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đ§ Fond Du Who?
Plus, The Ultimate REIT Retirement Basket Is Here!
Ethan Roberts
November 17, 2023
đ Happy Friday, Everyone. What a week! Inflation squashed, bonds down, REITs up! Yesterdayâs biggest losers were having a week to remember with double-digit gains. Want the scoop on what happened? REIT on!
PRESENTED BY JANOVER
If this year has taught us one thing, itâs that AI is changing the world, and the face of public markets â 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, Janoverâs fintech marketplace connects borrowers with the right financial products and lenders, bypassing the inefficiency of outdated systems.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 isnât 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 JNVRâs journey by clicking here.
REIT ROUND-UP
Realty Income Corp (NYSE: O) November 13, announced it has created an 80-20 joint venture with Digital Realty Trust (NYSE: DLR) to support the development of two build-to-suit data centers in Northern Virginia. The properties are already fully leased with a 10-year initial lease term that is extendable, with a 6.9% cap rate beginning in mid 2024.
Tanger Factory Outlet Centers Inc (NYSE: SKT) November 13, announced a $70 million all-cash acquisition of Asheville Outlets, an open air shopping center, in Asheville, North Carolina.
Essential Properties Realty Trust Inc (NYSE: EPRT) November 13, announced the retirement of Paul T. Bossidy, Chairman of the Board, and the appointment of Scott A. Estes as the new Chairman, effective December 31.
Boston Properties, Inc. (NYSE: BXP) November 14, announced the sale of its 45% interest in two life sciences development properties in Kendall Square, Cambridge, MA. to Norges Bank Investment Management for $1.66 billion.
Pebblebrook Hotel Trust (NYSE: PEB) November 15, announced it has completed the $68.50 million sale of Hotel Zoe Fishermanâs Wharf in San Francisco.
Alpine Income Property Trust Inc (NYSE: PINE) November 16, announced it has agreed to provide a $24.0 million, 3-year, interest-only first mortgage secured by 41 retail properties across the U.S. The interest rate begins at 8.75%, then increases to 9.0% in year two and 9.25% in year three. In addition, Alpine has agreed to provide a 2-year $6.8 million first mortgage construction loan for a 5-acre land development project anchored by Wawa and McDonaldâs in Nashville, TN. The interest only loan bears an initial fixed interest rate of 11.0%.
Dividend News:
Four Corners Property Trust Inc (NYSE: FCPT) November 10, announced an increase in its quarterly dividend from $0.34 to $0.345 per share, payable on January 12, 2024 to shareholders on December 29, 2023.
RPT Realty (NYSE: RPT) November 13, declared a special cash dividend of $0.05444 per share in connection with it being purchased by Kimco Realty Corp (NYSE: KIM) for $2 billion, payable December 21 to shareholders of record on December 7. RPT has already announced its regular dividend of $0.14 per share, payable December 21 to shareholders of record. on December 7 as well. Kimco Realty will pay a one time special dividend of $0.09 per share to satisfy its distribution requirements on December 21 to shareholders of record on December 7.
Third Quarter Earnings:
Modiv Industrial Inc (NYSE: MDV) November 13, fully diluted AFFO of $0.33, up from $0.31 in Q3 2022. Revenue of $12.50 million beat the estimate of $12.04 million and was a 22.41% increase over revenue of $10.21 million in Q3 2022.
đ Biggest Winners This Week: Office, Hotel and Mortgage REITs
Peakstone Realty Trust (NYSE: PKST) Up 31.35%
Net Lease Office Properties (NYSE: NLOP) Up 26.56%
Hannon Armstrong Sustnbl Infrstr Cap Inc (NYSE: HASI) Up 15.85%
Safehold Inc (NYSE: SAFE) Up 13.55%
Ashford Hospitality Trust, Inc. (NYSE: AHT) Up 13.07%
Extra Space Storage Inc (NYSE: EXR) Up 12.51%
Macerich Co (NYSE: MAC) Up 12.06%
National Storage Affiliates Trust (NYSE: NSA) Up 11.16%
Braemar Hotels & Resorts (NYSE: BHR) Up 11.11%
SL Green Realty Corp (NYSE: SLG) Up 10.72%
đ Biggest Losers This Week: Very few this week
Bridge Investment Group Holdings Inc (NYSE: BRDG) Down 6.96%
Arbor Realty Trust Inc (NYSE: ABR) Down 5.52%
Medical Properties Trust Inc: Down 2.59%
UMH Properties Inc (NYSE: UMH) Down 1.38%
Medalist Diversified REIT Inc (Nasdaq: MDRR) Down 1.32%
Prices as of November 16, 12:00 PM
UPGRADES:
There were no analyst upgrades this week.
âŚAND DOWNGRADES:
Medical Properties Trust Inc (NYSE: MPW) November 10, Stiffel analyst Stephen Manaker downgraded Medical Properties Trust from Buy to Hold and lowered the price target from $12 to $4.50.
Highwoods Properties Inc (NYSE: HIW) November 13, B of A Securities analyst Camille Bonnel downgraded Highwoods Properties from Buy to Neutral and lowered the price target from $29 to $20.
Paramount Group Inc (NYSE: PGRE) November 13, B of A Securities analyst Camille Bonnel downgraded Paramount Group from Neutral to Underperform and lowered the price target from $5 to $4.
Hudson Pacific Properties Inc (NYSE: HPP) November 13, B of A Securities analyst Camille Bonnel downgraded Hudson Pacific Properties from Neutral to Underperform.
ONE BIG THING
October CPI Comes In Soft: REITs Go Wild!
WHAT: On November 14, the highly anticipated October CPI came in flat, or in other words, 0%. Wall Street was expecting an increase of 0.1% and while core inflation (which excludes food and energy) rose 0.2%, it too was below the forecast of 0.3%. More importantly, it was the smallest increase since September 2021. Wow!
WHY: The soft CPI numbers drastically reduced the odds of another FED interest rate hike in December, and even gave those yearning for interest rate cuts in 2024 some hope. It was âBuy, Buy, Buyâ time on Wall Street, and especially for REITs.
Fall Out: By 10 AM, REITs, which have fared poorly since the FED rate hikes began in April 2022, were simply going wild. And every sub-sector was participating in the rally. Office REIT, SL Green Realty Corp stormed up 16%, Hotel REIT, Braemar Hotels & Resorts (NYSE: BHR), was 14% higher. The much maligned healthcare REIT, Medical Properties Trust Inc, was rocketing up 12%.
By 4 PM, REITs were like a tsunami, propelled to the sky by a 4.44% 10-year treasury bond which was flirting with 5% just a few weeks ago. Out of 202 total REITs, 198 were up for the day. 25 REITs produced double digit gains and 15 of those were office REITs, perhaps the worst performing REIT group of the last two years.
Specialty REIT, Uniti Group Inc (Nasdaq: UNIT) which on November 7 was downgraded by B of A Securities from Neutral to Underperform and had its price target slashed from $5 to $3.50, rocketed up over 16% to finish at $5.28. Office REIT, Paramount Group, which was downgraded on November 13, by B of A Securities from Neutral to Underperform with a price target cut from $5 to $4, finished up 10.54% to $4.72 .
Take that, B of A!
Yes, on this beautiful inflation-free day, REIT investors were cheering on their favorites and all the downtrodden stocks were flying high once more.
HOUSING NEWS BRIEF
Fond Du Who?
What: For several years, it was the Southern U.S. where everyone in the northern U.S. seemed to be heading. Florida, Tennessee, the Carolinas and Texas were the states where home prices were exploding due to heavy demand. But interestingly, that trend now seems to be changing to the Midwest.
Where Now? According to the National Association of Realtors (NAR), the top 10 areas with the largest year-over-year price increases in the third quarter of 2023 included three cities in Wisconsin, one city in Ohio, one in Indiana, and one in Illinois. Fond du Lac, Wisconsin, about an hour north of Milwaukee, saw the largest national price gain with an 18.9% year-over-year increase, and the third largest gain in the U.S. was Oshkosh-Neenah, WI, which rose 15.2%.
Conversely, Texas cities, Austin, Dallas and Houston all declined in average home prices year-over-year. In fact, Austin, a city techies are trying to turn into the next Seattle, actually fell 10.3% since Q3 2022.
California still boasts 8 of the 10 most expensive cities in the U.S. The San Jose-Sunnyvale-Santa Clara area leads the nation with an average priced home of $1.85 million. Honolulu, HI and Boulder, CO were the only two most expensive cities not in California.
Prospective home buyers will not be happy to hear that over 80% of all metro markets in the U.S. posted home gains between the second and third quarters of 2023, despite the high mortgage rates that have deterred so many from the real estate market.
Fall Out: When homes get too expensive, people gravitate towards areas of the state or country where prices are more affordable. This is especially true of retirees, employees who work from home and younger buyers who lack the funds needed for homes in more pricey areas.
What Now: If prices donât retreat over the next few years, Americans can expect to see much higher growth in areas where few folks previously desired to live. In 2021, Fond du Lacâs population was only 44,600, but folks are moving there and the average home which a year ago was about $175,000, has now jumped up to $220,000. In fact, in Fond du Lac County, there is a relocation program to help local businesses recruit workers by offering a 50% match up to $15,000 to workers moving there from other locations.
Yes, Americans are on the move and what they seek is simple- a home that doesnât cost them an arm and a leg!
ONE FOR THE ROAD
The Ultimate REIT Retirement Basket
Briefly: A basket is a collection of stocks with a similar theme or criteria that you create and buy all at one time. Itâs like designing your own personal ETF. You can put a little or a lot of money into it and either create the same number of shares for each security in the basket, or the same dollar amount for each one.
Leading Brokerages, such as Fidelity, Charles Schwab and Interactive Brokers have low-cost options for baskets of stocks that are tradeable and liquid at all times. Over time, an investor can add or subtract shares to the basket as their retirement needs change or make substitutions.
Below is a table of 15 REITs, designed to give retired or nearly retired investors a basket of stocks with steady income, high dividend yield, diversity of sub-sectors and reliability.
Criteria: The 15 REITs below were chosen among several REIT sub-sectors to provide diversity, and to include both monthly and quarterly dividend payments so an investor will receive payments every month. Since retirees need as much income as possible, the REITs selected have dividend yields between 4% and 13%.
As for performance, there are 14 REITs with 10-year annualized total returns averaging 8.60%. The one exception is Four Corners Property Trust Inc, which has only been in existence 8-years, and its total annualized return is 8.91%.
EPR Properties (NYSE: EPR), Agree Realty Corporation (NYSE: ADC), Realty Income Corp (NYSE: O), Stag Industrial Inc (NYSE: STAG) and SL Green Realty Corp all pay monthly dividends. The other10 are quarterly, but pay dates are spread out across each of the three months.
Dividend reliability is vital to retirees. REITs like Realty Income Corp, Omega Health Investors (NYSE: OHI) and Tanger Factory Outlet Centers (NYSE: SKT) have been paying reliable dividends to investors for decades and should continue to do so for years to come.
Dividend growth is also important. Tanger recently increased its dividend by 25%. Realty Income has produced dividend increases 122 times over 54 years. CubeSmart (NYSE: CUBE) and Mid-America Apartment Communities Inc (NYSE: MAA) have grown dividends by 55% and 45% respectively over the last five years. Four Corners has grown its dividend 42% over the last seven years.
Investing $100,000 in a basket of these 15 REITs at present prices would yield approximately $6,320 in dividends annually, or about $526 per month. Since these are quality REITs that have shown the ability to grow dividends over time, those payments may also increase from year-to-year, and become a hedge against inflation, which erodes oneâs spending power.
Notes: The average dividend yield of the 15 REITs is presently 6.60%, well above present CD rates and treasury notes. Some investors may want to eliminate a more volatile REIT like SL Green Realty Corp, with another office REIT such as Alexandria Real Estate Equities Inc (NYSE: ARE). Alexandria has provided a more stable 10-year past return, but with only half the dividend yield of SL Green. It should be noted, however, that prior to the onset of COVID-19 in 2020, SL Greenâs 10-year annualized total return was 9.85% and year-to-date, its total return is 9.91%.
Also note that a few REITs with ex-dividend dates in September have yet to declare the next ex-dividend date, but they likely will occur again in December.
Finally: Investors may want to change the model portfolio if they already own sizeable positions in any of the REITs shown. However, itâs best to make similar substitutions, based upon the criteria utilized here. This basket was specifically designed for retirement income rather than growth and may not be the best one for younger and/or still working investors. Dollar cost averaging into the total size of the basket is recommended for those concerned with current market risk.
PRESENTED BY JANOVER
If this year has taught us one thing, itâs that AI is changing the world, and the face of public markets â 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, Janoverâs 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 isnât 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 JNVRâs journey by clicking here.