iREIT Daily

On the Brink

Brad Thomas

467 postsJune 20, 2022

So…

We’ve flirted with the financial implications of a recession for the better part of this year. With so many factors influencing inflation, stagnation, and economic uncertainty, it’s only natural the “R” word would come into the equation.

Thankfully, the American consumer has remained strong despite higher prices, pain at the pump, and market volatility. This, I believe, has carried us through a spring of economic uncertainty.

But what about the summer?

With higher interest rates added to the mix, a recession seems much more likely – especially when previous efforts earlier this year haven’t made a dent in inflation. This is now making Americans begin tightening their belts, and the experts have taken notice.

The Wall Street Journal, for one, has been taking the temperature of top economists for years, looking for early signs of economic fluctuations. Yesterday, its pool of monetary masterminds handed down some rather concerning sentiments:

“Economists surveyed have dramatically raised the probability of recession, now putting it at 44% in the next 12 months, a level usually seen only on the brink of or during actual recessions.
“The likelihood of a recession has increased rapidly this year as inflationary pressures remained strong and the Federal Reserve took increasingly aggressive action to tame them. Economists on average put the probability of the economy being in a recession sometime in the next 12 months at 28% in the Journal’s last survey in April and at 18% in January.”

At this rate, there will be a 60% chance of recession in August – if we’re not there already by that time.

The Journal hardly ever sees such a high percentage without a recession to follow. For instance, in December 2007, its economists assigned a 38% likelihood of recession. The next thing we knew, we were stuck in a downturn into 2009.

Not to be repetitive (or state the obnoxiously obvious), but there’s numerous reasons why recession is on so many minds. Perhaps the most damning evidence comes from the diminishing returns we’re seeing in the Fed’s efforts to hamper rising inflation. Even with interest rate increases of up to 0.75% these last few months…

Prices remain high, demand persists at surprisingly high levels, and we’re still grappling with the aftermath of stimulus cash.

On the plus side, they’re not necessarily predicting a bad recession. Forecasts have unemployment rising from 3.6% in May to 3.7% by year’s end. And consumers should continue funding the leisure and hospitality spaces this summer.

It’s just that, as interest rates continue increasing, spending power will eventually erode.

More Non-REIT News to Know About

In the last few months, it seems unionization is affecting more and more businesses. From Starbucks (SBUX) to Microsoft (MSFT), many of America’s top companies have been forced to succumb to their workers’ will.

Even the almighty Apple (APPL) now finds itself in the crosshairs of the coalition trend. Its first retail store, located outside of Baltimore, Maryland, just voted in favor of unionization. The so-called Apple Coalition of Organized Retail Employees voted to join the International Association of Machinists and Aerospace Workers (IAM).

This prompted IAM President Robert Martinez Jr. to:

“… applaud the courage displayed by CORE members at the Apple store in Towson for achieving this historic victory. They made a huge sacrifice for thousands of Apple employees across the nation who had all eyes on this election.”
“I ask Apple CEO Tim Cook to respect the election results and fast-track a first contract for the dedicated IAM CORE Apple employees in Towson. This victory shows the growing demand for unions at Apple stores and different industries across our nation.”

Something tells me Cook isn’t too thrilled about this development. Though perhaps he’ll graciously accept the defeat anyway.

We still don’t know since (at last check) Apple had yet to respond. But it will be interesting to see the company’s corporate reaction to such a bold move.

The World According to REITs

While researching this weekend, I got a great reminder about why I do what I do. I couldn’t help but focus on why I became interested in real estate investment trusts (REITs) in the first place.

For one thing, I love the diverse nature of these assets – how they dip into so many market sectors while maintaining stability and consistent income. Whether they fall into the industrial, retail, healthcare, or hospitality (etc.) spaces, they can help boost your portfolio over time.

REITs are impressive at insulating your portfolio as the broader market shifts ever closer toward recession. That’s because they’re required to pay at least 90% of their income to shareholders via dividends, padding your portfolio with passive income despite price-point dips.

The best of the best keep those payouts steady even when their shares take a dive.

That’s nice to know since the market is going to do what the market is going to do. As investors, we only have so much control. However, with sound strategies, we can prepare in a way that brings peace of mind instead of panic.

As summer rolls on, one company that continues to catch my attention is VICI Properties (VICI). This gaming REIT owns the largest experiential real estate portfolio in the country thanks to top-notch casinos and resort holdings.

Currently, VICI operates 58,700 hotel rooms, 3.8 million square feet of gaming space, and over 50 entertainment venues across 43 properties. Plus, with a 75% adjusted funds from operations (AFFO) payout ratio to support dividends, its dividend seems safe.

Significantly so.

Right now, VICI’s share price is sitting under $29, which doesn’t reflect its future value. This REIT has tremendous potential with an embedded growth pipeline and unique assets.

All told, it could be a stellar source of passive income this summer.

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.

Dividend Growth Stock of the Week: Realty Income

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

On the Brink

Brad Thomas

467 postsJune 20, 2022

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On the Brink

467 postsJune 20, 2022

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