• ETF Insights

    REIT All About it

     

    Global Property’s rental returns green shoots

    When markets retreated in March, global real estate equities were among the worst hit. But while global stock markets have rebounded, real estate equities continue to languish in the calendar year to date. Notably, those in the retail and hospitality sectors were among the key laggards, weighed down by perceptions that landlords struggling to collect rents from tenants will have to cut or suspend dividends.

    The reality, however, is more upbeat than six months ago. It’s true the pandemic has pummelled retail and hospitality sectors. But rent collections in the embattled sectors, while still weak, has improved (see Figure 1) as stores and hotels are permitted to reopen. The other sectors with long-duration leases such as those in industrial and office have also remained remarkably resilient. Many property companies have long-duration leases, which not only act as a buffer and smooth economic cycles, but also provide a higher degree of visibility in projecting future earnings.

    Figure 1: Rental receipts improving

    % of Pre-COVID rent collection (US)

    Rental reciepts improving

    Source: FTSE, NAREIT. As of 30 September 2020.

    Investment opportunity

    The low interest rate environment around the world has left investors with few good options that generate decent returns. With major central banks looking to maintain their accommodative monetary policies in the foreseeable future, interest rates are expected to remain lower for longer, leaving investors to plod on with their search for income. Against this backdrop, global property can provide both a value and income opportunity.

    Current valuations for global property stocks look cheap, with many listed companies trading below their net asset values (see Figure 2). Likewise, their dividend growth appears attractive. For instance, the dividend yield on the FTSE Nareit Global Index is relatively high at 4.62%1, while TRET was yielding 4.73%2, compared to the returns from other instruments such as US government bonds and developed world equities. And while some REITs have cut dividends, these are the exception rather than the rule, meaning we still anticipate a reliable and attractive income stream.

    Figure 2: Property companies are trading at wide discounts to net asset value

    Property companies are trading at wide discounts to net asset value

    Source: Refinitiv Datastream, UBS estimates, as of September 2020.

    Diversification is key

    Historically real estate has a low correlation with the traditional bond and equity markets. Investing in a real estate ETF such as VanEck Vectors Global Real Estate UCITS ETF can help investors diversify without buying actual property. Investors gain exposure to many different countries, sectors and real estate assets; such diversification is not easily replicated in other forms of real estate ownership.

    Key Points:

    • The recovery in equity markets, from the sudden and severe drop in March, has been remarkable but it has not been uniform.
    • Global real estate equities were hit hard, and the recovery of the broader market, as represented by the FTSE NAREIT Global Index for example, has lagged global equity markets.
    • Investors remain wary of real estate companies with revenues tied to economic activity such as retail, which has been among the hardest hit sectors as a result of restrictive lockdowns.
    • However, global real estate companies are a diverse category that includes sectors such as healthcare, self-storage and data centres, not just retail and hospitality. Many of these companies’ operations have remained resilient amid the downturn and thus represent an opportunity.
    • Over time we think office and industrial use will return to pre-COVID-19 levels, underpinning a rebound in these assets too.
    • REIT all about it! With market participants expecting continued low rates and a low growth environment as the global economy emerges from this crisis, now could be the time to set your portfolio to rebuild and allocate a portion to listed global real estate securities.
    • The VanEck Vectors Global Real Estate UCITS ETF (TRET) is a UCITS-compliant ETF that invests in a portfolio of international real estate securities, with the aim of providing investment returns that closely track the GPR (Global Property Research) Global 100 Index.

    1Source: FTSE Russell. Data as of 30 October 2020.

    2Source: VanEck. Data as of 30 September 2020. The 12-Month Yield is the yield an investor would have received if they had held the fund over the last 12 months assuming the most recent NAV. The 12-month yield is calculated by summing any income distributions over the past 12 months and dividing by the sum of the most recent NAV and any capital gain distributions made over the past 12 months. The dividend paid may differ from the dividend yield of the index by increasing or decreasing the fund. A part of the dividend can be reinvested whereby this is processed in the price and not paid out.


    Important Disclosure

    For informational and advertising purposes only.

    This commentary originates from VanEck Investments Ltd, a UCITS Management Company under Irish law regulated by the Central Bank of Ireland and VanEck Asset Management B.V., a UCITS Management Company under Dutch law regulated by the Netherlands Authority for the Financial Markets. It is intended only to provide general and preliminary information to investors and shall not be construed as investment, legal or tax advice. VanEck Investments Ltd, VanEck Asset Management B.V. and its associated and affiliated companies (together “VanEck”) assume no liability with regards to any investment, divestment or retention decision taken by the investor on the basis of this commentary. The views and opinions expressed are those of the author(s) but not necessarily those of VanEck. Opinions are current as of the commentary’s publication date and are subject to change with market conditions. Certain statements contained herein may constitute projections, forecasts and other forward looking statements, which do not reflect actual results. Information provided by third party sources are believed to be reliable and have not been independently verified for accuracy or completeness and cannot be guaranteed. All indices mentioned are measures of common market sectors and performance. It is not possible to invest directly in an index.

    VanEck Asset Management B.V., the management company of VanEck Vectors™ Global Real Estate UCITS ETF (the "ETF"), a sub-fund of VanEck Vectors™ ETFs N.V., is a UCITS management company incorporated under Dutch law and registered with the Dutch Authority for the Financial Markets (AFM). The ETF is registered with the AFM and tracks an equity index. The value of the ETF’s assets may fluctuate heavily as a result of the investment strategy. If the underlying index falls in value, the ETF will also lose value.

    Investors must read the sales prospectus and key investor information before investing in a fund. These are available in English and the KIIDs in certain other languages as applicable and can be obtained free of charge at www.vaneck.com, from the Management Company or from the local information agent details to be found on the website.

    The VanEck Vectors™ Global Real Estate UCITS ETF is not sponsored, promoted, sold or supported in any other manner by Solactive AG and Global Property Research B.V. nor do Solactive AG and Global Property Research B.V. offer any express or implicit guarantee or assurance either with regard to the results of using the Index and/or Index trade mark or the Index Price at any time or in any other respect. The Index is calculated and published by Solactive AG. Solactive AG uses its best efforts to ensure that the Index is calculated correctly. Irrespective of its obligations towards the VanEck Vectors™ Global Real Estate UCITS ETF, Solactive AG has no obligation to point out errors in the Index to third parties including but not limited to investors and/or financial intermediaries of the VanEck Vectors™ Global Real Estate UCITS ETF.

    Neither publication of the Index by Solactive AG nor the licensing of the Index or Index trade mark for the purpose of use in connection with the VanEck Vectors™ Global Real Estate UCITS ETF constitutes a recommendation by Solactive AG to invest capital in the VanEck Vectors™ Global Real Estate UCITS ETF nor does it in any way represent an assurance or opinion of Solactive AG with regard to any investment in the VanEck Vectors Global Real Estate UCITS ETF.

    Performance quoted represents past performance. Current performance may be lower or higher than average annual returns shown. Discrete performance shows 12 month performance to the most recent Quarter end for each of the last 5yrs where available. E.g. '1st year' shows the most recent of these 12-month periods and '2nd year' shows the previous 12 month period and so on.

    The Dutch domiciled ETFs use a gross reinvestment index as opposed to many other ETFs and investment funds that use a net reinvestment index. Comparing with a gross reinvestment index is the purest form since it considers that Dutch investors can reclaim the dividend tax withheld. Please note that the performance includes income distributions gross of Dutch withholding tax because Dutch investors receive a refund of the 15% Dutch withholding tax levied. Different investor types and investors from other jurisdictions may not be able to achieve the same level of performance due to their tax status and local tax rules.

    All performance information is historical and is no guarantee of future results. Investing is subject to risk, including the possible loss of principal. You must read the Prospectus and KIID before investing in a fund.

    No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission of VanEck.

    © VanEck Investments Ltd / VanEck Asset Management B.V.

     


  • Important Disclosure

    For informational and advertising purposes only.

    This information originates from VanEck (Europe) GmbH which has been appointed as distributor of VanEck products in Europe by the Management Company VanEck Asset Management B.V., incorporated under Dutch law and registered with the Dutch Authority for the Financial Markets (AFM). VanEck (Europe) GmbH with registered address at Kreuznacher Str. 30, 60486 Frankfurt, Germany, is a financial services provider regulated by the Federal Financial Supervisory Authority in Germany (BaFin). The information is intended only to provide general and preliminary information to investors and shall not be construed as investment, legal or tax advice. VanEck (Europe) GmbH and its associated and affiliated companies (together “VanEck”) assume no liability with regards to any investment, divestment or retention decision taken by the investor on the basis of this information. The views and opinions expressed are those of the author(s) but not necessarily those of VanEck. Opinions are current as of the publication date and are subject to change with market conditions. Certain statements contained herein may constitute projections, forecasts and other forward looking statements, which do not reflect actual results. Information provided by third party sources are believed to be reliable and have not been independently verified for accuracy or completeness and cannot be guaranteed. All indices mentioned are measures of common market sectors and performance. It is not possible to invest directly in an index.

    All performance information is historical and is no guarantee of future results. Investing is subject to risk, including the possible loss of principal. You must read the Prospectus and KIID before investing.

    No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission of VanEck.

    © VanEck (Europe) GmbH