🪵 Timber!

Plus, short on money for a home? NACA makes it affordable.

Ethan Roberts
February 09, 2024

Happy Friday! Up until this week, markets were emulating Charles Dickens — whose birthday was on February 7th — with “Great Expectations” for a March FED interest rate cut. Well, you can cross that one off after FED chairman Jerome Powell was interviewed on CBS’ “60 Minutes” and dashed hopes again for the FED to cut rates next month. That was not good news for interest-sensitive REITs, which sold off hard on Monday. By the end of the week, very few REITs were in the green. REIT On!

In Today’s Edition: A Timberlands REIT crushes analyst estimates, major help for those unable to afford a home, and mall fever shuts down recession talk.

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REIT ROUNDUP:

Macerich Co (NYSE: MAC) February 5, announced the appointment of Jackson Hsieh to become President/CEO on March 1, following the retirement after 30 years of service of President/CEO, Thomas O’Hern. Mr. Hsieh was the former President/CEO of Spirit Realty Capital and was instrumental in securing the merger with Realty Income Corp (NYSE: O) in 2023.

Gaming And Leisure Properties Inc (Nasdaq: GLPI) February 6, announced it has acquired the real estate assets of the 162 acre Tioga Downs Casino Resort in Nichols, NY from American Racing & Entertainment, LLC for $175 million. Simultaneously, the two companies entered into a triple-net master lease agreement for a 30-year term.

Realty Income Corp (NYSE: O) February 7, announced a sale-leaseback transaction of 527 million Euros ($567.19 million USD) for 82 retail properties in five European countries leased to affiliates of sporting goods retailer Decathlon SE.

Dividend News:

Rexford Industrial Realty Inc (NYSE: REXR) February 5, announced a 9.8% increase in its quarterly dividend from $0.38 to $0.4175 per share. The dividend is payable on April 15 to Rexford stockholders as of March 28.

KKR Real Estate Finance Trust Inc (NYSE: KREF) February 6, announced a 41.9% decrease in its quarterly dividend from $0.43 to $0.25. The dividend is payable April 15 for shareholders of record March 28. The ex-dividend date is March 27.

Equity Lifestyle Properties Inc (NYSE: ELS) February 6, announced a 6.7% increase in its quarterly dividend from $0.4475 to $0.4775, payable April 12 to shareholders of record March 28, with the ex-dividend date on March 27.

First Industrial Realty Trust Inc (NYSE: FR) February 7, announced an increase to its quarterly dividend of 15.6%, from $0.32 to $0.37 per share. The dividend is payable on April 15 for shareholders as of March 28 and the ex-dividend date is March 27.

American Assets Trust, Inc (NYSE AAT) February 7, announced an increase in its quarterly dividend from $0.33 to $0.335, payable March 21 for shareholders of record on March 7. Ex-dividend date is March 6.

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: Only about 15% of all REITs were winners

Macerich Co (NYSE: MAC) Up 6.58%
Medalist Diversified REIT Inc (Nasdaq: MDRR) Up 4.23%
JBG SMITH Properties (NYSE: JBGS) Up 3.79%
Highwoods Properties Inc (NYSE: HIW) Up 3.53%
Simon Property Group Inc (NYSE: SPG) Up 2.78%
Terreno Realty Corporation (NYSE: TRNO) Up 2.39%

📉 Biggest Losers This Week: A bad week for mortgage and some office REITs

KKR Real Estate Finance Trust (NYSE: KKR) Down 20.91%
Great Ajax Corp (NYSE: AJX) Down 20.27%
Claros Mortgage Trust (NYSE CMTG) Down 14.30%
TPG RE Finance Trust Inc (NYSE: TRTX) Down 14.03%
Arbor Realty Trust (NYSE: ABR) Down 11.19%
Diversified Healthcare Trust (Nasdaq: DHC) Down 9.97%
City Office REIT Inc (NYSE: CIO) Down 9.73%

Prices as of February 8, 12:00 PM

UPGRADES/DOWNGRADES:

Rexford Industrial Realty: February 7, JP Morgan analyst Michael Mueller downgraded Rexford Industrial Realty from Overweight to Neutral and announced a $55 price target.

ONE BIG THING

Timber Falling GIF by ANTIQUES ROADSHOW | PBS

“Tim-ber!”: One Specialty REIT Crushes Earnings This Week

What: The initial earnings reports of several REITs were worrisome until Rayonier posted Q4 earnings that blasted estimates and stood out from its peers.

Who: Rayonier Inc (NYSE: RYN) is a Yulee, FL-based specialty REIT that invests in timberland in the U.S. and New Zealand. Rayonier owns long-term agreements on 2.7 million acres of timberland. It has a Market Cap of $4.81 billion and a 52-week range of $24.84- $36.18. Rayonier was established in 1926.

How: On January 31, after the bell, Rayonier reported fourth-quarter operating results. Adjusted FFO of $0.17 beat the estimates of $0.15 and was 54.55% better than last year’s same-quarter FFO of $0.11. Revenue of $467.40 million beat the estimates of $229.75 million by over 103%! It was also a 90.46% increase over revenue of $245.40 million in the same period a year ago.

In the first few weeks, investors saw tepid Q4 earnings out of REITs such as Prologis Inc (NYSE: PLD), misses on estimates and guidance from Brandywine Realty Trust (NYSE: BDN), and decent earnings but disappointing forward guidance from Boston Properties, Inc. (NYSE: BXP). So it was refreshing to see a REIT not only beat analyst estimates on FFO and revenue, but also crush its own earnings report from a year ago. Congratulations to CEO David L. Nunes and the rest of the team at Rayonier for a job well done.

Recent News: On December 18, Rayonier announced a one-time special cash dividend of $0.20 per common share, payable January 12, 2024, to shareholders of record on December 29, 2023. The special dividend was the result of the disposition of 55,000 acres of timberland in Oregon in Q4 2023, and was paid in January along with Rayonier’s regular quarterly dividend of $0.29 per share. The annual dividend of $1.16 presently yields 3.56%.

Analysts’ View: On February 2, RBC Capital analyst Matthew McKellar maintained a Sector Perform rating on Rayonier and raised the price target from $34 to $35. On January 4, Truist Securities analyst Michael Roxland maintained Rayonier with a Hold and raised the price target from $33 to $34.

Takeaway: REITs that not only beat estimates but improve year-over-year are the ones that investors should gravitate towards. Rayonier, which closed at $30.30 prior to the release of its report, rose 10% over the next five days, touching $33.32 on Monday, before pulling back to $32.83 by Thursday.

HOUSING NEWS BRIEF

Short on Money For A Home? NACA Makes it Affordable!

Who: The non-profit Neighborhood Assistance Corporation of America (NACA) has a “Home Purchase” program that provides assistance for long-term affordable homeownership with individuals who would otherwise not be able to afford to buy a home.

What: NACA provides mortgages to qualified homeowners with no down payment, no closing costs, no Private Mortgage Insurance (PMI), no fees and fixed rate 30, 20 and 15-year mortgages well below present market rates. This saves people thousands of dollars. The interest rate can also be bought down and NACA’s underwriting approach does not require a certain credit score. In fact, everyone pays the same interest rate, regardless of credit score.

However, to qualify, prospective homebuyers must undergo comprehensive financial counseling and full documentation to ascertain if they are ready for homeownership. If so, NACA works with local Realtors to help people through all stages of the home buying process. The sale transaction is closed right in the NACA office.

NACA’s main headquarters is in Boston, MA, but it has 47 offices nationwide. Over the past 30 years, it has provided 75,000 mortgages with $20 billion in loan commitments. While the national average 30-year fixed mortgage is presently 6.96% (Bankrate.com, week ending February 2), NACA’s present mortgage rates for low-to-moderate income members are 5.75%, 5.25% and 5.375% for 30, 20 and 15-year terms respectively.

Present homeowners who are having difficulty paying their pre-existing mortgage can also receive assistance through NACA’s “Home Save” program. They work with homeowners to provide mortgage modification that can change the interest rate or term of the current loan and advocacy to help homeowners negotiate with their lender if necessary. NACA has modified approximately 300,000 mortgages over the years. Mortgage modification is not a refinance because it does not replace the current mortgage with a new one, only changes the terms or interest rate.

Why: NACA’s mission is to provide assistance to those who cannot afford the traditional loan path for buying a home. They seek to help the “underserved” achieve the American dream of owning a home. More than 15,000 people begin the NACA process each month, and NACA’s foreclosure rate on its mortgages is well below 1%.

Takeaway: If you or someone you know has been unable to afford a home, you can contact a NACA representative by calling (425) 602-6222, or you can go to naca.com to find a NACA office near you.

ONE FOR THE ROAD

Simon Property Group Shuts Down Recession Talk With Blowout Quarter

What: Simon Property Group Inc (NYSE: SPG) made recession fears look silly on February 6, when it posted strong fourth quarter earnings and raised its quarterly dividend as well.

Who: Simon Property Group is an Indianapolis-based retail REIT that owns and leases over 250 properties, consisting of shopping malls, restaurants, outlet centers and entertainment venues. It has locations in the top 25 population markets across the United States. Simon Property Group was founded in 1960 and launched its IPO in 1993. Its occupancy rate for its U.S. malls and premium outlets at the end of Q4 2023 was 95.8%, up from 94.9% in Q4 2022.

How: Simon Property Group reported fourth quarter funds from operations (FFO) of $3.69, handily beating the estimates of $3.34 and FFO from a year ago of $3.40. Revenue of $1.53 billion beat the analyst estimate of $1.36 billion by 12.38% and was a 9.07% increase over revenue of $1.40 year-over-year. Note that analysts expected revenue to be lower than it was a year ago, but Simon dispelled that idea.

And while Simon’s full year 2024 FFO guidance range of $11.85-$12.10 was below 2023 full year guidance of $12.14-$12.22, the street was far more forgiving than they were for Boston Properties (NYSE: BXP), who beat estimates yet missed them on forward guidance.

In addition, Simon raised its quarterly dividend from $1.90 per share to $1.95 per share. It’s the third raise over the last year. One year ago, the quarterly dividend was $1.80 per share.

Increases in lease income by 5.9% y-o-y and management fees/other revenues by 5.1% y-o-y accounted for the positive results. Simon’s malls and premium outlets have also seen occupancy levels rise from 94.9% to 95.8% over the past year.

Simon Property soared on the news, up over 6.7% in the morning. By Thursday, noon, shares were still trading 4.5% higher.

Takeaway: So how can you have a recession when the malls are jammed with shoppers, tenant occupancy is rising, revenue is up and the management keeps raising dividends? Granted, the dividend is still less than the $2.10 it was pre-COVID, but when 2020 began, Simon’s share price was also about $12 higher than today. For now, Simon’s earnings are a double-edged sword, because while they show a stronger economy, they also give the FED more fodder to keep interest rate cuts out of the picture for longer.

Remember when all the talk was how Amazon was going to destroy the local malls? Oops. No wonder you can never find parking near the stores!