👋 Happy Friday, Everyone. Hope everyone had a great Thanksgiving! This was another great week for REITs as the 10-year Treasury yield fell below 4.3% for the first time in three months. That made interest sensitive REITs, especially the office REITs, bolt higher. Real estate stocks were the second best performing sector of the overall market in November, up 14%. If it continues in December, it could transform 2023 from a losing year into a winning one! REIT on!

PRESENTED BY JANOVER

Janover (Nasdaq: JNVR) is revolutionizing commercial real estate lending with AI

If this year has taught us one thing, it’s that AI is changing the world, and the face of public markets — looking at you, NVIDIA.

Janover (Nasdaq: JNVR) knows this better than most. It leverages generative AI to make commercial real estate financing faster and easier for banks and borrowers. Recognized by nearly 1 in 10 U.S. banks, Janover’s fintech marketplace connects borrowers with the right financial products and lenders, bypassing the inefficiency of outdated systems.

Results. Q3 2023 earnings: 

• 100%+ revenue growth in SBA business line

• 78% growth in average revenue per transaction

• Announced $1 million stock buy back 

Janover isn’t just part of the multi-trillion dollar commercial loan market. As the fastest-growing publicly traded, tech-first, commercial loan marketplace, Janover is redefining the way America finances its commercial properties and small businesses.

Join JNVR’s journey by clicking here.

REIT ROUND-UP

Alexandria Real Estate Equities, Inc. (NYSE: ARE) November 28, announced an exclusive partnership with Eli Lilly and Company (NYSE: LLY) to expand Lilly’s innovative Gateway Labs model to the San Diego life science cluster in Alexandria’s University Town Center.

WP Carey Inc (NYSE: WPC) November 28, announced it will replace Worthington Industries, Inc. (NYSE: WOR) in the S&P MidCap 400 index. WP Carey shares, which had already rebounded nicely since touching a low of $51.36 in early October, gapped up and was trading near $62 following the news.

Realty Income Corp (NYSE: O) November 28, announced the pricing of two public offerings of senior unsecured notes for a combined $750 million UK notes, one at 5.75% and the other at 6.00%, due respectively in 2031 and 2039.

Upcoming Ex-Dividend Dates: Here are the REITs going ex-dividend soon:

📈 Biggest Winners This Week: Office REITs were on fire!

• Hudson Pacific Properties Inc (NYSE: HPP) Up 13.40%

• Crown Castle Inc (NYSE: CCI) Up 12.26%

• Diversified Healthcare Trust (Nasdaq: DHC) Up 11.65 %

• Brandywine Realty Trust (NYSE: BDN) Up 10.89%

• Kilroy Realty Corp (NYSE: KRC) Up 10.57%

• SL Green Realty Corp (NYSE:SLG) Up 9.87%

• Vornado Realty Trust (NYSE: VNO) Up 8.63%

📉 Biggest Losers This Week: Cheap hotel REIT stocks were down

• Peakstone Realty Trust (NYSE: PKST) Down 11.99%

• Sotherly Hotels Inc (Nasdaq: SOHO) Down 8.50%

• Ashford Hospitality Trust, Inc. (NYSE: AHT) Down 5.65%

• Bridge Investment Group Holdings Inc (NYSE: BRDG) Down 4.08%

• Xenia Hotels & Resorts Inc (NYSE: XHR) Down 4.05%

• PotlatchDeltic Corp (Nasdaq: PCH) Down 3.88%

• Prices as of November 30, 12:00 PM

UPGRADES:

Equinix Inc (Nasdaq: EQIX) November 21, Oppenheimer analyst Timothy Horan upgraded Equinix from Perform to Outperform and announced an $875 price target. The rating comes after a one month share price increase off the bottom at $674, to $784 the day before the upgrade.

Mid-America Apartment Communities Inc (NYSE: MAA) November 28, Colliers Securities analyst David Toti upgraded Mid-America Apartment from Neutral to Buy and announced a $144 price target.

RLJ Lodging Trust (NYSE: RLJ) November 28, Oppenheimer analyst Tyler Batory upgraded RLJ Lodging from Perform to Outperform and announced a $13 price target.

AvalonBay Communities Inc (NYSE: AVB) November 29, Anthony Paolone upgraded AvalonBay from Underweight to Neutral and lowered the price target from $201 to $194.

Regency Centers Corp (Nasdaq: REG) November 30, Compass Point analyst Floris Van Dijkum upgraded Recency Centers from Neutral to Buy and announced a $72 price target.

Hudson Pacific Properties (NYSE: HPP) Goldman Sachs upgraded Hudson Pacific Properties from Sell to Neutral and announced a $6.25 price target.

…AND DOWNGRADES:

Empire State Realty Trust Inc (NYSE:ESRT) November 27, Evercore ISI Group analyst Steve Sakwa downgraded Empire State Realty Trust from Outperform to In-Line and announced a $9 price target.

Weyerhaeuser Co (NYSE: WY) November 27, Raymond James analyst Buck Horne downgraded Weyerhaeuser from Strong Buy to Market Perform

PotlatchDeltic Corp (Nasdaq: PCH) November 27, Raymond James analyst Buck Horne downgraded PotlatchDeltic from Strong Buy to Market Perform

Welltower Inc (NYSE: WELL) November 28, RBC Capital analyst Michael Carroll downgraded Welltower from Outperform to Sector Perform but raised the price target from $92 to $97.

Acadia Realty Trust (NYSE: AKR) Compass Point analyst Floris Van Dijkum downgraded Acadia Realty Trust from Buy to Neutral and announced a %16 price target.

ONE BIG THING

Bad Connections: Large Investor Pulls Plug Out On Crown Castle’s CEO and Board

WHO: Crown Castle Inc (NYSE: CCI) is a Houston, TX-based specialized REIT that owns, operates, and leases cell towers long-term. Crown Castle presently owns more than 40,000 cell towers, 85,000 route miles of fiber and 120,000 small cells in its portfolio. It works with businesses and governments to design and build solutions that meet connectivity needs like wireless coverage and custom fiber optic networks. Crown Castle has a market cap of $50.30 billion, making it one of the largest REITs in the U.S.

WHAT: On November 27, Elliott Investment Management released a letter to the Crown Castle board, detailing its views on the company’s history of underperformance versus its peers and calling for significant changes. Elliott Investment, which also disclosed it now holds a $2 billion stock position, was extremely critical of both CEO Jay Brown and the board, saying, “Crown Castle suffers from a profound lack of oversight by the Board, which has contributed to its irresponsible stewardship and flawed financial policy. The company’s strategy, led by CEO Jay Brown since 2016, has been a failure, as demonstrated by the breathtaking magnitude of its underperformance.”

On November 28, after the closing bell, Elliott Investment doubled down on its attack. It submitted a Section 220 demand and accompanying letter to the Crown Castle Board, requesting inspection of all company books and records. Elliott further suggested that the board had breached its fiduciary duties to shareholders and that it be reconstituted with directors who are committed to “best-in-class governance”.

WHY: Elliott is asking Crown Castle to review its fiber business and evaluate if it should be sold or spun-off. Three years ago, Elliott Investment Management also criticized the REIT’s returns and asked Crown Castle to rethink its fiber infrastructure strategy. But unlike in 2020, Elliott is now prepared to make its case directly to shareholders at the annual meeting in May 2024. Elliott is also likely to run nominees for Crown Castle’s board next year as well.

Fall Out: Elliott’s statement is somewhat curious, considering that since the end of November 2016, Crown Castle has a total return of 73.00%, or an average annual total return of 8.14%. However, year-to-date, Crown Castle does have a total return loss of 16.26%, so shorter-term investors have to be disappointed.

But as it turned out, Elliott Investment’s harsh attack and bad publicity for Crown Castle was actually good news for the stock price, as shares bolted higher, from $103 before the release on Monday, to nearly $116.50 by Thursday morning. Traders were hoping that Elliott’s involvement would improve Crown Castle’s stock performance, and that self-fulfilling prophecy came true this week. As for Elliott Investment, they’re shares garnered about $262 million in appreciation since Monday. It would not be surprising if large shareholders in other REITs take a lesson from Elliott and utilize a similar strategy in the future.

HOUSING NEWS BRIEF

Can’t Buy A House? Well then, Spend, Spend, Spend!

What: The difficulty of Gen Z and Millennials to purchase homes is leading many to simply give up and spend potential down payment savings in other ways.

How: Black Friday shopping data released this week showed that shoppers spent a record $9.8 billion in U.S. online sales, a 7.5% increase over Black Friday 2022. Smart watches, televisions, gaming and audio equipment were big hits. Black Friday shopper traffic in stores also rose 2.1% year-over-year.

Furthermore: ISS Market Intelligence reports an increase in vacations and other leisure activities, as younger generations decide to splurge since buying a home seems so far out of reach. This may be one reason why some Hotel REITs, such as Ryman Hospitality reported a 6% increases in RevPAR (revenue per available room) in third quarter operating results.

But as Jamie Battmer, Chief Investment Officer at wealth management firm Creative Planning notes, “unlike the equity they could build through a mortgage, that money is gone and it’s never coming back.”

Takeaway: According to a survey taken by Intuit Inc (Nasdaq: INTU), 73% of Gen Z Americans feel they’re falling behind in their life goals. They are so frustrated with their inability to get ahead in the 2023 economy that they’d rather have a better quality of life than money in the bank. 66% say they’re only interested in finances as a means to support other interests. They are, at least short term, readjusting the traditional American dream of owning a home. So they spend, spend, spend today and say they’ll worry about tomorrow….well tomorrow.

The Problem: It’s shortsighted thinking and to their own long term detriment. Studies have shown that the earlier one begins to invest and save, the greater the money they will eventually have for retirement and other life goals such as owning a home.

Given this present trend, one has to wonder- what will happen to the percentage of homeowners in the U.S. over the next decade or two? And ultimately, what will the financial state of Gen Z Americans be when they reach retirement age?

ONE FOR THE ROAD

Office REITs: The Good, The Bad, and the Ugly

Briefly: A recent survey of 1000 company leaders by ResumeBuilder.com found that 90% of companies plan to implement return-to-office policies by the end of 2024. Almost 30% say employees who don’t comply with in-office requirements will be fired. Looking into the future, this tough new corporate stance should help the much beleaguered office REIT sub-sector.

Where We Are Now: The occupancy rates of office REITs is still well below pre-pandemic levels and the share prices of many office REITs were decimated throughout 2022 and part of 2023. In addition, many investors worry that the values of office buildings will decline in a recession and that unless interest rates decline, many office REITs will not be able to refinance existing low debt with 2024-25 maturity dates.

But au contraire- most office REITs were on fire this week, thanks to the belief among investors that we’ve reached the peak in the interest rate hikes. Nevertheless, before this week there was a very clear dichotomy between a handful that showed superior relative strength in recent months, while others have continued to languish. March 24, 2023 appears to be the exact day that several office REITs touched their 52-week lows. Here’s a look at the good, the bad, and the ugly office REITs from March 24 through November 27:

The Good: SLG, VNO, and FSP have simply trounced their peers:

The Bad: The REITs below have had negative returns and are not likely to surpass the returns of the above going forward:

The Ugly: The two worst performing office REITs. Not for the faint of heart:

So you can see from the tables that not all office REITs are alike and some have actually performed better than most stocks on Wall Street over the last eight months. Of course, should we get another bad round of COVID this winter, the corporate push to return to office work could get a severe kick in the knees.

There’s also been talk of trying to convert vacant large city offices into residential units. This plan was highlighted here a few weeks back and although the idea has some merit and would help many of the REITs cited above, there could be a myriad of pragmatic problems to make that a reality. So, it’s no sure-thing.

Upshot: Some of the better office REITs cited above could continue to perform well into 2024 and dividend yields are still quite rich, but office REITs are short-term overbought, so investors may want to buy them on pull back days to minimize volatility. 

PRESENTED BY JANOVER

Janover (Nasdaq: JNVR) is revolutionizing commercial real estate lending with AI

Janover (Nasdaq: JNVR) is revolutionizing commercial real estate lending with AI

If this year has taught us one thing, it’s that AI is changing the world, and the face of public markets — looking at you, NVIDIA.

Janover (Nasdaq: JNVR) knows this better than most. It leverages generative AI to make commercial real estate financing faster and easier for banks and borrowers. Recognized by nearly 1 in 10 U.S. banks, Janover’s fintech marketplace connects borrowers with the right financial products and lenders, bypassing the inefficiency of outdated systems.

Results. Q3 2023 earnings: 

• 100%+ revenue growth in SBA business line

• 78% growth in average revenue per transaction

• Announced $1 million stock buy back 

Janover isn’t just part of the multi-trillion dollar commercial loan market. As the fastest-growing publicly traded, tech-first, commercial loan marketplace, Janover is redefining the way America finances its commercial properties and small businesses.

Join JNVR’s journey by clicking here.