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October Total Returns to Continuously Offered NTRs Lowest Since March 2020

November 23, 2022

October Total Returns to Continuously Offered NTRs Lowest Since March 2020

November 23, 2022

October Total Returns to Continuously Offered NTRs Lowest Since March 2020

November 23, 2022 | James Sprow | Blue Vault

The 14 continuously offered nontraded REIT programs posted the lowest median returns for the group since March 2020, the beginning of the COVID-19 pandemic. The median total return, calculated as the sum of the percentage change in the NAVs per share and the monthly distribution yield, was still positive at 0.17%, down from 0.47% in September. The total returns YTD thru October had a median of 10.09%, comparing very favorably to the total returns to the NAREIT All REIT Index of -12.86% and the S&P 500 of -17.70%.

Chart I

For the month of October 2022, the highest total return was for RREEF Property Trust with a return of 0.62%, followed by Brookfield REIT at 0.46% and InPoint Commercial Real Estate Income at 0.43%. October saw 11 of the 14 REITs with positive total returns ranging from the 0.62% for RREEF to -0.82% by Invesco REIT.

Chart II

The highest total return YTD thru October was recorded by Ares Industrial REIT at 26.86%, followed by Cottonwood Communities at 22.64% and Brookfield REIT at 16.73%. Only one continuously offered REIT had a negative total return thru October, InPoint Commercial Real Estate Income with a return of -1.58%.

Chart III

The average distribution yield for the 14 NTRs was 4.86% in October 2022. This means that roughly 0.40% is the income component of the median monthly return of 1.02%, and 0.62% is due to appreciation of the REITs’ NAVs per share over the last 12 months.

Chart IV

Comparing the median total returns for the NAV REITs to the performance of the S&P 500 Index for listed common stocks, we observe that in no since March 2020 has the median total return for the NAV REITs been negative. For the S&P 500 Index, there have been nine months in the last 22 with a negative total return.

Chart V

In terms of risk, the standard deviation of the monthly median returns for the NAV REITs over the last 34 months was 0.60%. The standard deviation of the S&P 500 monthly returns over the same period was 6.12%, or roughly 10 times the risk according to this commonly used metric. The correlation of the NTR monthly returns with the monthly returns of the S&P 500 Index over the last 34 months was a miniscule 0.068. This lack of correlation is another strong indicator of the value of using the continuously offered nontraded REITs in a diversified portfolio to reduce risk.

Sources: Individual REIT websites; Blue Vault