Median January Total Returns to Continuously Offered NTRs Were Negative

March 2, 2023 | James Sprow | Blue Vault

The 16 continuously offered nontraded REIT programs posted the second consecutive month of negative median returns. This means for only three of 37 months since January 2020 have the NAV REITs had negative median returns. The first month with median negative returns for the group was 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 yields, was at negative 0.19%, an improvement from December 2022’s median return of negative 0.95%. The total returns for the NAV REITS for the year 2022 had a median of (positive) 8.79%, comparing very favorably to the YTD total returns to the NAREIT All REIT Index of -30.80% (negative) and the S&P 500 of -22.83% (negative).

Chart I

For the month of January 2023, the highest total return was FS Credit Real Estate Income Trust with a return of 0.68%, followed by InPoint Commercial Real Estate Income at 0.53% and Nuveen Global Cities REIT at 0.53%. January saw 7of the 16 REITs with positive total returns ranging from just 0.01% for Brookfield REIT to 0.68% for FS Credit REIT. The nine REITs with negative returns ranged from Invesco REIT at negative 0.18% to RREEF Property Trust at negative 2.50%.

Chart II

The highest estimated total return for the year 2022 was recorded by Ares Industrial REIT at 26.75%, followed by Cottonwood Communities at 17.47% and Brookfield REIT at 12.68%. Only one continuously offered REIT had a negative total return for 2022, InPoint Commercial Real Estate Income with a return of negative 1.52%.

Chart III

The following chart compares the median monthly total returns for the continuously offered NAV REITs to the monthly total returns for the S&P 500 Stock Index from January 2021 thru January 2023. Over the 25-month period, the median returns on the NAV REITs were negative for only two months. The S&P 500 Index had negative returns in nine of the 25 months, over one third of the months in the time period. 

Chart IV

In terms of risk, the standard deviation of the monthly median returns for the NAV REITs over the last 37 months was 0.68%. The standard deviation of the S&P 500 monthly returns over the same period was 6.04%, or roughly nine times the risk according to this commonly used metric. Listed REITs performed even worse, with a lower average monthly rate of return at 0.24% and a higher standard deviation of 6.80%. The correlation of the median NTR monthly returns with the monthly returns of the S&P 500 Index over the last 37 months was a miniscule 0.109. 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. 

Chart V

Sources:  Individual REIT websites; Blue Vault