The REIT sector has been hammered by the market downturn.
All REITs are down significantly over the past week, with the majority of that pain coming in yesterday’s disastrous trading session. RL Commercial REIT [RCR 7.15 7.74%] was the worst hit, losing 10% of its price since March 3.
AREIT [AREIT 47.10 7.56%] has lost 9%, MREIT [MREIT 18.58 3.73%] 8%, and both Filinvest REIT [FILRT 7.15 0.69%] and DDMP [DDMPR 1.71 3.39%] down 4%.
Citicore Energy REIT [CREIT 2.55 2.30%], though, has lost 7% since March 3, but it’s worth noting that CREIT’s stock price may have been prevented from falling further by its stabilization fund, which is still in effect for another two weeks.
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As is the way with REITs, the stock’s yield rises as the underlying stock price drops.
This is part of the stability that comes with REIT stocks, as the theory goes that at some point, the rising yield will attract buyers back into the stock and soften the strength of the downward pull on the price.
Now, REITs aren’t bonds and the underlying dividend isn’t something that is contractually guaranteed, so it’s always worth taking a moment to consider the implications of the events that are dragging prices down (and yields up) to see whether those events might harm the REIT’s income stream.
In this case, the chaos on the commodities market and the uncertainty that comes from European war tensions doesn’t have an awful lot to do with BPOs in the case of the Original 5 REITs, or solar power, in the case of CREIT.
In fact, there’s an argument to be made that the events make CREIT’s power more valuable as rising coal, oil, and gas prices make the fuels that we burn to make electricity more expensive.
If REITs are pulling back as part of the market’s overall “sell everything that isn’t coal, oil, and nickel” strategy, then I’d expect REITs to perform quite well to normalize yields once this pressure subsides.
However, if REITs are pulling back for some other reason that just so happens to exist coincidentally alongside whatever has caused the market to tank, like perhaps apprehensions of interest rate increases around the world this year, then we can’t use the general market as a loose model for REIT stock recovery.
I don’t have any special info here.
I’m just watching closely, trying to figure out which model (REITs follow the market vs REITs pulled by other forces) is more accurate.
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