Continuously Offered Nontraded REITs Have Impressive Returns in 2021
January 26, 2022 | James Sprow | Blue Vault
The median total return achieved by 11 continuously offered nontraded REITs for the year 2021 was an impressive 23.10%. This compares very favorably to the median return posted by 13 continuously offered nontraded REITs in 2020 of just 5.77%. Blackstone REIT led the group in 2021 with a total return to Class I shareholders of 30.19%, followed by Black Creek Industrial REIT IV at 29.66% and Nuveen Global Cities REIT with a total return of 27.48%. All of the REITs in the group had positive returns for the year. The total return by Blackstone REIT was the sum of the REIT’s increase in its Class I share NAV by 23.76% and its average distribution yield of 6.43%.
Total returns by the 11 nontraded REITs for the month of December were led by Black Creek Industrial REIT IV with its impressive 4.89% return, followed by Jones Lang LaSalle Income Property Trust’s Class A return of 4.76% and Nuveen Global Cities REIT’s 3.52%.
Over the past 24 months, continuously offered nontraded REITs had only one month, March 2020, when the median return for the group was negative, at -0.46%. That was the month when the COVID-19 pandemic hit the U.S. Since that month, there has been a marked positive trend in the median total return for the REITs, with the best monthly result at +2.68% in September 2021.
When comparing the median returns of the nontraded REIT offerings to the total returns month-to-month by the S&P 500 market index, the consistency of the REIT returns is remarkable. Since December 2019, the S&P 500 monthly returns have been negative in seven out of 24 months.
While the standard deviation for the nontraded REIT median returns over that 24-month period was just 0.71%, the corresponding standard deviation of the S&P 500 monthly returns was eight times as great at 5.63%. From a risk vs. return perspective, the nontraded REITs offered dramatically less volatility while returning their impressive results.
Generally speaking, there is a clear relationship between the returns offered by the nontraded REIT programs over the last 24 months and their relative return volatility from month to month. But it is clear that the volatility of the monthly REIT total returns is the kind of volatility that investors can live with, since of the 303 monthly return observations available for this set of nontraded REITs, in only 22 monthly observations (less than 7.3%) were the monthly returns negative compared to 8 of the 24 S&P 500 monthly returns (33%) that were negative over that time span.
Sources: Individual REIT websites, S&P, SEC and Blue Vault
