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Essential REIT Evaluation: Residential And Healthcare

Jun. 02, 2020 7:31 AM ETCPT, ESS, AVB, INVH, AMH, SBRA, WELL, SNR, DHC, PEAK, BKD, VTR, VNQ3 Comments
Chilton REIT Team profile picture
Chilton REIT Team


  • The market is unsure of how to discount the duration of the stay at home order, as well as what may change permanently as a result of the pandemic.
  • The level of ‘essentialness’ should determine the multiple on cash flow at which it should trade.
  • We rank the 'essentialness' of the four sectors mentioned from most to least as single-family rentals, apartments, skilled nursing, and senior housing.

The word ‘essential’ has become very popular recently in its use by governing heads nationwide to delineate which businesses can remain open during the pandemic. A common definition uses the words, “… of upmost importance, something necessary or indispensable.” We have been using the term long before 2020 in describing our portfolio, but today it has relevance beyond what we could have ever imagined. Equity REITs come in all shapes and colors or in property talk, over fifteen different property sectors that comprise over 150 different companies. Not all are essential!

By now, the market is well aware of what the government has deemed essential or not, and stock prices thus already discount the current consequences of a stay at home order and shutdowns of various businesses. However, the market is unsure of how to discount the duration of the order, as well as what may change permanently as a result of the pandemic. In other words, will the essentialness of property types or geographies change in the next 12 months, 5 years, or 10 years?

The current valuation of a stock should reflect some probability that fundamentals will stay the same, get better, or get worse for its underlying properties. Over the next few publications, we will provide our current assessment for each property type, and how we are expressing that view in the Chilton REIT portfolio. We begin this series with an evaluation of the apartments, single-family rentals, and healthcare sectors. Note that the liquid nature of public REITs gives us the luxury of changing the portfolio to match any new views that may arise as we gather more data during this unprecedented period.

Essential Evaluation Tree For REIT Investors

In our opinion, there is a process that must be followed to determine how essential the company is, and thus

This article was written by

Chilton REIT Team profile picture
The REIT Team of Chilton Capital Management, a Houston-based investment adviser, is headed by co-portfolio managers Bruce Garrison, CFA, and Matt Werner, CFA. Mr. Garrison has over 40 years of experience analyzing public REITs both on the buy-side and the sell-side. Mr. Werner joined Mr. Garrison on the Chilton REIT Team in 2009. The REIT Team’s strategy primarily pursues investments in publicly traded real estate investment trusts (REITs) and real estate related entities based primarily in North America. The REIT Team believes public REITs are superior vehicles for investing in real estate due to their liquidity, transparency, and total return characteristics. Investing in public securities enhances the REIT Team’s ability to diversify by geography, sector, strategy, property, and tenant while maintaining portfolio liquidity. REIT property types include apartments, regional malls, shopping centers, lodging, office, industrial, self-storage, data centers/cell towers, and a variety of health care related facilities. The REIT Team focuses on traditional methods of security analysis; primarily research, critical thought and analytical depth, which are integral to their investment process. The REIT Team’s investment approach seeks to combine its real estate industry experience with traditional methods of security selection to make sound investment decisions in real estate companies. The Chilton REIT Team manages Separately Managed Accounts (SMAs) for high net worth individuals and institutions. Additionally, the REIT Team is the sub-advisor for an open-end investment company, the West Loop Realty Fund (tickers: REIIX, REIAX, and REICX). Before investing one should carefully consider the West Loop Realty Fund’s investment objectives, risks, charges and expenses. This and other information is in the prospectus and summary prospectus, a copy of which may be obtained by calling 800-207-7108. Please read the Fund’s prospectus or summary prospectus carefully before investing. The Fund may not be suitable for all investors. We encourage you to consult with appropriate financial professionals before considering an investment in the Fund. Liberty Street Advisors, Inc. is the advisor to the Fund. The Fund is part of the Liberty Street family of funds within the series of Investment Managers Series Trust. The Fund is Distributed by Foreside Fund Services, LLC. Chilton Capital Management, LLC is an independently owned and operated firm formed in 1996. Chilton provides investment advisory services for registered investment companies, private clients, family offices, endowments, foundations, retirement plans and trusts. For more information about Chilton Capital Management’s REIT Team, please visit www.chiltoncapital.com/reit/ or email info@chiltoncapital.com. Additional information about Chilton Capital Management LLC is also available on the United States Securities and Exchange Commission’s website at www.adviserinfo.sec.gov. The searchable IARD/CRD number for Chilton Capital Management LLC is 104592.

Analyst’s Disclosure: I am/we are long CPT, ESS, AVB, INVH, AMH, SBRA. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

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Comments (3)

This is one of the best written articles I have read since starting my Seeking Alpha subscription mid 2019. I look forward to future articles with this type of quality & content.


Paradyme Properties Inc.
Given the significant number of CV-19 deaths in nursing homes, senior citizens will most likely avoid nursing homes as long as they can by seeking other options like remaining in their homes or living with relatives.
perfect, we can load up on depressed prices and unload once they moon. My kinda thinking.
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