2020 vs 2008/2009 In 2008/2009, the Cdn REIT index fell by 56% over 16 months, and then regained it all back in the next 16 months, ultimately rising 460% in the next 11 years (NOT including dividends). From 2013-2016, the index did nothing but tread water, and the worst of it was a 20% correction during 2015, which was quickly regained in 1H/16. Importantly, the REIT index just pummelled the TSX 60 for 3 straight years (mid-2009 until mid-2012), again not including dividends.
In 2020, the Cdn REIT index fell by 47.5% in less than 6 weeks, and today, remains 31% off its 52 week high. The speed of this move has been extraordinary, unprecedented over the past 15 years.
The iShares Core US REIT ETF fell by 46.1% from its high this year, similar to the CDN REIT index, and remains 26% off its 52 week high.
So far, most of the CDN REITs have not been forced by their bankers/debt holders to issue dilutive equity, which took place in 2008/2009, as that was a balance sheet recession which witnessed serious impairments. As I stated previously, this is an income statement recession for banks and REITs. THe fact that the CDN REIT index fell by almost 50% from its high in 6 weeks is staggering. It infers a chunk of the customers just never will pay rent again and never get replaced. Yes, there will be store closures, but these are vibrant growing communities and likely no lack of new tenant interest. Furthermore, the GTA will continue to benefit from immigration and folks like SmartCentres and Riocan seem nicely positioned. The move from strip malls to mixed-use retail/office/residential over time should benefit from demographic change over time (GTA still lacks housing supply).
If further progress is made on a vaccine and Ontario continues to reopen due to low cases and deaths, higher quality REITs could see a rapid move, since everybody is underweight. With the Moderna news tonight, and with 23 other companies working seriously on a vaccine, investors may start looking over the valley and regain interest in REITs.
As for the person who stated that the BOC isn’t buying REITs, technically correct, but they have been buying mortgages, corporate bonds, bankers acceptance, commercial paper, and so much more (see link below). This indirectly helps REITs, since it stabilizes the market and keeps refinancing costs stable. And it really helps CDN banks, who have the benefit of having the taxpayer underwrite a big chunk of the mortgages they write (insured thru taxpayer-backed CMHC) and then the BOC has been buying tranches of mortgages from them, getting these off the books. NIM may be tight right now, but CDN banks are still a heck of a good business (oligopoly operating with moral suasion with continual government support). Hard not to make money, even if some have tried over the years (CIBC).
Good luck.
https://www.bankofcanada.ca/markets/market-operations-liquidity-provision/covid-19-actions-support-economy-financial-system/#Balance-sheet-expansion