corporate business has not seen a positive turn. Even as corporate America seems to be feeling better since the November election, spending largely has not materialized.

The Fund’s lack of exposure to the mixed sector hurt relative performance. Although the sector has a relatively small weighting in the Fund’s benchmark, the FTSE NAREIT Equity REITs Index, the two stocks in this group are industrially oriented and benefited during the quarter, given strong growth in net operating income (NOI) throughout the sector. We would like to highlight one company (not held by the Fund), Liberty Property Trust. Its shares gained more than 7% during the quarter, demonstrating that even when capital is not allocated well, it pays to be in the right sector at the right time. Over the past five years, Liberty Property Trust has reduced its office footprint in favor of industrial assets. Over this time, it sold $3 billion of assets at a dilutive rate of $0.40 per share. The company curtailed these sales at the end of 2016 and was then forced to cut its dividend in the first quarter of 2017. Liberty is now theoretically positioned in a stronger sector, but its NOI is no better than many beaten-down retail REITs with forecasted growth of 0% to 2% for 2017. Yet, its stock is up by single digits and retail REITs are down more than 20%. We believe this is an example of investors’ valuing a company on hope that a rising tide will lift all boats.

The healthcare sector performed well, given good fundamentals and the decline in interest rates. Overall, skilled nursing coverage ratios have continued to decline at a slow pace. Although many of these REITs have higher yields, their fundamentals have continued to deteriorate, hence the Fund’s long-term underweight. Senior living supply is gradually ebbing, and we see potential stabilization. The Fund is overweight the senior-living area, and the predominant reason for the outperformance in the sector was the Fund”s large out-of-index allocation to Brookdale Senior Living. Shares rose more than 9% for the quarter as Brookdale is greatly undervalued, and we believe the company is an attractive takeover candidate given long-term positive demographics. Its management has been unable to perform over the past three years, and we believe that a takeout, if it were to occur, could be at levels that are 30% higher.

The industrial sector continues to benefit from strong ecommerce demand and a general uplift in the economy. Growth in e-commerce has been the primary driver, as demand for same- and next-day delivery service is driving the development of larger and more technically advanced distribution centers. Both the Fund’s overweight to the benchmark and stock selection aided performance. Shares of Prologis and DCT Industrial Trust were both up by double digits. While supply in the sector is increasing, it has so far been matched with demand. Long-term, supply is an issue given strong returns and the many private players involved in the sector. We continue to maintain an overweight while being mindful of supply.

The Fund outperformed in the regional malls sector, as shares of GGP were up more than 3% even as the sector declined more than 4%. GGP’s outperformance was the result of the company”s effort to close the gap that exists between its share price and its net asset value (NAV). Currently trading at a 25% discount to its NAV, the company is on record saying it “will do whatever it takes” to erase that discount. Thus, the company became the only retail REIT to clearly state frustration with its low valuation. GGP”s effort could come in the form of selling assets and buying back stock, or an outright sale of the whole company. Malls are coming under attack as many of the anchor department stores have been closing locations. Interestingly, anchors produce only 3%-4% of average base rent for mall companies. For example, over the past seven years, GGP has taken back anchor sites and redeveloped them at an average yield of 11%. The difference in rent between the new lease and the old, the releasing spread, is typically a multiple of 3x or 4x, making redevelopment a more-attractive proposition than riskier ground-up development in other sectors.


US REITs have come under some pressure this year and their returns have failed to keep pace with the overall market. The underperformance of REITs can be attributed to rising interest rates, negative cash flows, and slowing fundamentals. Additionally, retail REITs in particular have experienced pressure over the past quarter as ecommerce sales continued to grow at a faster pace than those at traditional brick-and-mortar stores. With online commerce continuing to increase share at the expense of retail real estate, many shopping center and mall REITs are down 15% to 25% this year. Even after these companies reported their first-quarter results, with nearly all reaffirming guidance, the stocks continued to underperform. Many of these companies are now trading at large discounts to NAV.

Retail REIT management teams have long stated that an omnichannel approach (both a brick-and-mortar and an online presence) would be the preferred retail strategy. Surprisingly, it was online behemoth Amazon that confirmed this in June with its bid to buy Whole Foods. Amazon realized that in order to lower the cost of the last mile of distribution, it needs a brick-and-mortar presence. We believe that over the long term, this should bode well for high-quality retail real estate. Weaker retail outlets will likely disappear, but most REIT retail properties are of high quality. Given the lack of supply in retail real estate over the past seven years, we believe this should be a long-term positive.

The FTSE NAREIT Equity REITs Index measures the performance of all publicly traded equity real estate investment trusts (REITs) traded on US exchanges, excluding timber and infrastructure REITs.


The views expressed represent the Manager”s assessment of the Fund and market environment as of the date indicated, and should not be considered a recommendation to buy, hold, or sell any security, and should not be relied on as research or investment advice. Information is as of the date indicated and subject to change.

Document must be used in its entirety.

Carefully consider the Fund’s investment objectives, risk factors, charges, and expenses before investing. This and other information can be found in the Fund’s prospectus and its summary prospectus, which may be obtained by clicking the prospectus link located in the right-hand sidebar or calling 800 523-1918. Investors should read the prospectus and the summary prospectus carefully before investing.

Investing involves risk, including the possible loss of principal.

Narrowly focused investments may exhibit higher volatility than investments in multiple industry sectors.

REIT investments are subject to many of the risks associated with direct real estate ownership, including changes in economic conditions, credit risk, and interest rate fluctuations.

A REIT fund's tax status as a regulated investment company could be jeopardized if it holds real estate directly, as a result of defaults, or receives rental income from real estate holdings.

All third-party marks cited are the property of their respective owners.

Not FDIC Insured | No Bank Guarantee | May Lose Value

Fund Finder

Daily pricing (as of 07/27/2017)

Class APriceNet change
Max offer price$12.63n/a

Total net assets (as of 06/30/2017)

$137.5 million all share classes

Overall Morningstar RatingTM

Class A shares (as of 06/30/2017)
Class ANo. of funds
3 Yrs2230
5 Yrs2201
10 Yrs4141
Morningstar categoryReal Estate

(View Morningstar disclosure)

Morningstar ranking (as of 06/30/2017)

YTD ranking217 / 262
1 year197 / 258
3 years165 / 230
5 years138 / 201
10 years74 / 141
Morningstar categoryReal Estate

(View Morningstar disclosure)

Lipper ranking (as of 06/30/2017)

YTD ranking220 / 269
1 year204 / 262
3 years164 / 230
5 years140 / 201
10 years73 / 137
Lipper classificationReal Estate Funds

(View Lipper disclosure)

Benchmark, peer group

FTSE NAREIT Equity REITs Index (view definition)

Morningstar Real Estate Category (view definition)

Lipper Real Estate Funds Average (view definition)

Additional information