Happy Friday! They say that April showers may bring May flowers, but closing out April with a 570-point Dow loss was more like a monsoon. The monthly FED watch was on again, and on Tuesday traders preferred interest rates over solid earnings reports. One clear example was American Tower Corp (NYSE: AMT), which beat estimates on FFO, revenue and upped their guidance, only to see shares fall almost 2% on Tuesday.

However, on Wednesday, the FED left rates unchanged and said it would curtail its quantitative tightening program. Jerome Powell also ruled out any rate hikes for next month. Powell’s comments at the news conference were mostly as expected, and markets responded favorably. About 85% of all REITs moved higher and had further upside on Thursday.

One thing to note- more REITs are beating than missing consensus estimates on FFO/AFFO/EPS and Revenue this week. That should bode well for the sector if the market can let go of the idea that REITs cannot perform well in a higher interest rate environment.

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Finding Opportunity In Any Environment

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Its latest fund, the BAM Multifamily Growth & Income Fund IV, aims to acquire Class A & B assets located near major economic drivers with a focus on Midwest markets with strong demographics and quality school systems.

Using the BAM Companies vertically integrated platform, the fund plans to drive revenue and create operating efficiencies by seeking opportunities that can benefit from organic rent growth or select renovations to justify future rent increases.

Visit BAM Capital’s website for more details or to view the fund’s offering memorandum.

REIT ROUNDUP:

Terreno Realty Corp (NYSE: TRNO) April 25, announced it has completed the development of Countyline Corporate Park Phase IV Building 38 in Hialeah, FL. Building 38 is 506,000 square feet on 27.6 acres and is already 100% leased.

Four Corners Property Trust Inc (NYSE: FCPT) April 29, announced it has acquired a Patient First Urgent Care property for $6.6 million in a highly trafficked area in Pennsylvania. The property is under a triple-net lease with approximately ten years left on the term. The transaction has a 7.1% cap rate as of the closing date and exclusive of transaction costs.

Ashford Hospitality Trust, Inc. (NYSE: AHT) April 29, announced it has closed on the sale of an 85-room Hampton Inn in Lawrenceville, GA for $8.1 million. All net proceeds from the sale will be used to pay down Ashford’s strategic financing and for other general corporate purposes.

Invitation Homes Inc (NYSE: INVH) April 29, Invitation Homes announced that Moody’s Investors Service has upgraded Invitation Homes’ issuer and issue-level credit ratings from ‘Baa3’ to ‘Baa2’. On April 30, Invitation Homes announced it has entered into a joint venture with Quarterra Group Inc., a subsidiary of Lennar Corp (NYSE: LEN) et. al. Invitation Homes has acquired a minority equity interest in a portfolio of 4400 single-family homes for lease and will provide management services to these homes.

Host Hotels & Resorts Inc (Nasdaq: HST) May 1, announced the acquisition of fee simple interest in a two-hotel complex of 1 Hotel Nashville and the Embassy Suites by Hilton Nashville Downtown for approximately $530 million.

NexPoint Real Estate Finance, Inc (NYSE: NREF) May 2, announced the closing of the sale of Radbourne Lake Apartment Homes in Charlotte, NC. The sale generated net proceeds of $18.6 million.

WINNERS & LOSERS

📈 Biggest Winners This Week: Industrial, Mortgage and Office REITs

• Industrial Logistics Property Trust (Nasdaq: ILPT) Up 13.21%

• Innovative Industrial Properties Inc (NYSE: IIPR) Up 9.19%

• TPG RE Finance Trust (NYSE: TRTX) Up 8.48%

• Great Ajax Corp (NYSE: AJX) Up 7.85%

• Newlake Capital Partners (OTCMKTS: NLCP) Up 7.36%

• Net Lease Office Properties (NYSE: NLOP) Up 6.08%

• Centerspace (NYSE: CSR) Up 6.93%

• Strawberry Fields REIT Inc (NYSEAMERICAN: STRW) Up 6.90%

📉 Biggest Losers This Week: Some hotel and Specialized REITs were weak

• DigitalBridge Group Inc (NYSE: DBRG) Down 15.25%

• Macerich Co (NYSE: MAC) Down 12.16%

• Creative Media & Community Trust Corp (Nasdaq: CMCT) Down 6.74%

• Hudson Pacific Properties Inc (NYSE: HPP) Down 6.34%

• Equinix Inc (Nasdaq: EQIX) Down 5.37%

• Ryman Hospitality Properties Inc (NYSE: RHP) Down 5.33%

• Pebblebrook Hotel Trust (NYSE: PEB) Down 5.13%

Prices as of May 2 at noon

Upgrades:

PotlatchDeltic Corp (NYSE: PCH) May 1, RBC Capital analyst Matthew McKellar upgraded PotlatchDeltic from Sector Perform to Outperform and announced a $46 price target.

American Tower Corp: May 1, Raymond James analyst Ric Prentiss upgraded American Tower from Outperform to Strong Buy and raised the price target from $226 to $248.

Tanger Inc (NYSE: SKT) May 2, Compass Point analyst Floris Van Dijkum upgraded Tanger from Neutral to Buy and announced a $32 price target.

and Downgrades…

UDR Inc (NYSE: UDR) May 1, Scotiabank analyst Nicholas Yulico downgraded UDR from Sector Outperform to Sector Perform and maintained the price target at $39.

Macerich Co (NYSE: MAC) May 1, Piper Sandler analyst Alexander Goldfarb downgraded Macerich from Neutral to Underweight and lowered the price target from $17 to $11.

Community Healthcare Trust Inc (NYSE: CHCT) May 2, Piper Sandler analyst Alexander Goldfarb downgraded Community Healthcare and lowered the price target from $36 to $26.

Dividend News:

Community Healthcare Trust Inc: increased its quarterly dividend from $0.4575 to $0.46 per share.

Notable Earnings:

The following table shows the earnings and revenue of many REITs that reported first-quarter operating results this week:

ONE BIG THING

Healthcare REITs: The Patient Gets Well

What: Several healthcare REITs have beaten analyst estimates in first-quarter operating results, debts have been repaid, analyst upgrades are emerging and healthcare REITs are beginning to rally.

Who: Welltower Inc (NYSE: WELL), Healthpeak Properties Inc (NYSE: DOC), Ventas Inc (NYSE: VTR), Strawberry Fields REIT Inc (NYSEAMERICAN: STRW), Medical Properties Trust Inc (NYSE: MPW).

How: Healthcare REITs such as Welltower and Healthpeak have recently outperformed expectations on first-quarter FFO and revenue.

Welltower’s FFO of $1.01 per share beat the estimate of $0.95 per share and revenue of $1.859 billion topped the estimate of $1.561 billion. Welltower also increased its full-year 2024 FFO guidance from $3.95-$4.10 to $4.02-$4.15 per share, topping the estimate for $4.05.

Healthpeak’s FFO of $0.45 edged the estimate by a penny per share. Revenue of $606.560 million topped the estimate of $588.284. Healthpeak also raised its full-year FFO guidance from $1.50-$1.56 to $1.53-$1.57 per share.

Medical Properties Trust recently completed a $350 million sale of five facilities in California and New Jersey to Prime Healthcare. One week later it sold its interests in five Utah hospitals to a joint venture with an investment fund for $1.1 billion. The money is paying down much of MPW’s debt. MPW even got an upgrade from Sell to Hold on April 17 from Deutsche Bank analyst Omotayo Okusanya, and Okusanya raised the target price from $2 to $5.

Healthpeak, which merged with Physicians Realty on March 1, is another REIT with recent analyst attention. On April 1, Bank of America Securities. Analyst Joshua Dennerlein upgraded Healthpeak Properties from Underperform to Buy and raised the price target from $18 to $25. Mr. Dennerlein noted that Healthpeak’s earnings will “trough” in 2024 and there is a significant upside for its NOI through leasing up developments, asset sales and buybacks.

On April 22, Mizuho Securities USA resumed its coverage of Healthpeak with a Buy rating. His notes to investors were very similar to analyst Dennerlein.

On April 24, Ventas announced it’s closed an extended and improved $2.75 billion unsecured revolving credit facility.

Several healthcare REITs performed very well during April. Strawberry Fields REIT was up 13.08% over the past month. MPW was up 5.99%, Ventas 4.22% and Welltower 4.12%.

Takeaway: After a brutal two-year period in which healthcare REITs such as MPW declined almost 70% and Ventas over 24%, it’s refreshing to see these issues rebounding on hopes for improved performance. Spring is the renewal season and it appears the healthcare REIT “patients” are finally getting better. Perhaps patient investors will finally be rewarded.

Preliminary Approval for NAR Settlement-But At What Cost?

On April 24, Federal Judge Stephen Bough of the Western District of Missouri granted preliminary approval for the antitrust settlement between a group of home seller plaintiffs and the National Association of Realtors (NAR). A final approval hearing has been set for November 26, but that’s likely to just be a formality. Judge Bough called the settlement agreement, “fair, reasonable and adequate.”

The finalized ruling will put an end to the automatic commission split system through the Multiple Listing System (MLS) between listing agents and agents who represent buyers. Unless a seller agrees to give the buyer’s agent a commission, buyers with their own agent will have to sign an agreement with that agent and come up with additional funds.

Who: NAR, putting its best face forward, said it was pleased with the ruling as its goal is to resolve the litigation by giving consumers more choices and at the same time protecting the members of NAR from further litigation.

NAR plans to change its business model by late July, but many homebuyers and sellers are already making changes in how they negotiate the sales contract.

Takeaway: While some home sellers are celebrating the preliminary approval, Realtors who work primarily with buyers are fearful they won’t be able to make a living and buyers are wondering how they’re going to come up with extra money on top of closing costs and down payments to pay a fee to a buyer’s agent.

With no buyer’s agent representing their best interests, buyers could end up paying more, not less, for a home. And who’s to say that sellers will reduce their listing price, simply because they don’t have to fork over an additional 3% to a buyer’s agent? Homes sold as “For Sale By Owner” (FSBO) are often priced higher than those sold through a Realtor.

The media says the buyer can now work with the listing agent to avoid paying a commission, but what if 20 different people all want the same house? Only one homebuyer can win the bid. That leaves the other 19 scrambling to find another home or having to overbid the list price to win the home.

Good luck with that system.

ONE FOR THE ROAD

Pressuring Company Boards-Start of A Trend?

What: Several REITs have dealt with large investor groups pressuring their Board of Directors over the past year. Is this just a result of difficult times for REITs or the start of an ongoing trend that could just get worse?

Who:  Crown Castle Inc (NYSE: CCI), Innovative Industrial Properties Inc (NYSE: IIPR), Whitestone REIT (NYSE: WSR), National Health Investors Inc (NYSE: NHI) and Braemar Hotels & Resorts (NYSE: BHR).

Why: An inflationary environment that’s led to numerous interest rate hikes over the past two years has hindered the performance of many REITs. When large hedge funds or LLCs with sizable positions in a stock lose money, they may begin to pressure the Board of Directors to make immediate changes in policy, management, or the Board itself.

The most highly publicized of these disputes has been between Ted B. Miller and his investment group, Boots Capital Management, LLC, and the Board of Directors of Crown Castle and it’s now dragged on for many months with no end in sight.

Miller was the Co-Founder and former Chairman and CEO of Crown Castle. He and Boots Capital management claim that the Board of Directors has been ineffective for a decade. He recently wrote a scathing letter to CCI Shareholders saying, “The Board’s poor judgment has cost shareholders tens of billions of dollars in value, left you with a debt-fueled dividend policy, and corroded employee morale and broader stakeholder trust.”

Boots Capital recently urged shareholders to vote for Ted Miller and three other Boots directors for the CCI Board of Directors at the May 22 annual shareholders meeting.

The CCI Board then asked shareholders not to vote for anyone from Boots Capital, saying that “Ted Miller’s Self-Serving campaign risks derailing important work underway and is not aligned with interests of shareholders.”

But CCI is not alone with large investor groups pressuring Boards. A week ago, Erez Asset Management, LLC, a large shareholder in Whitestone REIT, released a presentation to investors, asking for changes to Whitestone’s Board of Trustees and presenting two of its candidates to join the board and restore value for shareholders.

A few days later, Erez chastised the Board for twisting the facts and failing to address WSR’s underperformance, misguided capital allocation and manifest governance failures. Whitestone REIT countered that Erez’s materials demonstrate a lack of understanding of Whitestone’s business. Whitestone further accused Erez of trying to generate short-term gains at the expense of long-term shareholder value creation.

And there are other disputes as well. Braemar Hotels is now sparring with Blackwells Capital and recently rejected a Director nomination from that group, saying Blackwells had made false statements and material omissions to shareholders.

Here’s another one: On April 18, Land & Buildings Investment Management, LLC issued an open letter to National Health Investors shareholders, saying that NHI is significantly undervalued because of poor management practices and conflicts of interest among NHI’s Board of Directors members. Land & Buildings is asking shareholders to vote against two incumbent directors who are up for election at the May 22nd annual meeting of shareholders.

Takeaway: It might seem plausible that quarrels between investment groups and the Board of Directors are bad for share prices. However, CCI shares blasted higher last October after Boots Capital began pressuring the Board to make changes to the company.

Whitestone, Braemar Hotels and National Health Investors have all performed better recently, so maybe this stirring of the hornet’s nest is a good way to light a fire under a stock. Of course, this is extremely difficult on shareholders who don’t know who or what to believe after all the accusations. But, hey, everyone has the shareholder’s interest at heart, right?

 PRESENTED BY BAM CAPITAL

Finding Opportunity In Any Environment

BAM Capital has one of the most impressive track records of any real estate fund manager we’ve seen. On 12 exited assets, investors have realized an average IRR of 35.14% with an average hold period of 3.4 years.

Its latest fund, the BAM Multifamily Growth & Income Fund IV, aims to acquire Class A & B assets located near major economic drivers with a focus on Midwest markets with strong demographics and quality school systems.

Using the BAM Companies vertically integrated platform, the fund plans to drive revenue and create operating efficiencies by seeking opportunities that can benefit from organic rent growth or select renovations to justify future rent increases.

Visit BAM Capital’s website for more details or to view the fund’s offering memorandum.