QUARTERLY REPORTS

The US 10-year has fluctuated over the quarter between the 3.80% mark up to the 4.35% mark. It ended the quarter roughly 10% above where it started, highlighting that the steady inflation data is keeping rates from coming down and thus affecting the 10 year. This risk-free option to investors have proven to be an Achilles heal for the REIT sector and has negatively impacted the love investors has for REITs.

The quarter saw the market drop early on to 7.5% below its starting point driven by economic data releases only to recover to its opening level halfway through the quarter and closed -1.07% down for the quarter. Uncertainty played a significant role in the market being hesitant to rotate into the beaten down asset class during the period under review despite offering deep value to investors.

An early-year stock rally, fuelled by hopes of a soft landing and a Fed pause, proved short-lived. Investors started off the year believing that inflation pressures were coming under control, however, by early February, a much stronger-than-expected jobs report, coupled with data showing inflation remained stubbornly high, had investors rethinking the notion of a friendlier Fed. 

Global REITs, as measured by the GPR 250 REIT World Index, gained 3.2% in June, which brought the total return performance for the second quarter to 1.1%. While the asset class delivered a positive return, the sector continued to trail the overall performance of the equity market. Japan (+5.22%), the US (+1.98%) and Australia (+1.70%) put up positive returns, the remaining markets delivered negative returns.

Global REITs produced a -5.8% total return for the quarter in local currency. The S&P Global Broad Market Index lost 3.2% during the quarter. Bonds faired no better. The Reitway Global Property Portfolio made a loss of 7.14% in USD terms during the third quarter, underperforming the GPR 250 REIT World Index by 46 bps. Allocation effects contributed positively while selection effects detracted.

The fourth quarter produced something special not seen since 2021—the everything rally. A growing consensus started to build that rates have reached their peaks, inflation was coming down at a good pace, and soon central banks would start cutting. The rally kicked off close to the end of October. The US 10-year yield dropped a full percentage point from 4.87% to 3.87%; the S&P 500 climbed 14.2%, and the battered REIT sector produced a vigorous recovery 23.77% (GPR 250 REIT World).

The GPR 250 REIT World Index was down 3.11% in local currency terms during the first quarter of 2022. The market fixation on inflation and the resultant monetary policy responses led to broad based declines across countries and sectors.

There were few places to hide during the first half of 2022. High levels of inflation, slowing growth, rising rates, Fed policy uncertainty and fallout from Russia’s war on Ukraine weighed on capital market returns. REITs were no exception.

The third quarter began with a relief rally, but as the days progressed the knock-on effects of decades-high inflation, aggressive interest rate increases by central banks, rising risks of recession,and Russia’s invasion of Ukraine, surfaced again. 

What a year…… Certainly, one for the record books, but not in a good way. The aftermath of the pandemic has upended supply chains and misaligned labour markets, leading to higher inflation which forced central banks to act. 

Global real estate, as measured by the GPR 250 REIT World Index, had a solid start to the year. The index gained 7.28% in US dollar terms during the first quarter of 2021. The Canadian REIT market took the top spot, delivering 11.32% in USD during Q1 2021. US REITs also outperformed the global index, increasing by 9.31% for the reporting period.

The GPR 250 REIT World Index delivered a 10.4% total return in USD during Q2-21, modestly outpacing equities (MSCI World Index +7.9%) and substantially ahead of global bonds (JP Morgan Bond Index +0.9%). The rally has pushed the REIT sector’s year-to-date USD total return to a solid 18.43%.

The GPR 250 REIT World Index delivered 0.38% in USD during Q3-21, pushing the sector’s year-to-date total return to a solid 18.9%. Global REITs remain ahead of Global Equities (15.3%) as well as Global Bonds (-2.7%) over the same period.

The GPR 250 REIT World Index gained 34.6% in US dollar terms during 2021, aided by a 13.2% increase in the final quarter of the year. On a country level, the US delivered the highest returns – gaining just shy of 18% in Q4 while UK REITs advanced by 13.5%. REITs in the East continued to struggle with Singapore (+2.3%) and Japan (-2.9%) being the worst performing markets.

Our benchmark, the GPR 250 REIT World Index produced a total return of -29.58% in US dollar terms during the first quarter of 2020. The best performing markets for the reporting period was Hong Kong (-19.94%) and Singapore (-21.07%). Australia and South Africa recorded the lowest total USD returns of -41.87% and -63.23% respectively.

Our benchmark, the GPR 250 REIT World Index produced a total return of 11.39% in US dollar terms during the second quarter of 2020. At a continent level, the quarterly gains ranged from 4.75% for Europe to 34.32% for Australia. The asset class outperformed equities marginally (11.39% vs 10.06%) while it achieved meaningful outperformance against bonds (11.39% vs 0.6%).

After a wobble in September the listed property sector managed to finish the quarter marginally positive. The GPR 250 REIT World Index lost 3.24% last month, but still produced a total return of 1.98% in US dollar terms during the third quarter of 2020. The South African (-10.48%) and European (-2.16%) property markets delivered the worst returns.

Global real estate, as measured by the GPR 250 REIT World Index, gained 12.82% in US dollar terms during the fourth quarter. Despite the strong end to the year, the index was still down -9.75% in 2020. After delivering the lowest returns in the prior quarter, the South African (29.87%) and European (25.07%) property markets were the top performers in Q4.

After a stellar start to 2019, Global REITs produced a 1.42% USD total return for the quarter ending 30 June 2019. It is important to remember that property is a pro-cyclical asset class and where the prospects for economic growth look muted or hard to predict the sector enjoys less support.

The global real estate market, as represented by the GPR 250 REIT World Index, delivered 6.20% in US dollar terms during Q3. Our strategy underperformed the benchmark slightly as a result of our cash position as well as allocation and selection effects in Asia Pacific. Pleasingly, we upheld our first quartile peer group ranking over the last 4, 5, 6 and 7 years.

The global real estate market, as represented by the GPR 250 REIT World Index, delivered 0.17% in US dollar terms during the fourth and final quarter of 2019. Our portfolio outperformed the benchmark due to superior sector and stock selection.

Global real estate, as measured by the GPR 250 REIT World Index, produced a total return of 14.55% in US dollar terms for the quarter ending 31 March 2019. This is the best start to a year the index has achieved since 1993. Oceania (16.11%) and Americas (15.87%) led the charge while Asia delivered just shy of 10% for the reporting period. Africa (-0.47%) was the only continental carve out to record a loss during the first quarter.

The GPR 250 REIT World Index delivered a negative Total Return of 5.87% (USD) for 1Q18. A significant contributor to this decline was the US 10-year Bond yield increasing from a low of 2.4% to a high of 2.7% by the quarter’s end. Optimism about global growth prospects lifted the US 10-year bond yield at the start of 1Q18, with investors bidding up equities and selling down bonds as well as REITs, due to their more defensive nature.

The GPR 250 REIT World Index produced a total return of 6.68% in US dollar terms for the quarter ending 30 June 2018. Africa (-1.57%) and Europe (-1.10%) were the only continental carve-outs that contracted in the April – June period, while Americas (9.69%), Oceania (6.08%), and Asia (1.47%) recorded quarterly gains.

The GPR 250 REIT World Index produced a largely flat total return of 0.15% in US dollar terms for the quarter ending 30 September 2018. Africa (-6.06%), and Europe (-6.31%) contracted markedly during the July to September period, while the Americas (1.14%), Asia (1.65%) and Oceania (0.44%) recorded small quarterly gains.

Global equity markets suffered a significant correction during the fourth quarter of 2018. The weakness experienced across many emerging markets through September spread to developed markets, with the highly valued technology stocks in the S&P 500 Index leading the way down. While real estate equity markets were certainly not immune, they were far less affected.

The global REIT market peaked at +3.78% during the quarter under review before plummeting in the lead up to the US Federal Reserve rate hike. Subsequently, the REIT market recovered to squeeze out a 0.97% total return for 1Q17 as the U.S. 10 year bond yield declined towards quarter end.

Global real estate securities, as measured by the GPR 250 REIT World Index, generated a modest total return of 1.12% in U.S. dollars during the second quarter of 2017. The macro backdrop was generally supportive as global growth continued at a measured pace while inflation data remained soft.

The GPR 250 REIT World Index exhibited a US Dollar (USD) total return of 1.04% during 3Q17. As the quarter progressed, persistently low inflation (and inflation expectations) saw the US 10-year bond yield dip below 2.1% during August 2017. Towards the end of the quarter, as US and other DM economic data proved resilient, the market pushed up bond yields.

The global bond market did not go quietly into the New Year! A few swift moves during the last two weeks of 2017 pushed the 10-year Treasury yields through key levels to the highest since March. The yield curve, which had been relentlessly flattening, steepened the most since September 2016, while market-implied inflation rates reached an eight-month high as U.S. tax cuts were on the brink of becoming law.

Global REITs continued their forward march with a total return (TR) of 7.2% in 1Q16, after achieving a TR of 5.7% in 4Q15 in USD terms. Global REITs drifted lower during January as well as the start of February, as economic growth concerns dominated the headlines. Risk assets were sold down and bond yields declined as investors sought shelter.

After an early year sell-off, markets rebounded to 2016 highs by mid-June, as traders followed the bookies that placed the likelihood of Brexit at only 30%. Complacency turned to bust as Brexit became reality on the 24th of June. British Independence Day (Global REITs -4%; Global Equities -6%) was followed by central bank pep-talk and this resulted in markets whiplashing back to pre-Brexit levels by the end of the quarter.

Global REITs, in US Dollar (USD) total return (TR) terms, retreated by 0.1% in 3Q16. This brings the year-to-date (YTD) TR of the global REIT market to 12.6%. Unsurprisingly, once again it was a potential US Federal Reserve (Fed) rate hike that saw bond yields spike and the global REIT market drop in the period leading up to the Fed’s 16 September policy interest rate decision.

Global real estate securities traded lower during the fourth quarter of 2016, with our benchmark (GPR 250 REIT Index) down 5.45%, taking the calendar year total return to 6.5% in USD. Lower trending bond yields during the first seven months of 2016 provided a tailwind however, the sharp rise in 4Q16 after the US elections negatively impacted the overall performance.

Entering 2015, the theme was one of divergence of economic performance amongst various regions and countries. Given this, as well as divergent global monetary policies, currencies were also expected to continue to exhibit heightened volatility (particularly weakness against the USD in many cases).

The listed real estate market continues to be influenced by movements in the bond markets and this was the main reason for the 8.12% correction by Global REITs during the second quarter. REITs are currently more correlated with bonds than they have ever been in history. The relationship between the two assets classes has increased significantly during the past 3 years and they look as though they are dancing the tango.

Global REITs returned 0.93% in US Dollar (USD) terms during the third quarter (3Q15) – but it didn’t come easily. This relatively flat figure in isolation disguises the sharp price movements that occurred during the quarter.

Global REITs pushed forward in Q4 with a 5.74% return. This recovery took the total return for 2015 up to a subdued 2.18%. On the positive side, the asset class did outperform both Global Equities (-0.32%) and Global Bonds (-5.50%) in what was a tumultuous year for markets around the globe.

The global REIT market is up 27.89% in dollar terms during the 1-year period ending 31 January 2015. The return generated by this asset class has far outpaced the performance of Global Equities and Global Bonds during the corresponding period.