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Serenity Alternative Investments Blog - 2019 REIT Recap
January 2020
Serenity Alternative Investments Blog - 2019 REIT Recap
The MSCI US REIT index returned -0.78% in Q4 and 25.8% in 2019.
- Data Center REITs led all property sectors in 2019 up 56%, while regional malls and self-storage lagged.
- Rexford Industrial (REXR) and Duke Realty (DRE) were two top performing REITs in 2019 up 58% and 38% respectively.
- More cowbell? 2020 is unlikely to be a repeat of 2019, but the REIT market is still swimming in opportunity.
- Macro data has improved recently, but not enough to drive bond yields meaningfully higher. We continue to watch the lodging sector closely for signs of economic acceleration.
“Allow myself to introduce…myself”
– Austin Powers
What a difference a year makes. At this point in early 2019, the equity market was still reeling from a 20% drop, the fed was pivoting from hawkish to neutral/dovish due to awful economic data, and the REIT market was being driven to multi-year lows. It was not an enjoyable time.
Fast forward 365 days and REITs are up over 25%, the broader equity market has hit all-time highs, and investor sentiment has gone from near panic to incredibly complacent.
Talk about the market getting its mojo back. In the intervening period the fed has returned to growing it’s balance sheet, economic data has continued to grind slowly lower, the US and China have started and partially resolved a trade war, and earnings growth for the S&P 500 has gone negative for the first time in years.
It’s a lot to keep up with. Which is why it’s important to step back and allow the REIT market to re-introduce…the REIT market. In case you have been caught up in all the headlines, just remember that REITs still offer the following…
- Exposure to the highest quality real estate in the world via LIQUID securities.
- Performance that has historically rivaled the stock market with only a 0.55 correlation (+10%/year over 25+ years).
- Access to emerging property type investments such as data centers, casinos, and single-family rentals.
- The ability to SHORT commercial real estate, allowing for superior risk-management and alpha generation potential in up and down markets.
- Dividend yields averaging near 3.5% that are stable and GROWING.
The REIT market represents the top tier of real estate investing. Its built on the highest quality commercial real estate in the world and run by the most sophisticated real estate investors in the market. REITs were left for dead in early 2019 and subsequently returned over 25%. Portfolio managers without a REIT allocation will be increasingly forced to justify non-ownership of a top performing asset class. For those that want to learn more about the market or how to build a well-diversified REIT portfolio, reach out to Martin Kollmorgen at [email protected].
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