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The State Of REITs: April 2018 Edition

Apr. 06, 2018 8:34 AM ETQCP, RVEN, WHLR, VNQ, IYR, DRA, DRN, DRV, FREL, FRI, USRT, IARAX, ICF, JRS7 Comments


  • REITs rebounded slightly in March but finished the 1st quarter down about 9%.
  • Large cap REITs significantly outperformed smaller market cap REITs.
  • Shopping Center REITs experienced the worst selloff of all property types.
  • REITS underperformed the S&P 500 in Q1, but outperformed in March as the broader market continued to sell off.
  • Was March merely a pause before a further selloff or was it the beginning of a comeback for REITs?


The REIT sector experienced a significant sell-off in January and February with a total return of -12.32%. In March, however, REITs rebounded slightly with a 3.67% return. After severely underperforming the broader market during January and February, REITs produced a solid March outperformance over the negative returns of the S&P 500 (-2.69%), NASDAQ (-2.88%) and DJIA (-3.70%). Although the REIT sector as a whole had a strong month, returns varied greatly across different market caps and property types. This presents a terrific opportunity to dig into the data, analyze current pricing and identify the property types and securities with the most attractive relative valuations. Significant and varied changes in price always present opportunities to capitalize on temporary shifts in relative valuation. For this reason, I will provide data throughout this article that can be used to determine where value opportunities currently exist within the REIT sector.

Source: Graph by Simon Bowler, Data compiled from SNL.com

Small cap REITs yielded the highest total return (5.6%) in March, followed by large cap REITs (4.3%). The underperformance of micro-cap REITs continued in March with another negative return (-0.4%). Year to date, however, there has been a strong positive correlation between market cap and total return.

Source: Graph by Simon Bowler, Data compiled from SNL.com

The disparity of performance between large cap REITs and smaller cap REITS was significant during the 1st quarter, with large cap REITs outperforming the REIT average by over 300 basis points. Performance by property type had even more variance:

Source: Table by Simon Bowler, Data compiled from SNL.com

14 out of 20 REIT Property Types Yielded Positive Total Returns in March

This marks a notable improvement from the first two months of the year, in which only Timber saw a positive return. Health Care (+8.8%) had the strongest performance in March largely

This article was written by

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Simon Bowler is the Chief Communications Officer at 2nd Market Capital Advisory Corporation (2MCAC).  2MCAC specializes in the analysis and trading of real estate securities. Through a selective process and consideration of market dynamics, we aim to construct portfolios for rising streams of dividend income and capital appreciation.Our Portfolio Income Solutions Marketplace service provides stock picks, extensive analysis and data sheets to help enhance the returns of do-it-yourself investors.Investment Advisory Services
We now offer a way to directly invest in our Proprietary Investment Portfolio Strategy via REIT Total Return, which replicates our activity in client accounts. Total Return client’s brokerage accounts are automatically invested simultaneously and at the same price when we make a trade in the REIT Total Return Portfolio (also known as 2CHYP).
Learn more about our REIT Total Return Portfolio.Simon Bowler, along with fellow SA contributors Dane Bowler and Ross Bowler, is an investment advisory representative of 2nd Market Capital Advisory Corporation (2MCAC), a state-registered investment advisor.Full Disclosure. All content is published and provided as an information source for investors capable of making their own investment decisions. None of the information offered should be construed to be advice or a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is suitable for any specific person. The information offered is impersonal and not tailored to the investment needs of the specific person. Please see our SA Disclosure Statement for our Full Disclaimer.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

This article is provided for informational purposes only. It is not a recommendation to buy or sell any security and is strictly the opinion of the writer. Information contained in this article is impersonal and not tailored to the investment needs of any particular person. It does not constitute a recommendation that any particular security or strategy is suitable for a specific person. Investing in publicly held securities is speculative and involves risk, including the possible loss of principal. The reader must determine whether any investment is suitable and accepts responsibility for their investment decisions. Simon Bowler is an investment advisor representative of 2MCAC, a Wisconsin registered investment advisor. Positive comments made by others should not be construed as an endorsement of the writer's abilities as an investment advisor representative. Commentary may contain forward looking statements which are by definition uncertain. Actual results may differ materially from our forecasts or estimations, and 2MCAC and its affiliates cannot be held liable for the use of and reliance upon the opinions, estimates, forecasts and findings in this article. Although the statements of fact and data in this report have been obtained from sources believed to be reliable, 2MCAC does not guarantee their accuracy and assumes no liability or responsibility for any omissions/errors.

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