👋 Hello Everyone and Happy Friday. We’re back in your inbox before the long weekend with a slightly updated format that we’ll be perfecting this fall. Our goal is to make this the best darn REIT and real estate newsletter on the market, and that starts with thinking about how we deliver the content to you on a weekly basis.

We’re hoping you find the new layout both digestible, but also jam-packed with the information you need to know. It’s a balance: we don’t want this newsletter to take an hour to read, but we also don’t want to sacrifice relevant details. So, with that said, we are soliciting feedback. There’s a poll at the end of the newsletter where you’ll be able to let us know what you think.

For now, let’s dive in with a little macro overview of what happened this past week and then get to a few of the top stories that you need to know.

Bad news was good news this week on Wall Street as some weaker-than-expected economic reports buoyed investors’ hopes that future rate hikes might be unnecessary. ADP’s payroll number of added jobs this month was 177,000, well below the August estimate of 200,000 and July’s revised 371,000 number.

Gross domestic product growth of 2.1% was also revised from its previous forecast of 2.4%. The only thing predictable about Wall Street’s reaction to news is that often it will be unpredictable.

REITs finished the month of August with a flourish after spending the first three weeks in the doldrums. The Vanguard Real Estate Index Fund (NYSE: VNQ) had fallen victim to the “dog days of summer”, losing about 10% of its value before bottoming on August 21. But REITs refused to roll over or play dead, and since then, the VNQ has risen about 3.4%.

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WINNERS & LOSERS

📈 Biggest Winners This Week: Hotel, office and retail REITs were the best performers overall.

• Hersha Hospitality Trust Class A (NYSE: HT) Up 56.37%

• RPT Realty (NYSE: RPT), Up 18.85%

• Braemar Hotels & Resorts (NYSE: BHR) Up 17.95%

• Innovative Industrial Properties Inc (NYSE: IIPR) Up 15.46%

• NewLake Capital Partners Inc (OTCMKTS: NLCP) Up 14.36%

• Ashford Hospitality Trust, Inc. (NYSE: AHT) Up 13.85%

• Hudson Pacific Properties Inc (NYSE: HPP) Up 9.66%.  

📉 Biggest Losers This Week: Diversified and Specialty REITs were the weakest sub-sectors this week.

• Diversified Healthcare Trust (Nasdaq: DHC) Down 6.40%

• Peakstone Realty Trust (NYSE: PKST) Down 5.97%

• Apartment Investment and Management Co (NYSE: AIV) Down 1.40%

• Sun Communities Inc (NYSE: SUI) Down 0.71%.

Prices as of August 31, 12:00 Noon

ONE BIG THING

Merger Mania Hitting REITs

Briefly: 2 individual REITs in different sub-sectors were acquired by other companies this week, spurring huge gains in share price for the acquisition targets, as well as sizeable gains for other REITs within the sub-sectors.

Hotel M&A: On August 28, Hersha Hospitality Trust Class A (NYSE: HT) announced it will be merging with private equity fund, KSL Capital Partners, LLC.

• Terms: KSL Capital Partners will acquire all outstanding common shares of Hersha Hospitality for $10.00 per share in an all-cash transaction of $1.4 billion. This represents a 60% premium over Hersha Hospitality’s closing price on August 25.

Retail M&A: On August 28, Kimco Realty Corp (NYSE: KIM) announced it has signed a merger agreement to acquire RPT Realty (NYSE: RPT) for approximately $2 billion in an all-stock transaction, including the assumption of debt and preferred stock. This was a 19% premium to RPT’s closing share price on the previous day. RPT Realty shares jumped on the news.

• Terms: The price paid represents about $11.34 per share of RPT, based on Kimco’s closing price on August 25. RPT shareholders will receive 0.6049 shares of Kimco shares for each RPT share they own. The merger is expected to close in early 2024. Kimco now expects to add 56 open-air shopping centers to its pre-existing 528 properties.

Analyst Takes: On August 29, Barclays analyst Anthony Powell upgraded Hersha Hospitality from Underweight to Equal-Weight and raised the price target from $8 to $10. But on August 29, Jefferies analyst David Katz downgraded Hersha Hospitality from Buy to Hold.

• RPT Realty endured two analyst downgrades after the announcement of its acquisition by Kimco Realty. On August 29, Keybanc analyst Todd Thomas downgraded RPT Realty from Overweight to Sector Weight and Raymond James RJ Milligan downgraded RPT Realty from Outperform to Market Perform.

Big picture: Several of the hotel REITs soared after the Hersha Hospitality deal was announced. Likewise, retail REITs were mostly trading higher following the Kimco-RPT deal. Investors are likely speculating that further M&A activity could be forthcoming in these two REIT sub-sectors.

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REIT ROUND-UP

Medical Properties Trust Inc (NYSE: MPW) August 31, Mizuho analyst Vikram Malhotra downgraded Medical Properties Trust from Buy to Neutral and lowered the price target from $18 to $9.

Four Corners Property Trust Inc (NYSE: FCPT) August 30, announced it has acquired a three-property developer portfolio in Michigan for $5.2 million. The newly constructed properties will house an Aspen Dental, Starbucks and WellNow Urgent Care. The transaction generates a 6.9% cap rate on rent as of the closing date, exclusive of closing costs.

Highwoods Properties Inc (NYSE: HIW) August 30, Wells Fargo analyst Blaine Heck downgraded Highwoods Properties from Overweight to Equal-Weight and lowered the price target from $26 to $22.

UDR Inc (NYSE: UDR) August 28, Truist Securities analyst Michael Lewis upgraded UDR, Inc from Hold to Buy. August 30, Scotiabank analyst Nicholas Yulico upgraded UDR from Sector Perform to Sector Outperform and raised the price target from $44 to $45.

Medalist Diversified REIT Inc (NYSE: MDRR) Insiders have been purchasing large numbers of shares this week. CEO/Interim President Francis P. Kavanaugh purchased 37,200 shares of company stock at a price of $18.29. Director Emanuel D. Neuman purchased 2074 shares on August 25 at $5.2408 per share and another 2,752 shares on August 29 at $5.228 per share. This was a new position for Mr. Neuman.

Modiv Industrial (NYSE: MDV) August 25, Aaron Scott Halfacre purchased 243.9435 shares of common stock at $11.95 per share. Mr. Halfacre now owns 31,696.4462 shares of common stock.

Gaming and Leisure Properties Inc (Nasdaq: GLPI) August 29, announced it has acquired the land below The Hard Rock Casino in Rockford, IL from an affiliate of 815 Entertainment, LLC for $100 million. Gaming and Leisure Properties also entered into a ground lease with 815 Entertainment, LLC for a 99 year term, with an initial annual rent of $8.0 million and a 2.0% annual escalation starting a year from now. Gaming and Leisure Properties will also be providing up to $150 million of development funding in the form of a senior secured delayed draw term loan at a 10.0% interest rate.

ARMOUR Residential REIT, Inc (NYSE: ARR) August 29, announced after the closing bell it will be initiating a 1-For-5 reverse stock split as of September 29. The closing price before the split announcement was $5.07, and the stock price dropped to $4.90 afterwards.

Kimco Realty Corp (NYSE: KIM) August 24, Announced it has acquired Stonebridge at Potomac Town Center in Virginia for $172.5 million. Potomac Town Center is a grocery-anchored lifestyle center of 504,000 square feet that is 96% occupied.

Phillips Edison & Co Inc (Nasdaq PECO), August 30, announced it has acquired the Lake Pointe Market in Rowlett, TX. Lake Pointe Market is a 40,600 square foot grocery anchored shopping center and is 96.7% occupied. Phillips Edison also announced it plans to acquire $200 to $300 million in net acquisitions this year.

Upcoming Ex-Dividend Dates: American Assets Trust, Inc (NYSE: AAT) 9/6 $0.33; Kimco Realty Corp (NYSE: KIM) 9/6, $0.23; Simon Property Group Inc (NYSE: SPG) 9/7 $1.90; Uniti Group Inc (Nasdaq: UNIT) 9/7, $0.15.

ONE FOR THE ROAD

Eastgroup: Dividend Stalwart Hikes Divvy Again

What Happened: On August 25, Eastgroup Properties Inc (NYSE: EGP) announced an increase to its next quarterly dividend, from $1.25 to $1.27 per share. The dividend will be payable October 13 to shareholders of record at the close of business on September 29. The ex-dividend date is September 28.

• Eastgroup Properties is a Ridgeland, MS industrial REIT with 57.6 million square feet of business distribution buildings comprising offices and warehouses. and is a member of the S&P Mid-Cap 400 and the Russell 1000 Index.

Why It Matters: Eastgroup Properties isn’t a “Dividend Aristocrat” by definition (25 consecutive years of dividend increases), but in 28 of the last 31 years, including the last 12 years in a row, it’s raised the dividend. This will also be the 175th consecutive quarterly cash distribution paid to Eastgroup shareholders. The $5.08 annualized dividend now yields 2.08%.

Final Remarks: In addition to providing consistent dividend checks, Eastgroup Properties is one of the best-performing REITs of 2023 with a total return of 24.01%. That’s quite impressive.

PRESENTED BY ARRIVED HOMES

You've Arrived

The fractional real estate platform, Arrived Homes, launched new offerings for rental homes this week. Fractional real estate makes it feasible for individual investors without the funds to buy entire properties to add real estate to their portfolios.

Investing in real estate typically has a high financial barrier, making it difficult for average investors to take part. Those days are gone. Click here to learn more, because you've arrived.