Happy Friday! It was a tough week for stocks, with Thursday’s Personal Consumer Expenditure Reading, the preferred inflation measure of the FED, on traders’ minds. The reading came in as economists expected, with 0.3% monthly and 2.4% y-o-y gains on the Headline PCE. Excluding food and energy, it was up 0.4% and 2.8% from a year ago. Market indices rose on the news to reverse some of the previous losses on the week. REITs benefited from the moderate inflation news as well. Let’s dive into this week’s edition.

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:

Americold Realty Trust Inc (NYSE: COLD) February 22, announced it is investing $127 million in a new 335,000 square foot facility in Kansas City, MO with a strategic collaboration with Canadian Pacific Kansas City Ltd (NYSE: CP) to co-locate Americold warehouses on the Canadian Pacific network.

AFC Gamma, Inc. (NYSE: AFCG) February 22, announced its Board of Directors has approved a plan to spin-off its commercial real estate portfolio into a new REIT called Sunrise Realty Trust, Inc. AFCG is a specialty REIT that originates and invests in senior secured loans and other loans for established cannabis-based industries in states where medical and/or adult use cannabis is legal.

Equinix Inc (Nasdaq: EQIX) February 23, announced a plan to invest $390 million in Africa over the next five years to create new data centers and to expand its current operations in South Africa and the western portion of the continent. February 27, announced the appointment of Merrie Williamson as Executive VP and Chief Customer and Revenue Officer, effective March 25. Ms. Williamson’s previous experience was in product development at Microsoft and Intel.

U-haul Holding Co (NYSE: UHAL) February 23, announced plans for new self-storage centers in Lawrenceville, GA. and Urbandale IA, to be completed in 2025 and 2026 respectively.

Regency Centers Corp (Nasdaq: REG) February 23, announced it has acquired land in Central Connecticut to develop Cheshire Crossing, a 152,000 square foot shopping center with a Whole Foods Market as an anchor store.

Kite Realty Group Trust (NYSE: KRG) February 26, announced that Moody’s Investor Service has upgraded Kite’s corporate credit rating from Baa3 to Baa2 and maintained a stable rating outlook.

CTO Realty Growth Inc/ Alpine Income Property Trust Inc (NYSE: PINE) February 28, announced the resignation of Matthew M. Partridge, Senior VP, CFO and Treasurer, effective April 1, 2024, to pursue another opportunity.

DIVIDEND NEWS

Essex Property Trust Inc (NYSE: ESS) February 22, announced its Board of Directors has approved a 6.1% increase in its annual cash dividend, the 30th consecutive annual dividend increase. First quarter’s dividend of $2.45 per share is payable April 12 to shareholders of record as of March 29.

Prologis Inc (NYSE PLD) February 22, announced a 10% increase in its annualized dividend to $3.84 per share. First quarter dividend of $0.96 per share is payable on March 29 to shareholders of record at the close of business on March 18.

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: Hotel, Healthcare, and Specialty REITs

• Xenia Hotels & Resorts Inc (NYSE XHR) Up 14.94%

• Medical Properties Trust Inc (NYSE: MPW) Up 14.36%

• Diversified Healthcare Trust (Nasdaq: DHC) Up 10.54%

• Iron Mountain Inc (NYSE: IRM) Up 9.43%

• Innovative Industrial Properties Inc (NYSE: IIPR) Up 8.49%

• American Homes 4 Rent Class A (NYSE: AMH) Up 6.56%

• American Tower Corp (NYSE: AMT) Up 5.71%

📉 Biggest Losers This Week: Office and Mortgage REITs

• Orion Office REIT Inc (NYSE: ONL) Down 20.36%

• Great Ajax Corp (NYSE: AJX) Down 17.44%

• Office Properties Income Trust (Nasdaq: OPI) Down 14.47%

• Americold Realty Trust (NYSE: COLD) Down 10.39%

• Service Properties Trust (Nasdaq: SVC) Down 9.53%

• Ellington Financial Corp (NYSE: EFC) Down 7.78%

Prices as of 2/29 12:00 Noon

Upgrades:

National Health Investors Inc (NYSE: NHI) February 26, Wedbush analyst Richard Anderson upgraded National Health Investors from Neutral to Outperform and raised the price target from $57 to $64. Also on the same day, Wells Fargo analyst Connor Siversky upgraded National Health Investors from Equal-Weight to Overweight and raised the price target from $55 to $63.

Omega Healthcare Investors Inc (NYSE: OHI) February 26, Wells Fargo analyst Conor Siversky also upgraded Omega Healthcare from Equal-Weight to Overweight and raised the price target from $31 to $35.

AvalonBay Communities Inc (NYSE: AVB) February 26, Morgan Stanley analyst Adam Kramer upgraded AvalonBay Communities from Equal-Weight to overweight and raised the price target from $175 to $191.50.

Essex Property Trust Inc: February 26, Mizuho analyst Vikram Malhorta upgraded Essex Property Trust from Neutral to Buy but lowered the price target from $255 to $250.

Xenia Hotels & Resorts (NYSE: XHR) February 29, Jefferies analyst David Katz upgraded Xenia Hotels from Hold to Buy and raised the price target from $14 to $18.

Americold Realty Trust (NYSE: COLD) February 29, Raymond James analyst William Crow upgraded Americold Realty Trust from Market Perform to Outperform, while maintaining the price target at $31.

Federal Realty Investment Trust (NYSE: FRT) February 29, Wells Fargo analyst Dori Kesten upgraded Federal Realty Investment from Equal-Weight to Overweight and raised the price target from $110 to $112.

… and Downgrades:

Ventas Inc (NYSE: VTR) February 26, Wells Fargo analyst Connor Siversky downgraded Ventas from Overweight to Equal-Weight and announced a $46 price target.

Apartment Income REIT Corp (NYSE: AIRC) February 28, Mizuho analyst Vikram Malhotra downgraded Apartment Income REIT from Buy to Neutral and lowered the price target from $37 to $31.

ONE BIG THING

American Homes 4 Rent Caps Off A Glorious Week

What: On February 26, American Homes 4 Rent Class A (NYSE: AMH) capped off a whirlwind week when it announced that prior to the opening of trading on March 1, it will be joining the S&P MidCap 400, replacing Physicians Realty Trust (NYSE: DOC), which is being acquired by Healthpeak Properties Inc (NYSE: PEAK).

Who: American Homes 4 Rent is a Calabasas, CA based residential REIT that purchases, develops, renovates and leases used and new single-family homes. In less than 12 years since its founding, American Homes has built a portfolio of over 59,000 single-family rentals across 21 states. Its largest concentration of homes is in fast-growing areas of the Southeastern U.S.

More Great News: Over the last 9 days, American Homes has achieved the following:

• February 21: American Homes announces an 18% increase in its quarterly dividend, from $0.22 per share to $0.26 per share, payable March 28 to shareholders of record on March 15.

• February 22: American Homes reports Q4 FFO of $0.43 per share, beating the estimate of $0.42 per share and Q4 2022 FFO of $0.40 per share. Revenue of $408.66 million beats the estimate of $407.35 million and tops Q4 2022 revenue of $380.93 million.

• February 22: American Homes announces that it has already named a successor for retiring CEO David Singelyn. Bryan Smith, American Homes’ Chief Operating Officer, will take over as CEO after December 31 and Mr. Singelyn, who has been the CEO since American Homes 2012 inception, will remain as an advisor through June 2025.

• February 26: RBC Capital analyst Brad Heffern reiterates an Outperform rating on American Homes and maintains a $39 price target.

• February 26: American Homes announced that CEO Dallas Tanner will participate in a roundtable discussion at Citi’s 2024 Global Property CEO conference on March 4.

Takeaway: American Homes’ share price, which touched a three-month low of $33.75 on February 13, has since rebounded and was trading near $37 on Thursday morning.

By joining the S&P MidCap 400, shares will be accumulated by at least seven different ETF’s that track that index. Since ETF’s have to accumulate shares slowly to keep the price from skyrocketing, It’s likely there will be substantial buying of the shares over the next few months to support the price.

HOUSING NEWS BRIEF

10 States With The Lowest Home Prices

What: The Midwest and certain Southern states have the most affordable homes in the U.S.

Who: Those who feel totally discouraged in 2024 that they can never afford a home should consider moving to one of the states in the South or Midwest where homes are the most affordable in the U.S.

Why: According to a new survey by Bankrate.com, over half of prospective homeowners say living costs are too high or their incomes are too low to come up with a down payment and closing costs with home prices near record levels. Mortgage rates, which fell into the 6% range about a month ago are back up again. The national average for a 30-year fixed rate mortgage this week is 7.36% APR.

Yet, today, with so many people working from home, it’s easier than it was before COVID transformed everything to move to a more affordable location without having to give up a good job.

Many people with higher-paying jobs still can’t afford to buy a home in expensive states like Hawaii, California, New York, Washington, and Massachusetts. But there are many parts of the country where prices are far lower, as you can see from the table below:

Where: According to Homebuyer.com, the following 10 states have the lowest median home prices in the U.S:

For those who cannot work from home and would have to find new jobs, the five states with the best ratio of Median Household Income to Median Home Price are West Virginia, Oklahoma, Michigan, Arkansas, and Alabama. Only Michigan didn’t make both lists, but it was actually the 11th lowest state for home prices.

Problems: Yes, moving costs money and it’s difficult leaving family and friends behind. Still, the pioneers blazed the trail in the 1800’s and Americans have been on the move ever since, in search of the best opportunities in life. But Planes, trains and automobiles, along with video calls, texting and e-mails provide advantages that the pioneers never had, to communicate and visit with loved ones.

Takeaway: Achieving one’s goals in life sometimes necessitates making sacrifices. The dilemma today for many Americans is they can’t afford to buy a home where they live and work. Renting an apartment or home is no longer a cheap alternative and the money spent each month on expensive rent prevents one from saving enough for a down payment and closing costs. The tough question for those locked out of the housing market is- how long will they allow themselves to be stuck in that quagmire before they try something else?  

ONE FOR THE ROAD

When You Beat The Estimates But Fall Short On Full Year Guidance

Who: Ventas Inc (NYSE: VTR), AvalonBay Communities Inc (NYSE: AVB) and several other REITs as of late.

What: Many REITs are beating the street estimates on fourth-quarter FFO and revenue, but falling short of estimates on Full Year (FY) FFO Guidance. What could be more frustrating for an investor than to see his stock beat the analyst estimates and maybe even top the numbers from the year-ago quarter, only to see the stock fall in price because the forward guidance comes in soft against the analyst consensus estimate. It’s like a football team that moves from its own 20-yard line to the opponent’s two-yard line, only to see the drive pushed back to the ten yard line-and then throw a game losing interception!

Why: Inexperienced investors don’t always realize that Wall Street always looks ahead and buys or sells stock on the basis of what they believe will happen months down the road. Wall Street really wants to know what the company will do for them going forward, not just what they did in the three months that make up the last quarterly report.

Recent Examples: On February 14, Ventas reported FFO of $0.76 per share that beat the estimates by a penny and was three cents better than the year ago same quarter. Revenue of $1.16 billion was ahead of estimates for $1.15 billion and topped revenue of $1.05 billion in Q4 2022. But FY 2024 FFO guidance of $3.07-$3.18 per share was well below the estimate of $3.21 per share. Before the earnings, Ventas was trading at $45.61. Two weeks later, it was trading between $42.13 and $43.02. The Wells Fargo downgrade cited above didn’t help either.

After the bell on January 31, AvalonBay Communities reported FFO of $2.74, which met the analyst consensus estimate. Revenue of $702.70 million beat the estimates of $700.16 million and also topped Q4 2022 revenue of $666.39 million. So far so good, right?

Unfortunately, FY 2024 guidance of FFO, in a range from $10.53-$11.03, with a midpoint of $10.78 was well short of the street’s estimate of $11.01. Shares dropped from $179.01 to $172.31 the next day on the open. After some up and down gyrations, a few days later AvalonBay closed at $169.99.

Takeaway: Buying individual stocks takes some intestinal fortitude at times. That’s why so many advisors say that long-term investing usually beats trading in and out of stocks. Falling short on guidance isn’t a death knell for a stock. They often bounce back in a few weeks. And if they don’t, there’s always the possibility of an upside surprise in the next quarter or two. Sometimes companies are purposely conservative with their guidance estimates and then lift the guidance before the end of the year. And sometimes, if the guidance number is just a penny or two short but the company beats on FFO and revenue, the stock will rise anyway.

The objective with REITs, as always, is to buy quality names with strong earnings and solid dividend growth. Over time, that will overcome any short-term disappointments such as the examples given above.

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.