Happy Friday! After a lackluster day on Friday, a stronger-than-expected retail report and the Iran-Israeli conflict over the weekend gave stocks a jolt on Monday. The retail report came in up 0.7% for March, 0.4% higher than the street’s expectation and that sent the 10-year T Bill up to 4.632%, its highest price since last November. Predictably, REITs sold off, with most down 1% or more.

As if that wasn’t enough, Jerome Powell threw gasoline on the fire on Tuesday. Referring to inflation returning to the FED’s goal, “The recent data have clearly not given us greater confidence, and instead indicate that it’s likely to take longer than expected to achieve that confidence.”

That sent the 10-year treasury up to 4.66%, and the 2-year briefly jumped over 5%. By Thursday morning, markets were still skittish, and although REITs were recovering, it was difficult to find many that were positive over the full week.

REIT ON FOR MORE!

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.

REIT ROUNDUP:

Four Corners Property Trust Inc (NYSE: FCPT) April 11, announced it has acquired Banfield Pet Hospital in Clive, Iowa for $2.4 million. The property has a long-term net lease tenant with 10 years of term remaining at a 7.3% cap rate.

Brixmor Property Group Inc (NYSE: BRX) April 11, announced that James M. Taylor Jr., the CEO and President of Brixmor Property Group, is taking a temporary medical leave of absence, effective immediately. Senior Executive VP and COO, Brian T. Finnegan, has been appointed by the Board to serve as interim CEO/President until Mr. Taylor returns.

Global Net Lease Inc (NYSE: GNL) April 15, announced it has appointed Edward M. Weil as the President of the company, effective immediately. Mr. Weil took over on March 31 for President/Co-CEO, James L. Nelson.

Equinix Inc (Nasdaq: EQIX) April 15, announced it has formed a $600 million joint venture with PGIM Real Estate to develop and operate the first xCale data center in the U.S. The center will be located in the Silicon Valley region of California. Equinix will own a 20% equity interest in the property.

DiamondRock Hospitality Co (NYSE: DRH) April 15, announced the appointment of Jeffrey Donnelly as CEO, Briony Quinn as CFO and Justin Leonard as President. Mr. Donnelly was previously the Executive VP and CFO and replaces Mark Brugger, who is leaving after 20 years of service.

Terreno Realty Corp (NYSE: TRNO) April 16, announced it has acquired a 357,000 square-foot industrial property on 1.9 acres in Alexandria, VA for $84.3 million. The property is 100% leased to 21 long-term tenants with a cap rate of 5.3%.

Easterly Government Properties Inc (NYSE: DEA) April 16, announced it has acquired a 135,200 square-foot commercial property primarily leased to the Office of the Chief Information Officer (OCIO) and Office of Human Capital of the U.S. Immigration and Customs Enforcement (ICE), near Dallas, TX.

WINNERS & LOSERS

📈 Biggest Winners This Week: Very few high percentage winners this week……

• Medical Properties Trust Inc (NYSE: MPW) Up 20.05%

• National Health Investors Inc (NYSE: NHI) Up 2.26%

• Centerspace (NYSE: CSR) Up 2.19%

• Claros Mortgage Trust Inc (NYSE: CMTG) Up 1.35%

• Kite Realty Group Trust (NYSE: KRG) Up 1.24%

• Equity LifeStyle Properties Inc (NYSE: ELS) Up 1.49%

📉 Biggest Losers This Week: Industrial and office REITs were hit hard

• Clipper Realty Inc (NYSE: CLPR) Down 14,51%

• Prologis, Inc (NYSE: PLD) Down 12.85%

• Peakstone Realty Trust (NYSE: PKST) Down 12.68%

• Great Ajax Corp (NYSE: AJX) Down 11.23%

• Rexford Industrial Realty Inc (NYSE: REXR) Down 10.97%

• Terreno Realty Corporation (NYSE: TRNO) Down 10.44%

• First Industrial Realty Trust Inc (NYSE: FR) Down 9.64%

Prices as of April 18th at noon

Upgrades:

Franklin BSP Realty Trust Inc (NYSE: FBRT) April 12, Raymond James analyst Stephen Laws upgraded Franklin BSP Realty Trust from Outperform to Strong Buy and maintained the price target at $15.

Medical Properties Trust Inc (NYSE: MPW) April 17, Deutsche Bank analyst Omotayo Okusanya upgraded Medical Properties Trust from Sell to Hold and raised the price target from $2 to $5.

Kite Realty Group Trust (NYSE: KRG) April 18. Jefferies analyst Linda Tsai upgraded Kite Realty Group from Hold to Buy and maintained the price target at $23.

SL Green Realty Corp (NYSE: SLG) April 18, BMO Capital analyst John Kim upgraded SL Green Realty from Market Perform to Outperform and raised the price target from $56 to $58.

….and Downgrades:

TPG RE Finance Trust Inc (NYSE: TRTX) April 12, Raymond James analyst Stephen Laws upgraded Franklin BSP Realty Trust from Strong Buy to Outperform and maintained the price target at $8.50.

Clipper Realty Inc (NYSE: CLPR) April 12, Raymond James analyst Buck Horne downgraded Clipper Realty from Outperform to Underperform.

Notable Earnings:

The following table shows the earnings and revenue of the first half dozen REITs to report first-quarter operating results this week. See “One For The Road” for the expanded story on Prologis’ earnings:

ONE BIG THING

Medical Properties Dumps A Chunk of Steward: Shares Soar! Has MPW Turned The Corner?

What: Medical Properties Trust Inc (NYSE: MPW) jumped 18.80% on Monday, April 15, following its announcement after the closing bell on April 12 that it sold its majority interest in five Utah hospitals to an unnamed investment fund.

Who: Medical Properties Trust is a Birmingham, AL-based healthcare REIT that owns and operates 434 general acute care and other properties across the U.S. and nine other countries, with locations in Europe and Australia. Its total portfolio before the sale was $18.3 billion, with about two-thirds of those general acute care hospitals in the U.S.

How: The sale was to a new joint venture, with the investment fund buying 75% of the portfolio for $886 million and MPW retaining a 25% interest in the venture.

Simultaneous with the closing, the venture placed new non-recourse secured financing, providing $190 million of additional cash to MPW. The total of the two transactions gives MPW approximately $1.1 billion in cash to be used to reduce outstanding debt, including a $300 million Australian term loan that comes due this year.

Takeaway: Now you may be saying, “Yeah, yeah, we’ve seen this movie before.” Well, true, MPW did climb about 35% in February before pulling back again from $4.83 to $3.94. But on Monday, MPW reached $5.25 before retreating to close at $4.74, up 18.80% for the day. On Thursday morning, it touched $4.95.

But after a miserable 2023 in which earnings declined, the dividend was slashed by 48%, and the share price dropped about 50%, it’s refreshing to see some good news and a huge gain, especially on a day when the market was down substantially.

These weren’t just any five hospitals- they were five operated by financially troubled Steward Health Care System hospitals. As of February, Steward owed $50 million in rent to MPW and had $4 million in liens with other contractors. The sticky financial relationship between Medical Properties and Steward has been well documented over the last two years, and investors cheered the news that MPW is at least trying to partially extricate itself from that relationship.

Has MPW finally turned the corner? It’s very possible. More upside for investors may be ahead, though, as usual, it may be a long, volatile ride.

When Closed Is Not Closed: Appeals Court Allows The DOJ TO Re-open Its NAR Anti-Trust Investigation

What: On April 5, a Federal Appeals Court in Washington, D.C. ruled that the Department of Justice (DOJ) can reopen an investigation into the National Association of Realtors (NAR) that had been closed in 2020 after the DOJ and NAR settled the case.

The November 2020 agreement defined rules to clarify Multiple Listing Service (MLS) policies regarding providing information about commissions and MLS participation.

The court stated that the government had not committed to refrain from either opening a new investigation or reopening its closed investigation in the previous settlement.

The DOJ moved to reopen the case in 2021, citing a “continuing threat of anticompetitive effects of NAR’s rules.”

DOJ antitrust chief, Jonathan Kanter said the DOJ will probe how potentially unlawful conduct by NAR could be contributing to high U.S. real estate commissions.

Who: NAR is quite angry and responded to this ruling by saying, “The government should be held to the terms of its contracts.” NAR also said it’s evaluating its next steps.

Judge Pan of the Court of Appeals wrote, “The fact that DOJ closed its investigation does not guarantee that the investigation would stay closed forever.” Pan added, “We discern no commitment by DOJ-express or implied- to refrain from either opening a new investigation or reopening its closed investigation, which might entail issuing new CIDs (Civil Investigative Demand) related to NAR’s policies.”

So, did the DOJ have its fingers crossed behind its back when it signed off on closing its investigation? Should NAR have made them do the “pinky swear”?

Takeaway: As a result of this ruling, the DOJ is now free to re-open its investigation. But will it do so? It seems like the DOJ is on a mission to destroy the housing industry via its number one trade association. Perhaps the recent NAR-DOJ $418 million settlement did not do enough to satisfy the government’s desire to see housing prices come down.

The $418 million settlement between NAR and the Plaintiffs still awaits court approval. The settlement disallows split commissions between listing and buyer agents on the Multiple Listing Service, but it does not bar those splits from taking place between parties in private communications. The DOJ feels this still leaves open the possibility of collusion, although both seller and buyer have to agree on the terms. The DOJ will push for a complete separation of compensation for the buyer’s agent and the seller’s agent.

Has the Government, in its zeal to lower home prices and supposedly help homebuyers, considered the increased difficulty that buyers will face in coming up with agent fees on top of the down payment and closing costs on $400,000 median home prices nationwide?

It would not appear so.

ONE FOR THE ROAD

Prologis: Revised Guidance Leaves Wall Street Holding Its Nose

Who: Prologis Inc (NYSE: PLD) is a San Francisco, CA-based industrial REIT that owns/manages approximately 1.2 billion square feet in 5618 industrial logistics properties throughout the U.S. and 18 other countries. Prologis leases space and also supplies equipment, robotics and other services to its customers.

Founded in 1983, Prologis is the largest REIT with a Market Cap of $98.508 billion and has been a REIT stalwart for the last 26 years. It’s long been a leader in appreciation, with a 657.45% total return since January 2000.

What: Prologis was the first REIT to declare first-quarter 2024 operating results, and they were, well… problematic. Core FFO of $1.28 per share met the consensus estimate and was better than Prologis’ Q1 2023 FFO of $1.22 per share. Revenue of $1.828 billion missed the consensus estimate of $1.865 billion but topped Q1 2023 revenue of $1.634 billion.

Not so bad, right?

Why: But often a negative revision of full-year guidance irritates Wall Street enough to dump a stock. Unfortunately for Prologis investors, that’s what happened this time. Prologis reduced its Full=Year Core FFO from $5.50-$5.64 to $5.45-$5.55 per share. Occupancy guidance of 96.50%-97.50% was reduced to 95.75%-96.75%.

Wall Street was already in a sour mood this week from stronger-than-expected economic reports and Jerome Powell’s admission that inflation is not coming near the FED’s 2% target rate. Investors were not happy to see Prologis’ guidance numbers declining and they reacted. The result? Shares fell more than 7% on Wednesday, closing at $106.49.

About an hour after the announcement, Barclays analyst Brendan Lynch maintained Prologis at Overweight but lowered the price target from $141 to $135. Prologis shares are now at levels not seen since mid-November.

Takeaway: Prologis has now declined from $134 to $105 per share within the past month. The good news for REIT investors is that the Prologis report was not necessarily a harbinger of things to come for the REIT world. After Wednesday’s closing bell, both SL Green Realty Corp (NYSE: SLG) and Rexford Industrial Realty Inc (NYSE: REXR) upped their full-year 2024 guidance.

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.