👋 Happy Wednesday, everyone. It’s been a great year and we wish all of our subscribers a very happy holiday season. We will see you back here on January 5th. In the meantime, we are sending this issue on Wednesday instead of the usual Friday because we want you to know about our REIT webinar this Thursday, December 21 — aka tomorrow! Click here to sign up or read more below.

JOIN OUR WEBINAR: DEC 21

Real Estate Reimagined: Capitalizing on Unique Opportunities in a Changing Market

Join us on December 21st for an insightful webinar hosted by Benzinga, dedicated to the dynamic world of real estate investing. Our expert panel, featuring the most innovative industry leaders, will guide you through the intricacies of the current market and the unique opportunities available to retail investors. 

Learn about the various types of passive real estate investments that are currently showing the greatest potential, and how virtually any investor can take advantage of the benefits that investing in real estate provides. 

This session is a must-attend for anyone looking to capitalize on the opportunities available in today's real estate market. Don't miss this chance to gain valuable insights and strategies from top industry leaders.

Click here to register

REIT ROUND-UP:

Brixmor Property Group Inc (NYSE: BRX) December 14, announced a major change in the organization. Angela M. Aman will step down as President, CFO and Treasurer as of January 19, 2024 to assume the position of CEO of Kilroy Realty Corp (NYSE: KRC) as of January 22. Steven Gallagher, Brixmor’s Senior VP and CAO, will serve as the interim CFO while Brixmor evaluates other candidates.

DIVIDEND NEWS:

Host Hotels & Resorts Inc (Nasdaq: HST) December 15, announced its fourth quarter dividend will be $0.20 per share, up 11% from its previous dividend of $0.18 per share, along with a $0.25 per share special dividend. Both dividends are payable January 16 for shareholders of record December 29. The ex-dividend is December 28.

Rayonier Inc (NYSE: RYN) December 18, declared a special cash dividend of $0.20, payable January 12 to shareholders of record on December 29, ex-dividend date December 28.

Veris Residential Inc (NYSE: VRE) December 19, announced a 5% increase to $0.0525 per share, payable on January 10 to shareholders of record on December 29, with an ex-dividend date of December 28.

Apple Hospitality REIT Inc (NYSE: APLE) December 19, announced a special cash distribution of $0.05 per share, along with a regular $0.08 per share dividend, both payable January 16, to shareholders of record on December 29. The ex-dividend date is December 28.

📈 Biggest Winners This Week: No clear sector winner this week.

• Diversified Healthcare Trust (Nasdaq: DHC) Up 15.03%

• Acres Commercial Realty Corp (NYSE: ACR) Up 12.28%

• Bridge Investment Group Holdings Inc (NYSE: BRDG) Up 11.26%

• Sotherly Hotels Inc (Nasdaq: SOHO) Up 4.70%

• Pebblebrook Hotel Trust (NYSE: PEB) Up 3.94%

• NewLake Capital Partners Inc (OTCMKTS: NLCP) Up 3.86%

📉 Biggest Losers This Week: Office REITs pulled back from recent gains

• Net Lease Office Properties (NYSE: NLOP) Down 12.73%

• Ashford Hospitality Trust, Inc. (NYSE: AHT) Down 12.26%

• Medical Properties Trust Inc (NYSE: MPW) Down 7.50%

• Creative Media & Community Trust Corp (NYSE: CMCT) Down 7.34%

• Paramount Group Inc (NYSE: PGRE) Down 6.62%

• Braemar Hotels & Resorts (NYSE: BHR) Down 6.02%

• City Office REIT Inc (NYSE: CIO) Down 6.02% 

Prices as of December 19, 4:00 PM

UPGRADES:

CubeSmart (NYSE: CUBE) December 15, BMO Capital analyst Juan Sanabria upgraded CubeSmart from Market Perform to Outperforms and raised the price target from $46 to $49.

SBA Communications Corp  (Nasdaq:SBAC) December 15, BMO Capital analyst Ari Klein upgraded SBA Communications from Market Perform to Outperforms and announced a price target of $285 per share.

Vornado Realty Trust (NYSE: VNO) December 15, BMO Capital analyst John Kim upgraded Vornado Realty from Underperform to Market Perform and announced a $31 price target. 

AND DOWNGRADES:

Camden Property Trust (NYSE: CPT) December 15, BMO Capital analyst John Kim downgraded Camden Property Trust from Outperform to Market Perform and announced a $100 price target.

Independence Realty Trust Inc (NYSE: IRT) December 15, BMO Capital analyst John Kim downgraded Independence Realty Trust from Market Perform to Underperform and announced a $15 price target.

Kilroy Realty Corp (NYSE: KRC) December 15, Wolfe Research analyst Andrew Rosivach downgraded Kilroy Realty from Outperform to Peer Perform.

Plymouth Industrial REIT Inc (NYSE: PLYM) Decenber 18, JP Morgan analyst Michael Mueller downgraded Plymouth Industrial REIT from Neutral to Underweight and raised the price target from $23 to $25.

ONE BIG THING

Is It Too Late To Buy The Hottest REITs?

WHAT: After a very strong November, REITs absolutely blasted off on December 13 when FED Chairman Jerome Powell announced after the FOMC meeting that rates would be held steady and that the FED was looking at three possible rate cuts in 2024. Shortly thereafter, the 10-year Treasury yield slid below 4% for the first time since August.

WHY: REITs are extremely interest sensitive, and have struggled since April 2022 from the FED interest rate hikes. The FED announcement indicates the rate tightening cycle is over and that a rate reversal will likely come next year. The decline in the 10-year also increases REITs’ attraction, as the gap between bond yields and REIT dividends increases.

Recent Performance: 18 REITs have gained over 40% in the seven weeks since November 1. 22 more have gains between 30% and 40% and 40 REITs have gains between 20% and 30%.

Best Sectors: 8 of the top 15 REITs since November 1 are in the office subsector. The best performing REIT has been Hudson Pacific Properties Inc (NYSE: HPP), a West Coast based REIT that owns offices and Hollywood studios. The actor and screenwriter strikes of 2023 decimated Hudson’s share price, so it was a likely rebounder once the strikes ended. Hudson Pacific is up 93.27% since November began.

Other surging office REITs include Vornado Realty Trust (NYSE: VNO), up 61% and SL Green Realty Corp. (NYSE: SLG), up 60%. Both of these REITs own office buildings in New York City and Vornado also has properties in San Francisco and Chicago. If office work is going the way of eight-track tapes, somebody forgot to tell investors about that. Vornado has some retail properties as well.

Mortgage REITs (mREITs) are another subsector that has been on fire. The leading mREITs since November 1 are Hannon Armstrong Sustainable Infrastructure (NYSE: HASI), up 69.25%, Claros Mortgage Trust (NYSE: CMTG), up 39.41% and Invesco Mortgage Capital Inc (NYSE: IVR), up 33.09%. Other mREITs up over 30% in that time frame include ARMOUR Residential REIT (NYSE: ARR), AGNC Investment Corp (Nasdaq: AGNC) and Mfa Financial Inc (NYSE: MFA).

Takeaway: REIT investors who were courageous enough to buy more shares between late October through early November are celebrating their good fortune, but others are wondering if they’ve missed the boat after the big REIT rally?

The answer is no, as REITs have historically performed well during interest rate declines and lower interest rate environments. Without admitting it, the FED is signaling its concern that the economy is slowing. The only question now is, do we get a soft or hard landing recession?

However, from a technical standpoint, most REITs are now clearly overbought, so it might be prudent for investors to wait for a pull back in these hot stocks. Chasing extended stock gains is rarely a good idea as stocks can pull back 10% or more off gains like these. 14 period RSI and Stochastic indicators are firmly in overbought territory, and while that doesn’t mean that all possible gains are over, it does push the risk/reward needle more toward the risk side.

SL Green is the same REIT at $46.29 that it was seven weeks ago at $28.34. The only real difference now is in the FED stance. If an investor didn’t purchase SL Green then, is it as good a buy now that the annual dividend yield has fallen from 11.45% to 7%?

So let’s practice some patience and avoid the “fear of missing out (FOMO)” that leads to loss of principal or at best modest gains. A nice pullback off these levels will lift the dividend yields and increase the long-term appreciation. Worst case scenario, if these REITs don’t pull back at all, an investor can still earn 5% or better in a money market or CD.

HOUSING NEWS BRIEF

Congress to Hedge Funds: Get Out of Housing!

What: Politicians introduced a bill last week to stop Hedge funds, REITs and other similar financial entities from buying and holding single-family homes indefinitely and mandating that institutions must divest themselves from all presently owned single-family homes within 10 years by selling off 10% of their homes each year to prospective owner occupants.

WHO: The bill was introduced by Senator Jeff Merkley (D-OR) and Representative Adam Smith (D-WA) and is slyly termed the End Hedge Fund Control of American Homes Act of 2023.

WHY: Politicians are upset that hedge funds, REITs and other partnerships own a large percentage of single-family homes, particularly in Southern cities like Atlanta, GA, Jacksonville, FL, Birmingham, AL and Charlotte, NC. Institutions own up to 28.6% in the Atlanta-Sandy Springs-Alpharetta areas of Georgia.

Takeaway:  Leave it to the U.S. Government to create a problem and then try to pass laws to fix it, with a name that sounds caring, but could actually cause chaos in the U.S. real estate market and economic turmoil.

History: Between 2000-2007, the U.S. Government created a housing bubble by teaming up with lenders to offer zero down, sub-prime and no-documentation loans. In 2008, when the recession caused a huge increase in loan defaults, hundreds of thousands of foreclosed homes hit the markets and triggered a subsequent real estate market crash.

Faced with a mountain of empty homes and declining values, the Government then passively stood by while large hedge funds scooped up thousands of single-family foreclosures at substantial discounts from the banks. Hedge funds were doing the Government and Wall Street a favor, as well as realizing they could make a fortune renting these homes out. So, they continued buying them in large quantities over the next 15 years.

Now that Uncle Sam has created Frankenstein’s monster, they want to step in and shut down the party. Just as lenders were scapegoated for the 2008 foreclosure crisis, hedge funds are now being scapegoated for the huge rise in home prices. But is anyone considering some of the possible ramifications of enacting this law? Consider the following:

1) Forcing institutions to sell their homes could lead to large numbers of homes being dumped onto the markets simultaneously, seriously depleting the values of homes, especially those purchased at higher prices within the last few years.

2) It could create the collapse of REITs, such as Invitation Homes Inc (NYSE: INVH) and American Homes 4 Rent Class A (NYSE: AMH) that own thousands of these rental properties.

3) It may lead to lengthy and expensive court battles that go all the way to the Supreme Court, as hedge funds will argue the constitutionality of such a law. It’s murky enough to prohibit future home sales to institutions, but how can the Government force someone to sell a home they already own when it’s clearly not a case of Eminent Domain?

4) If institutions begin selling large numbers of homes, it could lead to an immense shortage of rentals at a time when many younger Americans are already feeling the pinch of higher rents and houses that remain unaffordable.

5) It could put thousands of working class handymen, painters, and other laborers who now have a steady stream of work out of a job. Property managers for thousands of homes would also lose their source of income.

6) What happens if interest rates continue to rise and there are very few buyers for all of these homes? Would the institutions be forced by the Government to give up a good return on rental income and have to sell some properties at a loss?

Final Note: Between the recent court case in which plaintiffs won a huge settlement from NAR for allegedly conspiring to inflate Brokerage commissions and this proposed law, the Real Estate industry could be in for some very difficult times. Since real estate is a huge part of the overall strength of the American economy, politicians should be very careful what they wish for before undertaking such legislation.

ONE FOR THE ROAD

Insider Buying: Full Steam Ahead

Briefly: On the heels of the latest FED announcement, insider buying of REITs appears to be picking up steam. But why did they wait so long?

WHAT: On December 13, Chairman Jerome Powell announced a third consecutive pause in rate hikes, but more importantly told Wall Street investors that the FED anticipates three interest rate cuts in 2024.

REITs were already higher throughout November, but rallied hard on the Powell announcement, with many of them gaining 10%-20% in just a few trading days. Subsequently, over the past week, there’s been a pickup of insider buying among REITs. Even before the FED announcement there were some insiders scooping up large numbers of shares. The interesting question is- why did insiders wait so long? The price they paid for shares would have been much lower six or seven weeks ago. Let’s take a look at some of the insider buys:

Easterly Government Properties Inc (NYSE: DEA) On December 15, Darrell Crate, the Co-Founder and Chairman of the Board was named as CEO, beginning January 1. On December 13, Mr. Crate purchased 8,000 shares of common stock at an average price of $13.14, for a total of approximately $105,120. But at the end of October, Easterly was only $10.20 per share. That’s nearly a $24,000 difference on 8000 shares.

Agree Realty Corp (NYSE: ADC) On December 15, Director Greg Lehmkuhl purchased 1,700 shares of Agree common stock @ $61.17, for a total of $103,989. But Agree Realty shares were trading around $54 for almost the whole month of October. The director could have saved himself $11,900 by buying then, or for the same money could have picked up an additional 225 shares.

Ryman Hospitality Properties Inc (NYSE: RHP) On December 11, Director/Executive Chairman of the Board, Colin V. Reed, purchased 19,284 shares of common stock at an average price of $105.82, for a total of $2,040,633. Ryman stock was trading around $80 six weeks earlier.

National Storage Affiliates Trust (NYSE: NSA) On December 8, Vice Chairman Arlen Dale Nordhagen purchased 6,500 shares of common stock at $36.50, for a total value of $237,250. National Storage was trading near $27.50 at the end of October.

Takeaway: Investors perk up their ears when they hear that insiders are purchasing their own company stock, because the assumption is that insiders have better knowledge than others when their stock is undervalued.

But insiders are human like everyone else, and subject to the same emotions of fear or greed when stocks go down or up. In October there was still tremendous fear in the market for REITs, making it difficult, even for insiders to know whether REITs had reached their bottom.

Nevertheless, it’s a positive sign to see insiders of REITs buying shares of stock as a vote of confidence in their own companies. But investors should not buy shares in a company solely because of insider buying. Always do your own research before purchasing any stocks.

JOIN OUR WEBINAR: DEC 21

Real Estate Reimagined: Capitalizing on Unique Opportunities in a Changing Market

Join us on December 21st for an insightful webinar hosted by Benzinga, dedicated to the dynamic world of real estate investing. Our expert panel, featuring the most innovative industry leaders, will guide you through the intricacies of the current market and the unique opportunities available to retail investors. 

Learn about the various types of passive real estate investments that are currently showing the greatest potential, and how virtually any investor can take advantage of the benefits that investing in real estate provides. 

This session is a must-attend for anyone looking to capitalize on the opportunities available in today's real estate market. Don't miss this chance to gain valuable insights and strategies from top industry leaders.

Click here to register