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REIT Crash: The More They Drop, The More I Buy



  • REITs have dropped by about 30% since early 2022, much more than other defensive, debt-utilizing sectors like utilities and consumer staples.
  • Interest rates are unlikely to increase significantly further from here, while REIT fundamentals remain strong, aside from the notable exception of office buildings.
  • I highlight 6 of my favorite blue-chip REITs with investment-grade credit ratings, low-leveraged balance sheets, and strong long-term growth prospects.
  • I also explain why I am not buying the venerable investor favorite, Realty Income.
  • Looking for a helping hand in the market? Members of High Yield Landlord get exclusive ideas and guidance to navigate any climate. Learn More »

Wooden houses residential buildings and an easel with a red down arrow. Fall of real estate market. Value cost decrease. Bad liquidity attractiveness. Cheap rent. Reduced demand, recession. Low sales

Andrii Yalanskyi/iStock via Getty Images

We don't say, it's cheap today, but it'll be cheaper in six months, so we'll wait. If it's cheap, we buy. If it gets cheaper and we conclude the thesis is still intact, we buy more. We're more afraid of missing a bargain-priced

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This article was written by

Austin Rogers profile picture

Austin Rogers is a REIT specialist with a professional background in commercial real estate. He writes about high-quality dividend growth stocks with the goal of generating the safest growing passive income stream possible. Since his ideal holding period is "lifelong," his focus is on portfolio income growth rather than total returns.

Austin is a contributing author for the investing group High Yield Landlord, one of the largest real estate investment communities on Seeking Alpha, with thousands of members. It offers exclusive research on the global REIT sector, multiple real money portfolios, an active chat room, and direct access to the analysts. Learn more.

Analyst’s Disclosure: I/we have a beneficial long position in the shares of ADC, ARE, CCI, EXR, WPC, REXR either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (37)

Austin Rogers profile picture
Studies show that those who “like” my articles enjoy 22% better portfolio performance. Those who “like” my articles *and* leave a comment see 31% better portfolio performance. Those who “like” my articles, leave a comment, *and* click the “follow” button have 48% better portfolio performance and enjoy 35% more dividend income.

Alright, alright, I made all that up. I’m not an investment advisor and make no such promises. But please do me a favor and do any or all of the above anyway. It’s much appreciated!
WPC blew up by announcing a ‘dividend reset’ within 24 hours of the Buy recommendation here.
scottiebumich profile picture
This aged well...haha
Austin Rogers profile picture
@scottiebumich Did you interpret this article as claiming to time the bottom in REIT stocks? My only claim is that many REITs are cheap and a great value for long-term investors.
@Austin Rogers for the right time horizon, for those accumulating, I like the opportunity here. I wonder which will recover first--reits or financials. I like the long term values and dividends for both.
Austin Rogers profile picture
@ceb_13 I think that at least for a little while as interest drop (whenever they do), REITs and financials will be highly correlated as they surge higher. That’s the case, at least, for banks. If the yield curve un-inverts because the short end is falling faster than the long end, I think both REITs and banks will soar.
Maxlzzp profile picture
REITS still getting Crushed....
Thank you for the article.
Darren McCammon profile picture
What makes you think interest rates have peaked? A pause and a peak are not the same thing. Actually, a pause means borrowing rates will continue to go up for most REITs as their legacy debt comes due and has to be refinanced.
Austin Rogers profile picture
@Darren McCammon I’m not saying interest rates have peaked, although I do think the Fed Funds Rate has now reached its peak. But I believe we’re in the vicinity of the peak. To my mind, that means REITs likely have far more upside than downside right now.

And you’re absolutely right on refinancing debt maturities, which is why I prefer REITs with little to no debt maturing over the next year or so.
julienperville profile picture
I am watching your 6 picks and also O. But before I buy O I will add to ADC EXR and MAA for sure. CCI I will wait a bit, want to add SBAC first.
Austin Rogers profile picture
@julienperville Fair enough! Good luck to us both since we are both in most of those.
The jury is in, in the long term ADC wins out: ADC ytd -14.41 1yr-15.34 5yr6.29 10yr 12.04 O ytd -12.44 1 yr-12.24 5 yr4.18 10yr8.27. Thanks for the informative piece.
Richard Hill profile picture
Cant O grow FFO and AFFO organically?
Austin Rogers profile picture
@Richard Hill Assuming flat interest rates, yes, O could grow organically by about 1% per year. But O's interest expenses are going up due to refinancing maturing loans. So as long as interest rates remain where they are, I don't believe O can generate any organic growth.
good picks
Austin Rogers profile picture
@JackieDan Thank you! And thanks for the comment!
Thanks Austin-always look forward to your articles. Have a question regarding ADC. I’ve been looking at it for an initial position but am a bit hesitant. Another recent ADC article by Trapping Value, who in truth, puts a buy on less than about 10% of its articles, cited that they are concerned about ADCs WALT number, saying it was expensive compared to peers. So there were better bargains out there based on that. In no way, shape or form was it a strictly negative article, especially for long term investors, which is uncommon for that site. I really don’t understand what a WALT stat is? Currently, I own individually PLYM-STAG-VICI-SRC—-but my biggest reit holdings are RNP by far, and a smaller position in RLTY, which I just bought due to its large discount and recently announced buyback, which I assume was an attempt to narrow the discount. It may be that the reit ETFs are getting hit harder than utilities ETFs , but the CEFs in both sectors, due to leverage are horribly down about the same. So I’m feeling the pain in both, as I own UTG-UTF-MEGI in that sector. Defensive portfolios have seen nothing but carnage—fixed income-healthcare-utilizes/infrastructure -REITs and even international either way down or lagging badly if up. The only bright spot is dripping at lower prices thus lowering cumulative costs and increasing the payouts with the compounding shares. Which is why REIT investors usually investor—-for the payouts!
Austin Rogers profile picture
@Sane Man WALT is “weighted average lease term” and it refers to the weighted average remaining length of all leases in the portfolio, from the shortest to the longest. I’ll have to go read Trapping Value’s comments on this. You certainly can find some net lease REITs with higher WALTs, but when you own great real estate locations as ADC does, tenants are far more likely to renew their leases anyway. So WALT doesn’t matter as much as real estate quality.
Other than the positions I already have in equity reits. And have had them for years and years with some crazy low cost basis.
The rate adjustments coming for all reits on their bonded debt worries me.
I’ve been selectively buying the preferreds of numerous equity reits (and even some mreits).
Austin Rogers profile picture
@DadRuss72 Not a bad plan in order to avoid refinancing risk. But as I pointed out in the article, there are some equity REITs with little to no debt maturities for years into the future.
Joey Agree profile picture
Appreciate the thoughtful article Austin. Can always tag me with ?’s.
Austin Rogers profile picture
@Joey Agree Thanks for stopping by. I have some general questions about retail shrink/theft:

1. Has it risen to the point where it has begun to affect your portfolio in any way?
2. Is it mainly concentrated in jurisdictions that don’t prosecute shoplifting, or is it everywhere?
3. Does it affect your investment criteria going forward?
Joey Agree profile picture
@Austin Rogers interesting topic that has gotten alot of attention. No direct impact on ADC. Real questions being debated right now: 1) how much is true shrink? These are typically not GAAP numbers that are audited. 2) is it a permament hit to EBITDA that retailers should be incorporating into their #'s? Happy to expound more upon.
Austin Rogers profile picture
@Joey Agree I guess the primary concern is that in some cities, the steps being taken by brick-and-mortar retailers to prevent theft (e.g. locking up many items) could cause consumers to shop less at those stores and turn to online channels instead, creating a self-reinforcing cycle that could end in more store closures. But it sounds like you're saying ADC's portfolio is not highly at risk of that.
Business Breakdown profile picture
Starting a position in ADC today. Have never owned REITs before, but this one just seems like a gem. Joey is taking the company in the right direction and I can't think of any bad (internal) factors of the stock.
Austin Rogers profile picture
@Business Breakdown Yeah, agreed. I think the bear case is that interest rates keep going higher, same as for most REITs. Even then, ADC is not nearly as hurt as many other REITs. Hence the stock’s lower volatility.
The Dividend Collectuh profile picture
Great article. Love ADC and have been buying
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