iREIT Daily

The Cycle Lesson We All Need to Learn

Brad Thomas

467 postsJune 25, 2021

This Friday morning, I am so very torn on what to write about. There’s simply so much I can say about so many aspects of life in general and real estate in particular.

For one thing, I’m officially back from New York City, where I saw the commercial real estate sites – including a phenomenal VICI (VICI) property – and viewed the data about them as presented by industry insiders. Looking at the city with my own two eyes, I can tell you it’s going to take time for it to fully recover.

There’s been a lot of damage done, to put it mildly.

With that said, keep three things in mind when considering NYC-based real estate investment trusts (REITs): The market is a forward-thinking beast, so it’s not paying for the present. It’s evaluating the future. The companies in question have amazing financial, research, and analytical resources they’re working with. So they’re in excellent positions to roll with the punches and come out winners regardless.

That’s an intensely important story to cover in more detail. And as I promised before, I’ll be doing precisely that down the road. However, it’s just not the most pressing matter at the moment compared to what I just read on Forbes.

The piece isn’t even news. It’s commentary, pure and simple. Plus, it’s commentary for residential real estate, not the commercial kind.

Yet it rings far too true with what I’ve been saying for months now… with my own personal experience… and with the hard-core research that went into my almost released book, The Intelligent REIT Investor Guide.

I’ll explain a bit about that below.

Real Estate Is a Cycle, not a Straight Line

Sam Mehrbod, Ph.D., of the Forbes Technology Council, published “Are We Headed for a Real Estate Recession…” yesterday.

It speaks specifically to residential real estate agents. But there’s so much timeless truth to be gleaned between those house-specific lines.

Apparently, Mehrbod was “a top-selling realtor in Vancouver, Canada” in 2016 when “the market was sizzling hot.” Sellers were in the driver’s seat, and everyone knew it.

“As a result,” he reminisces, “real estate teams applauded themselves, proud of what an amazing job they had done for their clients” while it lasted. But those conditions weren’t going to stay in place forever.

They never do.

“Then it hit us all. Within a matter of weeks, open houses full of people turned into ghost towns. All of a sudden, buyers were now a hot commodity and realtors didn’t want to work with sellers anymore.

“Why? The market had reached equilibrium.”

Today, he’s seeing the same thing – the first part of it, anyway.

“Yes, we’re going through a similar kind of home-buying frenzy today in most North American markets. But there’s a sobering story behind every hyper-growth real estate market: Most emotionally buy out of FOMO. Until they don’t.”

FOMO, the fear of missing out, is emotions based. It doesn’t have a fundamental leg to stand on.

Yet it’s human nature, hence why Mehrbod can recognize a residential real estate cycle that just keeps recycling… And why I’m able to see the same thing in commercial real estate.

As I detail in The Intelligent REIT Investor, better, bigger minds than mine have mapped this out before. The evidence they’ve compiled is absolutely clear and extremely reliable.

It’s just a matter of knowing how to put your FOMO aside… and where to look.

The World According to Commercial Real Estate

Along the same cycle lines, Darden Restaurants (DRI) CEO Gene Lee gave some interesting information on his company’s quarterly earnings call. There’s just not many real estate deals going on right now, he admits.

You may have noticed how, earlier this year, certain REITs were buying up property seemingly every other day. Yet they’ve gone completely quiet as of late.

Lee blames this trend on “tremendous speculation” that’s “driving prices.” And CNBC adds that while he didn’t elaborate on that point:

“… restaurant chains that survived the downturn were expecting to snap up closed locations at a discount or receive more accommodations from landlords, like permission to build a drive-thru lane.”

If you want to see more of the activity that is still going on, sign up for the completely free Intelligent Real Estate Daily by accessing this link. For now though, here’s your Day in REIT Paradise slice:

Gladstone Commercial (GOOD) renewed its lease with Yanfeng U.S. Automotive Interior Systems at 1833 Frenchtown Center Drive, an industrial property located in a Detroit, Michigan, suburb. The new contract is good through August 31, 2029.
RLJ Lodging Trust (RLJ) released a publication of value creation opportunities that should unlock up to $28 million worth of incremental earnings before interest, taxes, depreciation, and amortization (EBITDA), eventually creating about $325 million of value.
CIM Commercial Trust (CMCT) raised aggregate gross proceeds of about $78.8 million from its rights offering of 8,521,589 common shares at $9.25 each.

Meanwhile, business activity or no activity, the markets keep moving regardless. Stay tuned to keep up-to-date!

(Source: The Daily REITBeat)

Happy Investing

Brad Thomas

467 posts

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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.

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

The Cycle Lesson We All Need to Learn

Brad Thomas

467 postsJune 25, 2021

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467 postsJune 25, 2021

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