Fundrise Outperforms Publicly Traded REITs In Q3

The performance among the major real estate investment trusts (REITs) so far in 2022 is hardly news at this point. This asset class — considered to be slightly less volatile than the overall stock market — has been especially susceptible to inflation and rising interest rates. 

The Real Estate Select Sector SPDR Fund XLRE, which is often considered the benchmark ETF for REITs, is down -32.59% for the year compared to the S&P 500, which is down -22.96%. The ETF hit its all-time high on Dec. 31, 2021, but has traded at an average price of only $40.88 during the second half of 2022. 

It’s been a similar story for many of the popular equity REITs this year. 

Realty Income Corp. O is down -19.22% year to date despite year-over-year funds from operation (FFO) per share growth of nearly 29.5%.

Medical Properties Trust Inc. MPW is down -53.41% year to date despite FFO per share growth of 19.2%.

Prologis Inc. PLD is down -39.38% year to date despite FFO per share growth of almost 12.2%. 

The key takeaway here is that market fears often have a greater impact on a REIT’s share price than actual earnings performance. The three REITs above are having some of their best years in terms of earnings but are seeing significant declines in share price. 

Investor returns having such little correlation with a REIT’s performance is one reason non-traded REITs have gained in popularity over the past couple of years. While a publicly traded REIT’s share price is largely affected by overall market sentiment, a non-traded REIT’s share price is directly tied to its net asset value (NAV).  

A great example of this can be seen across the several Fundrise-sponsored funds, most of which are non-traded REITs. 

In its “Q3 2022-Letter to Investors” on Oct. 11, 2022, Fundrise provided a breakdown of total returns across its 14 funds. The average return across all clients’ accounts for the third quarter was positive at 0.09%, resulting in a year-to-date average return of 5.40%. Relative to the benchmark ETF, Fundrise outperformed by nearly 38% for the first nine months of the year and by about 1.7% for the third quarter. 

The best-performing Fundrise REIT so far this year is the Growth eREIT III with net total returns of 15.60% and third-quarter returns of 2.64%. Only one Fundrise REIT has a negative return this year – the Development eREIT, which is down -0.77%. 

Photo: Courtesy of Fundrise