Wake Up Mr. Market, REITs Are No April Fools’ Joke

April Fools’ Day—a day for pranks—is observed on the first day of April each year. American novelist Mark Twain (1835–1910) has been quoted as saying:

“The first of April is the day we remember what we are the other 364 days of the year.”

According to History.com, some historians think the day originated in 16th century France as some towns switched from the Julian calendar—which celebrated New Year’s Day on April 1—to the current Gregorian calendar—which celebrates New Year’s Day on January 1. Townspeople who failed to observe the New Year in January were reportedly dubbed fools and were targeted for pranks and jokes.

Perhaps Mr. Market (an imaginary investor devised by Benjamin Graham in The Intelligent Investor) thought April Fool’s Day was yesterday? 

The S&P 500 and Dow each fell 1.6% and the Nasdaq 1.5%—with losses accelerating in the session’s final hours as traders rotated out of Q1 into Q2. The S&P 500 fell 4.9% in Q1, while the Dow fell 4.6% and the Nasdaq 9.1%.

REITs were down 1.1% yesterday, as measured by the Vanguard Real Estate ETF (VNQ), and in Q1, they sank 6.6%. Farming and hotels led the way in terms of the best quarterly performance in the REIT sector. 

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According to Yahoo! Finance, “The track record for April has been astonishingly strong. Since 1950, the fourth month of the year has been the best month for stocks on average.”

The S&P 500 has been green in April over 15 of the past 16 years, with an average return of 3.1%. The high was a 12.7% return in April 2020, and the low was a -0.7% dip in April 2012.

As Yahoo warns, “One caveat to this trend has been that in midterm years (like 2022), April has ranked the seventh-best month for the S&P 500 with an only slightly positive return.”

I’m down in West Palm Beach this week, and as I type my morning blog, I’m amazed to see how strong the economy is here in South Florida. 

Office buildings and hotels are filling up, conferences are coming back, and restaurants are in full demand. And one critical indicator is jobs!

According to Bloomberg:

Employers are forecast to have added almost half a million people to their payrolls in March after hiring almost 700,000 a month earlier. If the data proves to be strong today, the Federal Reserve will get back to focusing its efforts on how to tame inflation.

The World According to REITs

You may have seen shares on Orion Office REIT (ONL) tumble last week after the company announced Q4 2021 earnings. The news of a lower-than-expected dividend seemed to spook investors. This week I interviewed the company’s CEO, Paul McDowell, and he explained,

“…when we thought about the dividend, it was less about a specific payout ratio and more about having a dividend that we can sustain for long periods of time. We can grow from here.”

Let’s hope he’s right. We’re maintaining our “strong buy” rating on this new REIT, anticipating that the management team can deliver steady returns. Also, another net lease REIT, Agree Realty (ADC), saw Morgan Stanley initiate an “overweight” rating yesterday. The net lease sector has been hopping with these headlines: 

  • Realty Income (O) priced a private placement offering of £140 million senior unsecured notes due 2030, £345 million senior unsecured notes due 2032, and £115 million senior unsecured notes due 2037.
  • Four Corners Properties Trust (FCPT) announced the acquisition of five Fresenius Medical Care properties located in Louisiana for $9.4 million. The properties are corporate-operated under net leases with a weighted average of 6 years of term remaining and priced at a 6.5% going-in cash capitalization rate exclusive of transaction costs.
  • VICI Properties (VICI) announced its wholly-owned subsidiaries, VICI Properties L.P. and VICI Note Co. Inc., have extended the expiration date of their previously announced private offers to exchange all outstanding notes issued by MGM Growth Properties Operating Partnership LP and MGP Finance Co-Issuer, Inc. for up to an aggregate principal amount of $4.2 billion of new notes. The new notes will be issued by the VICI Issuers and related consent solicitations on behalf of the MGP Issuers to adopt certain proposed amendments to the indentures governing the MGP Notes and extend the expiration date from March 31, 5 p.m. ET to April 4 at 5 p.m. 

That’s what we’ve got today, at least for here. Check out Intelligent REIT Daily—completely free if you want more updates like these!

(Click on image to enlarge)

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(Source: The Daily REITBeat) 

Brad Thomas is the Editor of the Forbes Real Estate Investor.

Disclaimer: This article is intended to provide information to interested parties. As ...

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