Dedicated to Frankie I originally composed this post on the Artis board but I suppose you can substitute this for most reits. I hope you enjoy this one Frankie. I know you'll be reading this.
Why would anyone invest in short term cash? Most of the time you lose to inflation when it's running hot and you have to pay the tax man if it's a non registered account. Yes there is such a thing as a registered account where taxes can be defered in the case of a RRSP or none at all if you're investing with a TFSA. Unfortunately Tina (there is no alternative) has been replaced with Tiaa (there is an alternative)
Nimble investors have taken advantage of the fact that the equity risk premium is almost non existent these days. One can easily hold a 5.5% 1 year t-bill and get almost the same type of returns without any capital risk. Why would I invest in a reit with a distribution that is at risk and a share price that has been falling for a number of years?
Let's go over the numbers. In substitute for cash I have used the average Fed Funds rate in the United States. For each of the years, I assumed you made a purchase in Artis units at the beginning of the year and held them to today. Under the Artis distribution column, the first number to the left is the distribution paid in units. The next number represents the share price at the start of the year.
Artis distribution Cash yield
2023 $0.6/ $9.11 5.03%
2022 $0.6/ $12.14 1.68%
2021 ~ $0.59/ $10.43 0.08%
2020 $0.54/ $11.59 0.36%
2019 $ 0.54/ $9.30 2.16%
2018 $1.035/ $14.13 1.79%
If you invested in Artis units at the beginning of 2018, you underperformed cash if you held units until 2019,2020,2021 and 2023.
If you invested in Artis units at the beginning of 2019, you outperformed cash if you held units until 2020,2021,2022 and 2023. To be perfectly fair, nobody was recommending cash in 2019.
If you invested in Artis units at the beginning of 2020, you underperformed cash if you held units until 2021 and 2023. Nobody recommended cash and yet it still outperformed Artis for the aforementioned periods.
If you invested in Artis units in 2021 you outperformed in 2022 but underpermed in 2023. Finally, if you invested in Artis in any of the years mentioned and held units until today, you underperformed cash in every single year since 2018.
The recommendation to start putting your money away in t-bills was growing more popular in 2023. It is not a coincidence that short term cash has outperformed Artis. Even in the years where cash was not recommended; namely, 2018,2019, 2021 and 2022 cash still outperformed.
How long will this outperformance last? Is the worst behind us and the right time to be long Artis? Only time will tell but I think there are plenty of risks ahead in commercial real estate that you better hope there is no credit crisis in the years ahead. If it does, the baby too will be thrown out with the bath water and the industry as a whole will suffer.
Good luck!
Until then, I'll stick with my "marginally better than inflation" t-bills and to be ready to pounce when the opportunity arises.