Happy Friday! It wasn’t the easiest of weeks as the hotter-than-expected CPI report gave investors a scare on Tuesday, but markets managed to bounce back somewhat from the worst day since March 2023. This five-day stretch saw a few dozen REITs report earnings that, for the most part, looked good. But fears of “higher rates for longer” tempered many of the gains.

In Today’s Edition: WPC gets smacked down for the second time in the last five months, a new crackdown on real estate money laundering and the bursting of the FED will cut 3-4x in 2024 bubble.

Plus, from today’s sponsor: is fractional real estate investing the future of Gen Z portfolios?

PRESENTED BY GROUNDFLOOR

Is Fractional Real Estate Investing The Future Of Gen Z Portfolios?

At 20% of the U.S. population, Generation Z is beginning to reshape the world of finance, shifting away from traditional investments and toward alternatives like real estate, artwork and cryptocurrencies. 

This shift is primarily driven by their financial realities: living paycheck-to-paycheck and seeking financial independence rather than more traditional markers of wealth. 

Groundfloor is tapping into this trend by offering fractional real estate investments, aligning with Gen Z's preference for accessible, technology-driven options.

For more insights into Groundfloor’s role in advancing alternative investments, visit their website.

Plus, Benzinga readers earn a free $50 credit.

REIT ROUNDUP

Simon Property Group Inc (NYSE: SPG) February 8, announced a new common stock repurchase program in which Simon can repurchase up to $2.0 billion of its common stock over the next 24 months. The previous program of $1.7 billion was to expire in May 2024.

Welltower Inc (NYSE: WELL) February 13, announced a plan to form a long-term strategic partnership with Affinity Living Communities, a developer and operator of age-restricted and age-targeted Wellness housing. Welltower will acquire a portfolio of 25 purpose-built active adult communities, with nearly 3900 units in the Pacific Northwest for $969 million.

Four Corners Property Trust Inc (NYSE: FCPT) February 14, announced it has acquired a Baptist Medical Group Primary Care property for $9.7 million in Tennessee. The property is corporate operated under a long-term, triple net lease with approximately 10 years left on the term.

DIVIDEND NEWS

CBL & Associates Properties, Inc. (NYSE: CBL) February 8, announced a 6.7% increase in its quarterly dividend from $0.3750 per share to $0.40 per share, payable March 29 for shareholders of record March 15. The ex-dividend date is March 14.

Weyerhaeuser Co (NYSE: WY) February 9, increased its quarterly dividend by 5.3% from $0.19 to $0.20, payable March 22 to shareholders as of the close of business on March 8. The ex-dividend date is March 7.

Community Healthcare Trust Inc (NYSE: CHCT) February 9, increased its quarterly dividend from $0.4550 to $0.4575, payable March 1 to shareholders as of the close of business on February 20. The ex-dividend date is February 16.

Notable Earnings:

The following table shows several REITs that reported 4th quarter earnings this week, vs estimates and the year ago quarter:

WINNERS & LOSERS

📈 Biggest Winners This Week: Healthcare and REITs with good earnings

• Medical Properties Trust Inc (NYSE: MPW) Up 17.99%

• Community Healthcare Trust Inc (NYSE: CHCT) Up 9.37%

• CareTrust REIT Inc (NYSE: CTRE) Up 8.52%

• Arbor Realty Trust Inc (NYSE: ABR) Up 8.33%

• Net Lease Office Properties (NYSE: NLOP) Up 8.06%

• Braemar Hotels & Resorts (NYSE: BHR) Up 7.91%

• Welltower Inc (NYSE: WELL) Up 7.61%

Biggest Losers This Week: Office and retail REITs

• Hudson Pacific Properties Inc (NYSE: HPP) Down 9.49%

• Bridge Investment Group Holdings Inc (NYSE: BRDG) Down 7.59%

• WP Carey Inc (NYSE: WPC) Down 7.38%

• Retail Opportunity Investments Corp (NYSE ROIC) Down 6.25%

• Healthpeak Properties Inc (NYSE: PEAK) Down 3.84%

Prices as of 2/15 12:00 Noon

UPGRADES/DOWNGRADES

Equity Lifestyle Properties Inc (NYSE: ELS) February 9, Wolfe Research analyst Andrew Rosivach upgraded Equity Lifestyle Properties from Peer Perform to Outperform and announced a $75 price target.

WP Carey Inc (NYSE: SPG) February 12, Raymond James analyst RJ Milligan downgraded from Outperform to Market Perform. See article below:

ONE BIG THING

WP Carey: Kapow! Another Punch To The Jaw

What: WP Carey Inc: On February 9, WP Carey reported 4th Quarter 2023 earnings that missed analyst estimates on both AFFO and revenue.

How: WP Carey reported AFFO of $1.19 and revenue of $410.38 million. But the street was expecting $1.21 and $422.12 million. In addition, the AFFO was 6.7% below AFFO of $1.11 in the same period last year. The only positive in the report was that revenue was above $402.14 million in Q4 2022.

In addition, the forward guidance for full year 2024 AFFO of $4.65-$4.75, with a midpoint of $4.70 matched the estimates, but did little to inspire confidence of a bounce back. Shares of WPC fell 6.47% on the day following the release of earnings and guidance.

Recent News: Last September 21, WP Carey surprised Wall Street by announcing a strategic plan to sell 87 of its office assets and spin-off another 59 of them into a separate publicly-traded REIT, called Net Lease Office Properties (NYSE: NLOP). But what really shocked investors was WPC’s additional decision to cut its $1.07 quarterly dividend, especially since just one week earlier it had announced it was raising the $1.06 quarterly dividend to $1.07!

WP Carey had been a dividend stalwart for decades, continually raising the dividend each and every year since its IPO in 1998. There were no cuts nor suspensions of the dividend in all that time. From January 1998 to the day before the announcement, WPC had a total return of 512.28% for those who collect dividends and 1,484% return for those who reinvest dividends.

Fall Out: The announcement triggered a huge sell-off, with shares falling from just below $62 to a little over $50 within two weeks. But from there, WPC shares were able to creep back up to $67.40 by mid January. It was a nice gain for astute investors who bought the stock near the lows. In December, the dividend was reset to $0.86 per share and that removed much of the uncertainty about the dividend in investors’ minds.

But like a prize fighter who shakily gets to his feet after being knocked down, WPC just received another sock in the jaw from Wall Street. WPC shares were already pulling back from the January high, but the announcement last Friday sent shares tumbling back down to $57. By Tuesday, shares were trading below $55.00. WPC has fallen to the canvas floor again and who knows for how long? The only positive for investors is this new decline has once again pushed the dividend yield back over 6% for anyone wishing to pick up new shares.

Analysts Raise Price Targets: On January 8, Raymond James analyst RJ Milligan maintained an Outperform rating on WPC and raised the price target from $63 to $68. On January 11, RBC Capital analyst Brad Heffern also maintained an Outperform rating on WPC and raised the price target from $66 to $68. Unfortunately for investors, both of these price target hikes were announced right before the January 12 price peak. It was all downhill after that.

However, the day after WPC’s earnings were announced, analyst Milligan downgraded WPC from Outperform to Market Perform and RBC Capital analyst Heffern maintained WPC at Outperform but lowered the price target from $68 to $65. Sorry to say it was too late-the genie was already well out of the bottle.

KAPOW!

HOUSING NEWS BRIEF

Treasury Department To Require Real Estate Pros To Report Cash Sales

Who: In an effort to target and fight money laundering, the Treasury Department’s Financial Crimes Enforcement Network proposed a regulation this past week to require all real estate professionals to report information to the department about sales of residential real estate to legal entities, trusts and shell companies. The ruling affects Realtors, real estate attorneys and title and closing companies.

Gifts of real estate or non-value transactions would also need to be reported, but transfers due to death or divorce or to a bankruptcy estate would be exempted.

Why: The Treasury Department is concerned about money laundering via real estate purchases. It considers all-cash sales to be high-risk venues for money laundering. However, the regulation does not require the reporting of cash sales to individuals. The department states that this money laundering is contributing to inflated housing prices, making it more difficult for ordinary Americans to afford a home.

Takeaway: While eliminating or diminishing crimes such as money laundering is certainly positive, the timing of this regulation seems a bit political and could prove to be a burden to real estate professionals who are already feeling the brunt of slow sales and a challenge to their livelihood with the recent lawsuit against commission based sales. In fact, the number of Realtors declined in 2023 for the first time in a decade.

It also seems possible that those who are determined to launder money through real estate transactions could still find some loopholes. For example, they could take out mortgages with large cash down payments, perhaps as much as 50%, bypassing the requirement for Realtors to report the transaction. The mortgages could then be paid off soon after the closing to avoid interest payments. Sellers could be asked to pay some or all of the buyers’ closing costs as part of the transaction to reduce those expenses.

Many times, well-meant laws and regulations have unintended consequences that the proponents of the regulations haven’t considered in advance. If launderers are forced to take out mortgages, it could actually backfire on the intent of the regulation, because if shady operations don’t pay off these mortgages quickly they would have to buy twice as many residential properties as before to hide all of their cash. With limited inventories nationwide, this could inflate housing prices even further. 

ONE FOR THE ROAD

Guess What? Inflation’s Back

What: In the midst of all the speculation about how many rate cuts we’ll see in 2024, a red-hot inflation report lets all the air out of the hope balloons.

How: On February 13, the Bureau of Labor Statistics said the January Consumer Price Index (CPI) rose 0.3% from the previous month, with CPI up 3.1% on an annual basis. The street was expecting 0.2% and 2.9% on the annual. Core prices, excluding food and energy, were up 0.4% monthly and 3.9% year-over-year. in contrast to the expectations of 0.3% and 3.7% respectively.

Takeaway: Jerome Powell now looks like the smartest man on the planet for warning investors that strength in the economy amplifies the risk of prices inflating again and the FED won’t cut rates prematurely in case that happens. Premature rate cuts were the mistake the FED made back in 1986 when Fed Chairman Paul Volcker reduced rates about 2% and then the had to reverse course in 1987 when inflation escalated again.

So the result is a continuation of what we’ve seen since April 2022-”higher rates for longer” and share prices of REITs either declining or struggling to maintain their equilibrium. On Tuesday morning, with curtailed hopes for three rate cuts in 2024, there were only a handful of REITs out of approximately 185 that were in positive territory for the day. At one point on Tuesday, the Dow was down over 700 points and the S&P and Nasdaq were also heavy losers.

Regardless, portfolio manager Russ Koesterich of Blackrock Inc was still optimistic, saying on Bloomberg TV he still thinks the FED will cut rates in late spring or summer and that 3-4 cuts are likely.

Wall Street had survived another Saint Valentine’s Day massacre, albeit one day early.

PRESENTED BY GROUNDFLOOR

Is Fractional Real Estate Investing The Future Of Gen Z Portfolios?

At 20% of the U.S. population, Generation Z is beginning to reshape the world of finance, shifting away from traditional investments and toward alternatives like real estate, artwork and cryptocurrencies. 

This shift is primarily driven by their financial realities: living paycheck-to-paycheck and seeking financial independence rather than more traditional markers of wealth. 

Groundfloor is tapping into this trend by offering fractional real estate investments, aligning with Gen Z's preference for accessible, technology-driven options.

For more insights into Groundfloor’s role in advancing alternative investments, visit their website.

Plus, Benzinga readers earn a free $50 credit.