Worst REITs in History Since the Global Financial Crisis

The world of REITs can be a wild ride, and some have taken investors on a particularly bumpy journey since the global financial crisis. Many REITs have struggled to stay afloat, with some even going bankrupt.

Some of the worst REITs in history include General Growth Properties, which filed for bankruptcy in 2009 and took years to recover.

The housing market crash of 2008 had a devastating impact on REITs, with many seeing their stock prices plummet. General Growth Properties was one of the hardest hit, with its stock price dropping by over 90% in a single year.

In 2012, Colony Capital's shopping mall REIT, Colony Financial, was forced to merge with another company after struggling to stay afloat.

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REITs have matched the S&P 500's decline, with the Dow Jones Equity All REIT Index slipping 3 percent on Monday, its biggest one-day drop since September 2022.

This decline is largely due to fears of a recession, which is causing investors to pull back on spending and reducing demand for commercial real estate.

Most REITs have fared poorly compared to the broader market over the past year, with the All REIT Index logging an annual return of 5.7 percent, compared to the S&P 500's 24.6 percent.

Office REITs have been particularly hard hit, with rising vacancies and falling revenues exacerbating their distress.

The worst-performing REIT in the second quarter was Hudson Pacific Properties, which posted a negative return of 24.7 percent after reporting a $52 million loss in the first quarter.

New York's office landlords, including Vornado Realty Trust and SL Green Realty, also suffered larger declines compared to REITs on the whole.

The REITs with property types well-suited to reprice in an inflationary environment, like multifamily, single-family rentals, and self-storage, have seen shares fall the farthest.

The median national rent in November was up 9 percent year-over-year, but REITs like AvalonBay Communities and Equity Residential have still seen their market cap plummet by 31 and 30 percent, respectively, since January.

REITs are exceptionally cheap right now, especially the higher-quality companies, according to a report by Hazelview Investments.

An easing of rate hikes could help bring REIT valuations closer in line with their fundamentals, but the uncertainty around how high rates may surge makes it tough for markets to gauge the value of the underlying assets REITs own.

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The pandemic led to widespread lockdowns and travel restrictions, causing a significant decline in foot traffic and occupancy rates for many retail-focused REITs.

In 2020, the retail REIT, General Growth Properties, saw its same-store sales drop by 13.6% due to the pandemic's impact on consumer spending habits.

The shift to online shopping accelerated during the pandemic, further hurting retail REITs that failed to adapt.

The office REIT, Boston Properties, experienced a 15.6% decline in same-store cash NOI in 2020 due to reduced leasing activity and increased vacancy rates.

As a result of the pandemic, many REITs were forced to re-evaluate their business strategies and adapt to the new market realities.

The hospitality REIT, Host Hotels & Resorts, saw its same-store revenue per available room decline by 45.1% in 2020 due to the pandemic's devastating impact on the travel industry.

The pandemic exposed the vulnerabilities of many REITs, particularly those with high levels of debt and limited financial flexibility.

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REITs had a brutal sell-off in the market, matching the S&P 500's 3 percent decline, its biggest one-day drop since September 2022.

Fears about the health of the U.S. economy, stoked by the threat of recession, drove the sell-off, and real estate stocks took a hit.

The Dow Jones Equity All REIT Index, which measures performance across all classes of real estate, matched the S&P 500's decline.

Most REITs have fared poorly compared to the broader market over the past year, with the All REIT Index logging an annual return of 5.7 percent, compared to the S&P 500's 24.6 percent.

Indices tracking industrial, hotel, and office real estate investment trusts have taken the worst of it, with all of them posting negative returns in the second quarter.

Office REITs continue to suffer from rising vacancies and falling revenues, and a recession would likely exacerbate that distress.

The U.S. MSCI index, which tracks real estate investment trusts, has plunged over 20 percent in the past 12 months, the steepest fall since REITs lost 38 percent of their value in 2008.

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This decline is seen as a fear-based reaction, not one grounded in the trusts' underlying performance, with Hazelview Investments pointing to the comparatively stable performance of privately held investments.

REITs with property types well-suited to reprice in an inflationary environment, such as multifamily, single-family rentals, and self-storage, have seen shares fall the farthest.

The median national rent in November was up 9 percent year-over-year, suggesting that REITs are exceptionally cheap right now, especially the higher-quality companies.

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The market has been brutal on REITs, with the S&P 500 slipping 3 percent, its biggest one-day drop since September 2022, and the Dow Jones Equity All REIT Index matching that decline.

Most REITs have fared poorly compared to the broader market over the past year, with the All REIT Index logging an annual return of 5.7 percent, compared to the S&P 500's 24.6 percent.

Office REITs continue to suffer from rising vacancies and falling revenues, with Hudson Pacific Properties posting a negative return of 24.7 percent in the second quarter, clocking in as the third worst performing REIT in the period.

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The U.S. MSCI index, which tracks real estate investment trusts, has plunged over 20 percent in the past 12 months, the steepest fall since REITs lost 38 percent of their value in 2008.

REITs with property types well-suited to reprice in an inflationary environment, like multifamily and self-storage, have seen shares fall the farthest, with AvalonBay Communities' market cap plummeting 31 percent since January.

This has been a brutal year for REITs, with the US MSCI index plummeting over 20 percent in the past 12 months, the steepest fall since REITs lost 38 percent of their value in 2008.

REITs have been particularly hard hit, with most faring poorly compared to the broader market over the past year. The All REIT Index as of late June had logged an annual return of 5.7 percent, compared to the S&P 500's 24.6 percent.

Office REITs have been among the worst performers, with rising vacancies and falling revenues taking a toll on their values. Hudson Pacific Properties, for example, posted a negative return of 24.7 percent in the second quarter.

The decline in REIT values has been so severe that they are now 26 percent below benchmarks for private real estate. This has led some to question whether REITs have hit bottom.

The market cap of AvalonBay Communities, the most valuable apartment REIT, has plummeted 31 percent since January.

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This has been a tough year for REITs, with the U.S. MSCI index plummeting over 20 percent in the past 12 months, the steepest fall since 2008.

Public REIT valuations are 26 percent below benchmarks for private real estate, making them exceptionally cheap right now.

The median national rent in November was up 9 percent year-over-year, yet REITs with property types well-suited to reprice in an inflationary environment have seen shares fall the farthest.

REITs with properties like multifamily, single-family rentals, and self-storage have been hit hard, with AvalonBay Communities' market cap plummeting 31 percent since January.

A more predictable interest rate environment could help bring REIT valuations in line with their fundamentals, making them more attractive to investors.

Investor anticipation of rate hikes has been a major factor in the decline of REITs, with the MSCI U.S. REIT index tumbling over 23 percent from mid-August to mid-October after the Fed's July hike.

Rates hikes don't necessarily need to reverse to shift the valuation paradigm, they just need to moderate or stop going up and be more predictable.

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