Hedge Fund
Serenity Alternative Investments Blog - REIT Signal Redux: Did You “BUY” REITS In 2018?
August 2018
Serenity Alternative Investments Blog - REIT Signal Redux: Did You “BUY” REITS In 2018?
- The REIT market was flashing a strong “BUY” signal multiple times in 2018
- Investors who heeded these signals saw 16% returns on average over the next six months, and 17.8% returns over the next twelve months*
- Using NAV estimates to time the REIT market continues to generate significant excess returns
Net Asset Value or “NAV” is a hotly debated topic in REIT circles. At its best, it represents the underlying value of a REITs real estate portfolio, or the liquidation value a REIT would achieve were it to put itself up for sale. Knowing a REITs NAV gives REIT investors an immediate view as to whether a REIT is cheap or not. Does it trade above NAV? Then sell, as it’s likely over-valued. Does it trade below NAV? Then buy, as private market participants will eventually arbitrage away the difference.
At its worst, however, NAV can lure investors into value traps, or change suddenly based on outlying factors. It’s a notoriously difficult data point to triangulate, and it is still not widely published. Since 2016, NAV has been increasingly misleading, as REITs trading at discounts to NAV have consistently under-performed their pricier peers.
For these reasons it has become a polarizing discussion topic for professional and non-professional REIT investors. For the NAV skeptics, it represents an old-school methodology that doesn’t have any value in the modern REIT landscape. For NAV proponents, it is an under-performing value marker that will eventually have relevance again based on its strong theoretical basis.
View the remainder of the post here.