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Another Day In REIT Paradise: A New Year, A New REIT Book

Jan. 21, 2021 9:57 AM ETAIRC, PLD, PLDGP, STOR, WELL
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The markets celebrated Biden’s inauguration yesterday by heading higher and staying there. And futures this morning are up a bit as well.

If you read the news or listened to the speeches, it appears that everyone agrees that a new era has begun. To be sure, Biden made it very clear that social justice issues will be a central theme of his administration, which will effect businesses everywhere in the U.S.

That’s one more reason why it’s such a very good time for me to be putting the finishing touches on my book, The Intelligent Investor, due out in just a matter of months. Here’s a snippet of the final chapter to show you what I mean:

… earnings, social, and governance (ESG) issues have become items of intense interest for investors, making it increasingly important for REITs to thoroughly disclose how they’re performing in each one of those categories. Fortunately, this isn’t an entirely new concept for them.

According to Stephen Hester, CFA and senior analyst at Wide Moat Research, several elements of ESG were already included in their regular reviews by higher-quality due-diligence officers and researchers. But others are less familiar, especially since the larger guidelines involved change with society’s expectations and capabilities, and their application in the REIT sector is no exception.

Leadership in Energy and Environmental Design (LEED) standards set the benchmark in sustainable building operation and design back in 1994. And by 2006, it had grown to six comprehensive systems encompassing all aspects of construction. Today, it’s nine, and the challenges presented in 2020 could impact it again considering how sharply demand for improved air quality, touchless door systems, and other building enhancements increased. Employee health and success are influenced by the buildings they work and live in, and companies will want to properly provide for their workers in this regard.”

As such, it might not be a bad idea to be on the lookout for which REITs are on top of that. Chances are high they’ll get more positive attention going forward into this new era.

Who knows. That kind of focus could even benefit such troubled subsectors as senior housing… eventually. As you’ll see in the next segment, there’s still an occupancy decline those companies are dealing with that have to be addressed somehow, someway if they’re going to regain their status as promising investments.

It's not going to be an easy road up ahead for select REITs. But that doesn’t mean some won’t survive.

The World According to Commercial Real Estate

Yesterday was rather light on REIT news, though maybe that’s the calm before the storm as REIT earnings are just around the corner.Up front and center, for instance, will be Prologis (PLD) as it kicks things off on Tuesday, January 26, by reporting its quarterly earnings in pre-trading hours.

As for today, here’s your taste of Daily REITBeat information:

  • Store Capital (STOR) says that, as of January 20, it’s received 91% of its contractual rent payments for this first month of 2021.
  • Apartment Income REIT (AIRC) received a letter fromLand & Buildings Investment Management that calls for its board to be refreshed with actually independent directors, including a special committee that can evaluate strategic alternatives.
  • Welltower (WELL) is ramping up vaccinations of both its staff and residents at its senior housing facilities. But as of January 15, only 84% of those communities are accepting new residents, down from 95% mid-December. In addition, its sequential occupancy fell to 76.2% in Q4-20 from 78.4% in Q3.

On that last note, Welltower’s outpatient medical portfolios are performing phenomenally, with 97% rent collection recorded for the last quarter. So we’re happy to see that!

(The Daily REITBeat)

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Analyst's Disclosure: I am/we are long STOR.

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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