Happy Friday! Note: Due to the early close on Wednesday and the Independence Day Holiday on Thursday, this week’s newsletter will be slightly abbreviated.

On Wednesday, ADP data on private payroll growth came in lower than expected with weekly jobless claims above the forecast. It was a fairly good week for REITs, with almost two-thirds of them finishing in positive territory. Still, the Vanguard Real Estate Index Fund ETF (NYSEARCA: VNQ) was off almost 1% for the week.

In This Issue: Regency’s partnership with Evgo could just be the spark Regency needs, Changes in the law re: property squatters and can anything slow down or stop Iron Mountain’s share price appreciation?

REIT ROUNDUP:

Kite Realty Group Trust (NYSE: KRG) June 28, announced it has been upgraded by S&P to BBB with stable outlook.

AFC Gamma Inc (NYSE: AFCG) June 27, announced that when its previously reported spin-off of its commercial real estate portfolio closes on July 9, it will pay a special dividend of $0.15 per share from the sale. The new spin-off will become an independent, publicly traded REIT called Sunrise Realty Trust, Inc. (SUNS).

Upgrades:

Americold Realty Trust Inc (NYSE: COLD) July 1, Wolfe Research analyst Andrew Rosivach upgraded Americold Realty Trust from Peer Perform to Outperform and announced a $31 price target.

Digital Realty Trust Inc (NYSE: DLR) June 28, JP Morgan analyst Richard Choe upgraded Digital Realty Trust from Neutral to Overweight and raised the price target from $150 to $175.

Equity Residential (NYSE: EQR) June 28, Piper Sandler analyst Alexander Goldfarb upgraded Equity Residential from Neutral to Overweight and raised the price target from $70 to $80.

and Downgrades:

Medical Properties Trust Inc (NYSE: MPW) July 2, Exane BNP Paribas analyst Nate Crossett downgraded Medical Properties Trust from Outperform to Neutral and lowered the price target from $6 to $4.

WINNERS & LOSERS

📈 Biggest Winners This Week: Office and Healthcare REITs

• Geo Group Inc (NYSE: GEO) Up 10.95%

• Strawberry Fields Reit Inc (NYSEAMERICAN: STRW) Up 6.52%

• American Healthcare REIT Inc (NYSE: AHR) Up 5.66%

• Bridge Investment Group Holdings Inc (NYSE: BRDG) Up 5.52%

• Hudson Pacific Properties Inc (NYSE: HPP) Up 5.21%

• Piedmont Office Realty Trust, Inc. (NYSE: PDM) Up 4.94%

• Net Lease Office Properties (NYSE: NLOP) Up 4.69%

• Americold Realty Trust Inc (NYSE: COLD) Up 4.55%

• UMH Properties Inc (NYSE: UMH) Up 4.13%

• Highwoods Properties Inc (NYSE: HIW) Up 4.00%

📉 Biggest Losers This Week:

• Medical Properties Trust (NYSE: MPW) Down 13.09%

• PotlatchDeltic Corp (Nasdaq: PCH) Down 4.18%

• Weyerhaeuser Co (NYSE: WY) Down 4.00%

• Annaly Capital Management, Inc. (NYSE: NLY) Down 3.66%

• Rayonier Inc (NYSE: RYN) Down 3.22%

• Pebblebrook Hotel Trust (NYSE: PEB) Down 3.18%

• NewLake Capital Partners Inc (OTCMKTS: NLCP) Down 3.13%

• Tanger Inc (NYSE: SKT) Down 2.90%

ONE BIG THING

Can Evgo Light A Spark Under Regency Centers?

What: On June 26, Regency Centers Corp (Nasdaq: REG) announced a new Fast Charging Station for electric vehicles in partnership with Evgo Inc (Nasdaq: EVGO), at Blakeney Town Center in Charlotte, N.C.

Who: Regency Centers is a Jacksonville, FL-based Retail REIT that owns and operates 482 properties with over 61 million square feet, in higher-income areas, mostly on the East Coast of the U.S. About 80% of its properties are in grocery-anchored strip malls, along with restaurants, service providers, medical spaces and higher-class retailers. Regency Centers was founded in 1963 and is a member of the S&P 500.

Evgo is a fast-growing provider of DC fast chargers for electric vehicles with over 1000 fast-charging stations already in place.

Why: In comparison with many other REITs, Regency Centers has not performed very well since Jan 1, 2022, as it’s traded sideways to lower. Its total return since then is -8.85%. However, Regency Centers has rallied over 8% since April 15.

Regency has already teamed up with Evgo on about 120 fast-charging stalls across 40 of Regency’s properties since 2020, but the two companies are getting ready to launch even more, with locations in Maryland, Massachusetts and Texas in the works. Each station will feature at least one high-power 350kW fast charger that can accommodate two cars at one time.

How: The inclusion of many more EV chargers on its properties should give Regency additional revenues to add to its bottom line and also make its properties more attractive to prospective tenants. Love them or hate them, the percentage of electric vehicles on the road has grown from 2% in 2018 to 18% in 2023, with almost 14 million EV sales in 2023. And all of those electric vehicles are going to need convenient access to charging stations away from home.

Takeaway: The Regency-Evgo partnership calls to mind the last line of the film, “Casablanca”, as Humphry Bogart said to Claude Rains, “Louie, I think this is the beginning of a beautiful friendship.”

Squatter Laws Need To Change

What: Squatters are persons who have illegally taken over someone else’s property. They pay no mortgage or rent and have no legal right to be there.

Recently, a few states have tried to toughen the laws against squatters taking over a residence from its legal owner. But too many states are still turning a blind eye to the problem. Stories about squatters taking over homes are everywhere. Check out these examples:

Where: In Staten Island, NY, a squatter has lived in a dead man’s home for six years. He says he will vacate the property, but only if the deceased owner’s family pays his moving costs. Such costs amount to one month’s rent, a security deposit and the broker’s fee for the the next place the squatter will rent.

A 75-year-old man in Maysville, Arkansas suffered a stress-induced heart attack after returning from a medical facility to discover that squatters had taken over his home while he was away. The squatters used tips they found on Google to try to claim the man’s house away from him.

A single mother in Durham, North Carolina rented a house through Airbnb to pay for her son’s college, only to learn that her guests had remained at the property for months after the reservation expired and refused to leave when the owner’s housekeeper showed up to clean the premises. The squatters said they would not leave without a court eviction order and Airbnb would not offer any assistance or compensation. The woman is now pursuing a legal eviction.

Other instances of squatters taking over a home have occurred with members of the military who are overseas for several months and return home to find it occupied by strangers. Another target group is owners of vacation homes who haven’t been there for several months and find unwelcome guests upon arrival.

How: There are squatter’s rights laws in all 50 states, but the laws vary in enforcement. Many of these laws allow a squatter to use or inhabit someone else’s property if the lawful owner does not evict or take action against them. In New York, a squatter can be awarded “adverse possession” if they’ve lived in a property for 10 years or more. Of course, that’s an extreme example.

But some states are now fighting back. In Florida, Governor Ron DeSantis championed a new law, HB 621, granting state law enforcement more power to remove squatters and raise criminal penalties for repeat offenders.

As of June 1, a new law in West Virginia established that a squatter cannot be considered a tenant in that state. Both Georgia and New York have recently toughened their laws as well.

Takeaway: Squatters are not tenants with legal rights and therefore should not require a standard eviction which can cost the owner or landlord hundreds of dollars and is very time-consuming. Florida’s new law allows the legitimate owner to fill out a form and have the sheriff go to the property to remove the squatters immediately. If squatters have damaged the property, there is little an owner can do other than file an insurance claim, but there is no guarantee that the claim will be approved. However, the problem has become so commonplace, that some insurance companies are now offering specific squatters insurance. 

But it’s good to see that states are finally deciding to do something about the problem.

ONE FOR THE ROAD

Can Anything Slow Down Iron Mountain?

Who:  Iron Mountain Inc (NYSE: IRM) is a Boston-based specialty REIT focused on information management and storage, data center infrastructure and asset lifecycle management. Iron Mountain was founded in 1951 and has more than 240,000 customers worldwide. In recent years, it has shifted its focus from paper storage to data storage.

What: One Analyst recently jumped aboard this runaway train called Iron Mountain. On June 27, Goldman Sachs analyst George Tong maintained IRM with a Buy and raised the price target from $89 to $101.

It’s hard to blame the analyst for wanting to raise the price target. In its Q1 operating results, Iron Mountain beat the street on both FFO and revenue. Revenue was also up from the year-ago same quarter. Then it reaffirmed its previous guidance for full-year 2024 AFFO from $4.39-$4.51 per share.

But is the analyst raising price targets too late in the game?

Why: Shares of Iron Mountain have rallied 65% from $55 in October to a recent price of $91. While that’s a terrific performance, the price/FFO is now 27.99, versus a sector median of 12.45. The 14-period RSI is at 79, well above the 70 line where “overbought” status begins. Its present dividend yield of 2.90% is well below the 5-year average of 5.92%. Iron Mountain has taken on $2.2 billion over the past year and now has over $15.3 billion in total debt, with interest expenses on the increase.

Short interest has been increasing lately as the price has risen and is now at 4.30%. But many who have shorted this stock, expecting a pullback for quite a while, have regretted it so far.

Takeaway: Granted, analyst price targets are typically a 12-18-month guide, but why not wait for a pullback before raising the price target another 13.4% from its recent price of $90.78? Investors who rely on a big name Brokerage price target hike, now run the risk of buying at a short-term peak. At some point, this runaway train could well have a derailment.

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