iREIT Daily

Defaults, Driving Forces, and Differing Opinions

Brad Thomas

467 postsOctober 12, 2021

Once again, there’s a lot going on today. So I have to skip my intended Paris update yet again.

I’ll just say this: This city is phenomenally fascinating!

“Fascinating” could describe much of the news out these past 24 hours as well. It wouldn’t be preceded by “phenomenally,” however.

For instance, Evergrande just missed at least portions of its third round of bond coupon payments. Holders of its April 2022, April 2023, and April 2024 notes were due by 4:00 a.m. GMT on Tuesday.

When that deadline came and went, it put a lot more people in panicky positions considering the developer’s $101.2 billion in bonds due in the next year.

Moreover, we now learn that smaller Chinese developers Modern Land and Sinic Holdings are struggling too. The former is asking for a three-month delay to certain payments. The latter has simply stated it expects to default next week.

Over in the West then, Kraft Heinz (KHC) CEO Miguel Patrico told the BBC that higher prices are here. Permanently.

He specifically cited truck driver shortages in the U.K. and increased “logistics costs” and labor shortages in the U.S. Clearly, he doesn’t expect this to change any time soon; and he doesn’t expect prices to ever go back to normal.

Fox Business says the logistics comment “could refer to the record backlog of container ships waiting to enter the Port of Los Angeles. The port’s executive director, Gene Seroka, claimed that around 250,000 containers require moving through the port” as of October 6.

At this point though, I do have to throw in JPMorgan Chase (JPM) CEO Jamie Dimon’s somewhat contrary opinion. My goal here is to give you a well-rounded analysis of your investing environment.

Which is why I’m more than willing to share what he said.

Big Banks and Big Battles

Yesterday, I reported that:

… Goldman Sachs (GS) now estimates 5.6% U.S. GDP growth for 2021 and 4% for 2022. That’s down from 5.7% and 4.4%, respectively, due to such things as a likely fall in fiscal support this year, consumer spending coming back slowly, virus-sensitive consumer services suffering further, [and] semiconductor supply issues that will last into 2022.

Goldman Sachs is a very well-respected institution with a lot of resources at its disposal. So I don’t take that assessment lightly.

Then again, the same is true of its financial peer, JPMorgan. Hence the reason why I’m reporting his opinion as well.

“I should never do this,” he virtually told attendees at the Institute of International Finance’s annual conference the other day. “But I’ll make a forecast.” Current supply chain problems “will not be an issue next year at all. This is the worst part of it. I think great market systems will adjust for it like companies have.”

I also have two real estate investment trust (REIT)-related news stories to share below. Though to lead into it, let’s first lighten the mood, if only for a moment…

By now, we all know that Tesla (TSLA) founder and CEO Elon Musk doesn’t have a high opinion of Amazon (AMZN) founder and former CEO Jeff Bezos. And vice versa.

Normally, I trend toward taking Musk’s side in their ongoing and very public spats. But I have to say the latest installment wasn’t the most mature on Musk’s part.

Entertaining, yes. Just not mature…

A Timely REIT Tenant Report

Musk is apparently once again the world’s richest man by more than $10 billion. So when Bezos tweeted this the other day:

Listen and be open, but don’t let anybody tell you who you are. This [A 1999 copy of Barron’s predicting Amazon’s demise] was just one of the many stories telling us all the ways we were going to fail. Today, Amazon is one of the world’s most successful companies and has revolutionized two entirely different industries.

Musk tweeted back a second-place medal.

Why bring their playground spat up at all? Well, again, it was to lighten the mood. But also because second-place or not, Amazon is still an extremely influential property owner and tenant.

So it is worth pointing out how current CEO Andy Jassy has taken another stance on returning to the office. Yesterday, he reminded corporate employees how the company originally hoped to be back to normal last month. Then that date was moved to January 3 “with the suggestion we should all try to be in the office at least three days a week.”

But it’s changing “course a bit” again, this time to let each team decide for itself. And, like the back-and-forth between the world’s richest man, who knows what will happen next.

There’s plenty of room for things to change from here.

The other REIT-related story is No Time to Die’s disappointing showing in U.S. theaters. Some analysts were predicting the flick would bring in more than $100 million for its opening weekend.

Yet it came in at just $56 million instead.

Part of that might be because of its two-hour and forty-five minute running time. Part of it might be because James Bond films typically attract “older” audiences versus the teens that flock to superhero movies.

In short, this isn’t an automatic box-office disaster from a REIT perspective. It’s only something to be aware of.

The World According to Commercial Real Estate

Alright then. Let’s move on to actual REIT actions and reactions. Because there definitely are some worthwhile developments that have been recently announced.

For instance:

Global Net Lease (GNL) says it closed on a 90,000 square-foot training and development center last week for $40.6 million. Located in Bentonville, Arkansas, it’s leased to Walmart (WMT)with seven years left to its contract. It also acquired two industrial properties elsewhere for $14.2 million leased to Pilot Point Steel. This brings its total 2021 finalized purchase count to nine properties for $381 million with 16.9 years left to their terms.
Healthcare Trust of America (HTA) responded to Elliott Investment Management L.P.’s letter accusing it of long-term underperformance. The REIT says its board “regularly reviews the company’s strategic plan, priorities, and opportunities to enhance shareholder value. We are openminded and committed to delivering superior returns for all HTA shareholders.” Presumably, this won’t convince Elliott off its current line of criticism.
LTC Properties (LTC) updated investors that it originated $46 million in new investments since the beginning of Q3. These properties’ combined weighted average lease term is 3.2 years, and their expected annual interest income generation is about $3.5 million.

And, yes, the worst performer yesterday is particularly noteworthy considering what a favorite it usually is. Here’s the thing though: Power REIT (PW) really didn’t see a September decline.

So this could simply be a belated correction.

I’ll be looking into it further from here…

(Source: The Daily REITBeat)

Happy Investing

Brad Thomas

467 posts

View all my Posts

Brad Thomas is Senior Research Analyst at iREIT and CEO of Wide Moat Research LLC. With over 30 years of real estate experience, he is also long-time Editor of Forbes Real Estate Investor, a monthly subscription-based newsletter that dives deep into the vast world of profitable properties, and since 2021, he has served as an adjunct professor at New York University.

Thomas has also been featured on or in Forbes magazine, Kiplinger's, U.S. News and World Report, Money, NPR, Institutional Investor, GlobeStreet, CNN, Newsmax, and Fox. And he was the #1 contributing analyst on Seeking Alpha in 2014, 2015, 2016, 2017, 2018, 2019, 2020 and 2021 based on both page views and number of followers.

Thomas is the recently-published author of The Intelligent REIT Investor Guide (2021), co-author of The Intelligent REIT Investor (2016), and he wrote The Trump Factor: Unlocking The Secrets Behind The Trump Empire (2016) - all available on Amazon.

Thomas received a bachelor of science in business/economics from Presbyterian College and is married with five wonderful kids.

Better Start Prepping for Christmas Now

REIT Mutual Fund	Symbol
Alpine Realty Income and Growth Fund	AIGYX, AIAGX
American Century Real Estate Fund	REAIX, REACX, AREEX, AREWX, ARYCX, AREDX
Real Estate Securities Fund	MRESX
AR Capital Real Estate Income Fund	ARIAX, ARICX, ARIPX
AssetMark Real Estate Securities Fund	AFREX
Aston/Harrison Street Real Estate Fund	AARIX, ARFCX
Baron Real Estate Fund	BREIX, BREFX
BlackRock Real Estate Securities	BIREX, BAREX, BCREX
Brookfield U.S. Listed Real Estate Fund	BRUAX, BRUCX, BRUIX, BRUYX
CGM Realty Fund	CGMRX
West Loop Realty Fund	REIIX, REIAX, REICX
Cohen & Steers Institutional Realty Shares	CSRIX
Cohen & Steers Realty Income Fund	CSEIX, CSDIX, CSBIX, CSCIX
Cohen & Steers Realty Shares	CSRSX
Columbia Real Estate Equity Fund	CREAX, CREIX, CRRVX, CRERX, CREEX, CRRFX, CREWX, CRECX, CREBX
Compass EMP REC Enhanced Volatility Weighted Fund	CWRAX, CWRIX, CWRTX, CWRCX
Davis Real Estate Fund	RPFRX, DREYX, DRECX, DREBX
Delaware Real Estate Investment Trust Portfolio II	DPRTX, DPRBX
Delaware Real Estate Investment Trust Portfolio	DPREX, DPRSX, DPRRX, DPRCX
DFA Real Estate Securities Portfolio	DFREX
Dunham Real Estate Stock Fund	DAREX, DNREX, DCREX
DWS RREEF Real Estate Securities Fund	RRRRX, RRREX, RRRAX, RRRSX, RRRBX, RRRCX
DWS RREEF Real Estate Securities Income Fund	REFAX, REFCX, REFIX, REFSX
Eaton Vance Real Estate Fund	EAREX, EIREX
EII Realty Securities Fund	EIIRX
Fidelity Advisor Real Estate Fund	FHEIX, FHEAX, FHETX, FHECX, FHEBX
Fidelity Advisor Real Estate Income Fund	FRIRX, FRIQX, FRINX, FRIOX
Fidelity Real Estate Income Fund	FRIFX
Fidelity Real Estate Investment Portfolio	FRESX
Fidelity Spartan Real Estate Index Fund	FSRNX, FRXIX, FSRVX
Fidelity Series Real Estate Equity Fund	FREDX, FREFX
Fidelity Series Real Estate Income Fund	FSREX, FSRWX
Forward Real Estate Long/Short Fund	KSRYX, FRLSX, FFSRX, KSRAX, KSRCX, KSRBX
Forward Real Estate Fund	FPREX, FFREX, KREAX, KRECX
Forward Select Income Fund	KIFYX, FSIMX, FFSLX, KIFAX, KIFBX, KIFCX
Franklin Real Estate Securities Fund	FREEX, FRLAX, FRRSX, FSERX
GMO Real Estate Fund	GMORX
Goldman Sachs Real Estate Securities Fund	GREIX, GRETX, GREAX, GRESX, GRERX, GREBX, GRECX
Great-West Real Estate Fund	MXREX
Heitman REIT Fund	OARTX, OBRTX
ING Real Estate Fund	CRARX, IREWX, IDROX, CLARX, CRWRX, CRCRX, CRBCX
INVESCO Real Estate Fund	REINX, IARFX, IARIX, IARYX, IARAX, IARRX, IARCX, AARBX
Ivy Real Estate Securities Fund	IRSAX, IREIX, IRSYX, IRSRX, IREEX, IRSCX, IRSBX
John Hancock Real Estate Securities Fund	JIREX
Johnson Realty Fund	JRLTX
J.P.Morgan Realty Income Fund	URTLX, JRIRX, URTAX, URTBX, URTCX
J.P. Morgan Security Capital U.S. Core Real Estate Securities Fund	CEEAX, CEERX, CEEFX, CEESX, CEECX
J.P. Morgan U.S. Real Estate Fund	SUSIX
Lazard U.S. Realty Equity Portfolio	LREIX, LREOX
Lazard U.S. Realty Income Portfolio	LRIIX, LRIOX
Manning & Napier Real Estate Series	MNRIX, MNREX
Morgan Stanley Institutional U.S. Real Estate Portfolio	MSUSX, MUSDX, MSULX, MURSX
Natixis AEW Real Estate Fund	NRFAX, NRFYX, NRFBX, NRFCX, NRFNX
Neuberger Berman Real Estate Fund	NBRIX, NBRFX, NREAX, NRERX, NRECX, NRREX
Nuveen Real Estate Securities Fund	FREAX, FARCX, FRSSX, FREBX, FRLCX, FREGX
Oppenheimer Real Estate Fund	OREAX, OREIX, OREYX, ORENX, OREBX, ORECX
PHOCAS Real Estate Fund	PHREX
PIMCO RealEstateRealReturn Strategy Fund	PRRSX, PETPX, PETAX, PETDX, PETCX, PETBX
Pioneer Real Estate Shares	PWREX, PYREX, PCREX, PBREX
Principal Real Estate Securities Fund	PIREX, PIRPX, PREPX, PRETX, PREJX, PRRAX, PRERX, PRENX, PRAEX, PRCEX, PRLEX
ProFunds Real Estate UltraSector ProFund	REPIX
Prudential Select Real Estate Fund	SREAX
Prudential U.S. Real Estate Fund	PJEAX, PJEZX, PJECX, PJEBX
REMS Real Estate Income 50/50 Portfolio	RREIX
REMS Real Estate Value-Opportunity Fund	HLRRX, HLPPX
Rydex Real Estate Fund	RYREX, RYHRX, RYCRX
SA Real Estate Securities Fund	SAREX
SEI Institutional Mgd Real Estate Fund	SETAX, SEIRX
Spirit of America Real Estate Income & Growth Fund	SOAAX
SSgA Clarion Real Estate Fund	SSREX
Stratton Real Estate Fund	STMDX
T.Rowe Price Real Estate Fund	TRREX, PAREX
TIAA-CREF Real Estate Securities Fund	TIREX, TRRPX, TRRSX, TCREX
Vanguard REIT Index Fund	VGSNX, VGRSX, VGSLX, VGSIX
Virtus Real Estate Securities Fund	PHRAX, PHRIX, PHRCX, PHRBX

REIT ETF	Symbol
Flex Shares	ASET
Wisdom Tree Global Ex-US	DRW
S&P 500 Equal Weight	EWRE
iShares FTSE Industrial/Office	FNIO
MSCI Real Estate Index	FREL
S&P REIT Index	FRI
First Trust S&P REIT	FRI
iShares Real Estate 50	FTY
Flexshares Global	GQRE
iShares Cohen & Streers	ICF
iShares International Developed RE	IFGL
iShares US RE	IYR
Premium Yield Equity REIT	KBWY
ETRACS Monthly Pay 2x Leverage	MORL
Market Vector Mortgage	MORT
iShares Global REIT	REET
iShares FTSE Mortgage	REM
iShares Residential	REZ
IQ US Real Estate Small Cap	ROOF
iShares FTSE NAREIT Retail	RTL
DOW Jones Global RE	RWO
SPDR Dow Jones	RWR
Schwab US REIT	SCHH
Super Dividend REIT	SRET
ProShares Ultra RE	URE
Vanguard REIT	VNQ
Vanguard Global ex-US	VNQI
iShares International Developed	WPS
Wilshire US REIT	WREI
Pacer Benchmark Data & Infrastructure RE	SRVR
Pacer Benchmark Industrial RE	INDS
Pacer Benchmark Retail RE	RTL
Hoya Capital Housing	HOMZ
NetLease Corporate RE	NETL

REIT Name	Ticker	Annual Increases/yr
Federal Realty	FRT	51
Universal Health Realty	UHT	33
National Retail Properties	NNN	29
Realty Income	O	27
Tanger Outlets	SKT	26
Urstadt Biddle	UBA	25
Essex Property Trust	ESS	25
W.P.Carey	WPC	22
National Health Investors	NHI	17
Equity Lifestyle	ELS	15
Digital Realty	DLR	15

Defaults, Driving Forces, and Differing Opinions

Brad Thomas

467 postsOctober 12, 2021

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Defaults, Driving Forces, and Differing Opinions

467 postsOctober 12, 2021

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