I've expressed my view for months that EPR is more or less fully priced, suitable for income but not really upside. And the utility of cinemas as a comparatively inexpensive way to have a social experience outside the house will not be replaced by AI. So I do not buy any scare stories about EPR.
I had numerous people tell me they were not fans of mall REITs. Others were not fans of cinemas. In the end I made lots of money on SPG and on EPR, and was paid very well to wait. The same will be true of ARE.
Thanks for sharing your thoughts, interesting charts.
There might not be much value around, but what about the growth prospects of the REITs in your pofos? Growth is in the end the driver of your first graph
Well, yes and no. A lot of that first graph reflects the long-term decline in interest rates in addition to growth. My focus when I analyze a specific REIT is what growth their business model can support, and what headwinds they face. In the group I cover, my view is that Regency has the best growth prospects. Essential Properties does too but they are SO expensive. Next are the quality apartment REITs. Next are NNN and VICI. Then come big, slow growers Simon and Alexandria, and also I think EPR.
I think local population is a factor for any specific region, and most of the REITs have some kind of regional focus (coastal, sunbelt, etc). Local population is more affected by internal migration than anything else, except in locations that get a lot of immigration. But also broadly, REITs generally own properties in the top segment of whatever market they are in. That provides some degree of insulation. Otherwise one has to think about the current dynamics for any particular sector. They differ.
Agree. Whilst the big general tide of population might be gone for now, local supply and demand dynamics still play a role - this is now more relevant than ever. Very difficult headwinds for REITs indeed and really need to know what you are buying
Still, the headwinds as I see them are not loss-making, they are growth-slowing. REITs IMO still have a viable role as income generators, for investors who want that.
Not much going on in REIT land that gets my attention these days. I'm already loaded up on ARE, I don't want to increase that position more. Covid sort of spoiled me as it offered up so many market over reactions that more than made up for the list of tickers that circled the drain. Now the market just seems dull.
Considering recent world events I expected energy to whipsaw all over the place but the moment passed with barely a whimper. I may trim CNQ and EPR to bump up WCP. I think the only bargain out there in mining right now is AFM. The recent peace deal between Rwanda and Congo should reduce the risk in theory, but in practice neither country has full control of its armed factions who can start fighting again out of boredom among other factors.
A mutual friend today issued a "Trade Alert" in which he is selling all his EPR and buying Kite. Do you have any thoughts on the trade, Paul?
I've expressed my view for months that EPR is more or less fully priced, suitable for income but not really upside. And the utility of cinemas as a comparatively inexpensive way to have a social experience outside the house will not be replaced by AI. So I do not buy any scare stories about EPR.
As to Kite, I published this last month: https://focusedinvesting.substack.com/p/rpd-looks-at-kite-realty-group
Dividends are REITs’ secret weapon. I'm not a big fan of life sciences REITs like ARE.
I had numerous people tell me they were not fans of mall REITs. Others were not fans of cinemas. In the end I made lots of money on SPG and on EPR, and was paid very well to wait. The same will be true of ARE.
Absolutely. Patience has worked well for specialized REITs historically.
Thanks for sharing your thoughts, interesting charts.
There might not be much value around, but what about the growth prospects of the REITs in your pofos? Growth is in the end the driver of your first graph
Well, yes and no. A lot of that first graph reflects the long-term decline in interest rates in addition to growth. My focus when I analyze a specific REIT is what growth their business model can support, and what headwinds they face. In the group I cover, my view is that Regency has the best growth prospects. Essential Properties does too but they are SO expensive. Next are the quality apartment REITs. Next are NNN and VICI. Then come big, slow growers Simon and Alexandria, and also I think EPR.
Yes, wanted to write "one of the drivers". Interest rates is the other main driver.
Question is now: what fueled the growth? What do you think?
I think it was population growth and that is about to start falling.
What do you think?
I think local population is a factor for any specific region, and most of the REITs have some kind of regional focus (coastal, sunbelt, etc). Local population is more affected by internal migration than anything else, except in locations that get a lot of immigration. But also broadly, REITs generally own properties in the top segment of whatever market they are in. That provides some degree of insulation. Otherwise one has to think about the current dynamics for any particular sector. They differ.
Agree. Whilst the big general tide of population might be gone for now, local supply and demand dynamics still play a role - this is now more relevant than ever. Very difficult headwinds for REITs indeed and really need to know what you are buying
Still, the headwinds as I see them are not loss-making, they are growth-slowing. REITs IMO still have a viable role as income generators, for investors who want that.
Indeed. You still have the inventory as it is plus some growth, albeit likely less fast.
The good about higher rates is also that management teams think twice before buying
Not much going on in REIT land that gets my attention these days. I'm already loaded up on ARE, I don't want to increase that position more. Covid sort of spoiled me as it offered up so many market over reactions that more than made up for the list of tickers that circled the drain. Now the market just seems dull.
Considering recent world events I expected energy to whipsaw all over the place but the moment passed with barely a whimper. I may trim CNQ and EPR to bump up WCP. I think the only bargain out there in mining right now is AFM. The recent peace deal between Rwanda and Congo should reduce the risk in theory, but in practice neither country has full control of its armed factions who can start fighting again out of boredom among other factors.
Sadly, I pretty much agree with you. So now investing becomes an exercise in patiently not blowing it.
Thanks Paul. I own many of these and am always hoping for a drawn-down in the market to own more. I don't own ARE or Prologis but I'm watching.
Note to self: buy a starter position in REG while it's still reasonably priced.