REITs Are Historically Cheap

August 31, 2023 | Hoya Capital

REITs Are Historically Cheap Sector Report Weekly Outlook Aug 31 Written By Alex Pettee, CFA Rates Up, REITs Down. Commercial and residential real estate markets remain an easy transmission mechanism - or "punching bag" - of the Federal Reserve's historically swift monetary tightening cycle. Higher For Longer? The business models of many private equity funds and non-traded REITs were not designed for a period of sustained 5%+ rates or double-digit declines in property values.

"Hope" is the only strategy for some highly-levered property owners amid a dearth of buying interest and dwindling refinancing options. CRE transactions and capital market activity has dipped to GFC-era-lows. Pockets of distress remain almost entirely debt-driven, however. Property-level fundamentals remain solid across nearly every property sector. Public REIT reported that "same-store" property-level income was 10% above pre-pandemic levels in the most recent quarter. We're beginning to see some REITs with balance sheet firepower become more aggressive, and seeing some capitulation from highly-levered players that are desperate for capital.

Blackstone's nontraded fund has sold nearly $10B of its best-performing assets to public REITs this year. READ THE FULL REPORT HERE Alex Pettee, CFA Comments (0) Newest First Oldest First Newest First Most Liked Least Liked Add Comment --> Preview Edit --> Post Comment… Previous Previous Hoya Capital Announces David Auerbach as Chief Investment Officer Next Next Inflation Week • Return To Office? • Storage In Focus