Happy Friday! Things were going along smoothly, with the Dow climbing over 40,000 until the minutes from the last FED meeting were released on Wednesday. The minutes showed that FED officials were still concerned about the lack of progress toward its 2% objective and that some FED officials were even willing to hike rates further if risks to inflation materialize in a way that warrants further action.

That put traders in a dour mood and stocks sold off, including REITs. Realty Income Corp (NYSE: O) was down 2.5%, effectively wiping out gains over the past two weeks. Other stalwarts such as Prologis Inc (NYSE: PLD), SL Green Realty Corp (NYSE: SLG) and American Tower Corp (NYSE: AMT) were also hit hard.

Nvidia Corp’s (Nasdaq: NVDA) earnings perked up spirits again on Saturday, but only the Nasdaq was higher and REITs continued to be weighed down by “higher for longer” sentiment. Over 80% of REITs lost ground this week.

In This Issue: Global Self Storage rejects a buyout offer 47% above share price, insurance companies play Big Brother with your house and Gaming and Leisure Properties steps out of the shadow of VICI Properties.

REIT ON!

PRESENTED BY DLP CAPITAL

Unlock Financial Success With This Innovative REIT

Unlock greater financial opportunities and security with real estate investments that can help you achieve consistent double-digit returns.

• DLP Housing Fund: 10-12% targeted annual net return, 6% preferred return paid monthly.

• DLP Building Communities Fund: 11-13% targeted annual net return. 8% preferred return paid quarterly.

There’s more, including the DLP Lending Fund and the DLP Preferred Credit Fund. 

Reach out to our Investor Success team today.

REIT ROUNDUP:

Acadia Realty Trust (NYSE: AKR) May 16, announced it’s entered a strategic relationship with J.P. Morgan Asset Management to pursue the acquisition of retail assets, including assets currently owned by Acadia. The first transaction was a sale by Acadia to JPM of a 95% interest in Shops at Grand, a grocery-anchored center in Maspeth, NY for $48 million. Acadia will use the net proceeds to invest in new retail assets and to reduce leverage.

Gaming and Leisure Properties Inc (Nasdaq: GLPI) May 16, announced the acquisition of three casino resorts in Nevada and South Dakota for $105 million. The lease to Strategic Gaming Management, LLC will have two cross-defaulted triple-net agreements with an 8.4% cap rate, with initial 25-year terms with two 10-year renewal periods. GLPI will provide $5 million in capital improvement proceeds (see full story below).

DIVIDEND NEWS:

Realty Income Corp (NYSE: O) May 17, increased its monthly dividend 2.1% from $0.2570 to $0.2625 per share. The dividend is payable June 14 to shareholders of record as of June 3. The new dividend represents an annualized dividend of $3.150 per share, compared with the previous dividend of $3.084 per share.

WINNERS & LOSERS

📈 Biggest Winners This Week: Mortgage and Healthcare REITs

• Medalist Diversified REIT Inc (Nasdaq: MDRR) Up 6.24%

• GEO Group Inc (NYSE: GEO) Up 5.52%

• Omega Healthcare Investors Inc (NYSE: OHI) Up 3.65%

• Americold Realty Trust Inc (NYSE: COLD) Up 3.43%

• CareTrust REIT Inc (NYSE: CMCT) Up 2.21%

• Medical Properties Trust Inc (NYSE: MPW) Up 2.15%

📉 Biggest Losers This Week: Diversified and Office REITs

• Claros Mortgage Trust Inc (NYSE: CMTG) Down 14.67%

• Hudson Pacific Properties Inc (NYSE: HPP) Down 11.39%

• Great Ajax Corp (NYSE: AJX) Down 9.84%

• Peakstone Realty Trust (NYSE: PKST) Down 9.36%

• Service Properties Trust (Nasdaq: SVC) Down 8.26%

• DigitalBridge Group Inc (NYSE: DBRG) Down 7.62%

• American Assets Trust, Inc. (NYSE: AAT) Down 6.63%

Upgrades:

Tanger Inc (NYSE: SKT) May 17, Scotiabank analyst Greg McGinniss upgraded Tanger from Sector Underperform to Sector Perform and raised the price target by 40% from $20 to $28.

Americold Realty Trust Inc (NYSE: COLD) May 23, Scotiabank analyst Greg McGinniss upgraded Americold from Sector Perform to Sector Outperform and raised the price target by 11% from $27 to $30.

and Downgrades:

Macerich Co (NYSE: MAC) May 17, Scotiabank analyst Greg McGinniss downgraded Tanger from Sector Perform to Sector Underperform and lowered the price target from $16 to $14.

EPR Properties (NYSE: EPR) May 20, Bank of America Securities analyst Joshua Dennerlein downgraded EPR Properties from Neutral to Underperform and lowered the price target from $45 to $40.

ONE BIG THING

Global Self Storage Rejects 47% Increase Offer: What?!

What: On May 21, Global Self Storage Inc (Nasdaq: SELF) announced its Board had rejected a May 7 acquisition offer from Etude Storage Partners, LLC for $6.15 per share in cash, representing a 47.48% increase from the share price at the time of the offer. Shares have increased since because of the offer, but the offer is still 26% above Wednesday’s price of $4.87.

Who: Global Self Storage is a specialized REIT that owns and manages a portfolio of 13 self-storage facilities across eight states, with both commercial and residential customers. Etude Storage Partners is a self-storage-focused investment firm.

Why: The Board stated the offer did not reflect the company’s true value nor future growth potential. They believe that executing Global’s strategic business plan will yield more long-term value for shareholders than the $6.15 offer.

Seriously? Global’s 52-week range is $4.01-$5.42. Its total return over 27 years is only 73.17%, less than a 3% annual return. Only once in the last 25 years has Global Self Storage been above $6.15 per share. The share price is about $3.50 less today than it was in 1997. Without the dividends, the total return would have been negative.

Global pays a quarterly dividend of $0.29 per share while first-quarter AFFO came in at $0.08 per share, down from $0.09 in Q4 2023 and $0.10 in Q1 2023. Revenue of $3.03 million was down from $3.04 million in the year-ago same quarter. Three million? By contrast, Extra Space Storage Inc (NYSE: EXR) reported revenue of $688.04 million in its first quarter. CubeSmart (NYSE: CUBE) had revenue of $261.41 million. Very few analysts even cover Global Self Storage.

Takeaway: Global Self Storage investors have every right to be ticked off that this proposal was rejected. This REIT has shown no real growth lately and the price has languished for decades. To say that it has a strategic business plan that will take shares above $6.15 from present levels is a joke. At best it could take years.

The board should have jumped at a buyout with a 47% increase. Maybe they’re holding out for a better offer. After all, in February, Etude Storage Partners had initially offered only $5.52 per share and after that was rejected, raised the offer to $6.05 in April. Maybe Etude thought the third time would be the charm. Not so.

Etude would be wrong to raise the $6.15 offer, but not half as foolish as Global Self Storage was to reject it.

Caution: Big Brother Insurance Companies Are Watching Your Home

What: Insurance companies are “spying” on homes with aerial photos to determine whether or not to renew homeowner’s insurance. Many policy holders are receiving termination notices for one reason or another.

Why: Insurance companies inspect homes from above as part of an underwriting process to reduce the likelihood of a homeowner filing a claim. In 2023, 28 natural disasters in the U.S. caused more than $1 billion in damage. Inflation has made repairs and rebuilding much more expensive. Insurance companies are raising premiums and becoming more particular about which homes they will continue to reinsure.

How: Insurers had previously hired inspectors to personally visit homes to gather information and assess any hazards they may find. However, insurance companies have found that aerial photos can save them time and money on exterior inspections.

Red flags noted by these aerial photos include:

• Yard debris, which may become hazardous for vermin or accidents

• Trees hanging over the home could lead to a risk of fire or crashing onto the roof in a bad storm.

• Swimming pools or trampolines that homeowners did not reveal to the insurance company could present a risk of a lawsuit.

• Roofing problems, such as broken shingles, wear, or even moss.

You may not like this intrusive practice as it may feel like Big Brother is watching you. But it’s entirely legal and another way for insurance companies to inspect homes for damage. Aside from soaring costs to homeowners, the biggest losers in this new practice are the men and women who once performed personal home inspections for insurance companies.

Yet, Doug Heller, the director of insurance at the Consumer Federation of America does not appreciate what the companies are doing. Heller says that technology must be used with guardrails and consumer protections. He feels the use of images without consumer awareness and consent is problematic.

One problem with the aerial footage is that the photos could have been taken months ago, with corrections already made. If a termination letter is sent, homeowners should contact the insurance company immediately and may have to provide proof of repairs or clearing of trees or debris.

Takeaway: We may not like it, but aerial insurance photos are probably here to stay. Homeowners should ensure that any potential problems cited above are taken care of, as that will reduce the risk of damage or lawsuits. Having one’s insurance dropped can make it more expensive to secure new insurance.

ONE FOR THE ROAD

Gaming and Leisure Properties Steps Out From VICI’s Shadow

Who: Gaming and Leisure Properties Inc (Nasdaq: GLPI) is a specialized REIT that as of March 31, 2024, owns 62 triple-net leased gaming properties across 19 states. Its tenants include Penn Entertainment, Caesars Entertainment, Boyd Gaming Corporation and Bally’s. It owns and operates over 14,900 hotel rooms and leases over 29 million square feet of property. Gaming and Leisure Properties was formed in 2013 as the nation’s first gaming REIT.

Yet, historically, GLPI has taken a back seat to VICI Properties Inc (NYSE: VICI), the other specialized REIT that owns and operates gaming properties. Since the COVID-19 pandemic lows in 2020, VICI has outgained GLPI by 30%.

VICI Properties has a Market Cap of $31.42 B, much larger than GLPI’s $12.95 B. VICI also has a much larger total portfolio of 93 gaming and non-gaming facilities, with approximately 127 million square feet. It also boasts 60,300 hotel rooms and 500 restaurants.

However, despite VICI’s superiority in size and historical performance, GLPI has been closing the appreciation gap between the two REITs over the past six months. And over the last three months, GLPI has outperformed VICI, 3.63% to 2.81%.

Why: In Q1 operating results, although GLPI’s FFO of $0.92 missed consensus estimates by a penny, revenue of $375.96 million beat the estimate of $370.54 million. Revenue was also higher than last year’s Q1 total of $355.21 million.

Another positive is that GLPI has recently been growing its portfolio. On May 16, it announced the purchase of three casino resorts in South Dakota and Nevada for $105 million. The transaction included two triple-net leases with 25-year terms plus two 10-year renewal periods.

Analysts’ opinions have also been favorable since the earnings release. Wedbush and RBC Capital have recent Outperform ratings on GLPI with price targets of $51 and $47 respectively. JMP Securities has a Market Outperform rating and a $53 price target. On May 17, Stiffel maintained a Buy and raised the price target slightly from $50.75 to $51. GLPI is presently trading just below $46.

On May 20, GLPI declared a quarterly dividend of $0.76 per share, the same as the previous quarter. The dividend is payable June 21 for shareholders of record on June 7 with an ex-dividend date of June 6 and the forward yield is 6.54%. A payout ratio of 78% shows the dividend is well covered. Although the quarterly dividend was cut from $0.70 to $0.60 per share in August 2020, GLPI has increased it seven times since then and paid a few special dividends to its investors.

Takeaway: Summing up, both VICI and GLPI are solid REITs, but GLPI seems to be emerging from the shadows of VICI and might continue to match or even outperform VICI in the future.

PRESENTED BY DLP CAPITAL

Unlock Financial Success With This Innovative REIT

Unlock greater financial opportunities and security with real estate investments that can help you achieve consistent double-digit returns.

• DLP Housing Fund: 10-12% targeted annual net return, 6% preferred return paid monthly.

• DLP Building Communities Fund: 11-13% targeted annual net return. 8% preferred return paid quarterly.

There’s more, including the DLP Lending Fund and the DLP Preferred Credit Fund. 

Reach out to our Investor Success team today.