I’m looking at the next round of real estate investment trusts (REITs) that just reported their earnings. And I have to say, it’s inspiring a line from Hairspray, of all things, to run through my head.

I think it’s the closing song of the Broadway musical turned movie that goes, “You can’t stop the beat.” It begins like this:

“You can’t stop an avalanche as it races down the hill.
You can try to stop the seasons, girl, but you know you never will.
And you can try to stop my dancing feet, but I just cannot stand still.

“‘Cause the world keeps spinning ‘round and ‘round
And my heart’s keeping time to the speed of sound
I was lost ‘til I heard the drums, then I found my way.

“‘Cause you can’t stop the beat.”

Well, you can’t stop the REIT beat either. Those lyrics apply just as well (or nearly as well) to the earnings news.

That’s not to say they’re all peachy perfect. There’s still a lot of room for improvement in many companies and subsectors as well.

But the vast majority of them are still trucking along despite last year’s predictions.

As the song says, “The world keeps spinning ‘round and ‘round” regardless of the naysayers. That’s why consumer confidence is on the rise.

The Conference Board reported yesterday that it hit 129.1 this month, the highest it’s been since last February – even despite inflation.

Speaking of which…

Realist Requirements on REITs, Anything Affecting REITs, and Everything Else to Boot

Remember that we’re realists here at Wide Moat Research. That’s why we didn’t panic in 2020. And that’s why we’re not getting euphoric in 2021.

I’ve been saying for months – in the face of silly comments to the contrary too – that inflation wasn’t a “transitory” issue. And the International Monetary Fund is now beginning to admit as much, with “beginning” being the keyword.

Here’s a bit on that from Fox Business:

“‘In the case of monetary policy, central banks should look through what are transitory inflation movements,’ IMF chief economist Gita Gopinath said in a blog post Tuesday. ‘However, it’s very important that they remain prepared and strongly communicate what they will do if it turns out that inflation goes up even more [high] and is much more persistent than expected.’

“Should [that happen]… Gopinath said, it could [lead] to a faster tightening of monetary policy, which could possibly disrupt market conditions.

“‘These are some of the major risks we are concerned about,’ she wrote.”

Perhaps that factored into Apple (AAPL) and Microsoft’s (MSFT) lackluster results yesterday. Not that the companies themselves did badly. They easily beat estimates for the quarter.

It was the response to their beats that didn’t look so good, with investors deciding to nitpick their news.

Speaking of responses, the Federal Reserve should come out today with an update about its bond purchase plans. Will it continue to inject money into the markets? Will it keep interest rates low?

My guess is yes. But we will see what we will see.

The World According to REITs

Now that we’ve acknowledged and addressed all of that, let’s get down to REITs and how they did. And just to reiterate my realist remarks up above, we’ll start with a company I’ve criticized a lot as of late:

• EPR Properties (EPR) brought in total Q2-21 quarterly revenue of $125.36 million compared to Q2-20’s $106.36 million. Its adjusted funds from operations (AFFO) were $53 million versus $33.3 million, or $0.71 per diluted common share versus $0.44. EPR also terminated its covenant relief period earlier than expected and reinstated its monthly cash dividend of $0.25, to be paid out next month.
• Extra Space Storage (EXR) reported net income attributable to common stockholders of $1.25 per diluted share – a 56.3% jump over Q2-20. FFO (minus non-cash interest adjustments) rose 33.3% to $1.64, and same-store occupancy increased from 94.2% to 97%. It also acquired 13 operating stores, two that are still in the works, and five more existent ones through joint ventures.
• EastGroup Properties (EGP) achieved net income attributable to common stockholders of $0.69 per diluted share, a $0.09 increase year-over-year. FFO rose from $1.33 to $1.47, and rental rates on new and renewed leases came in 31.2% higher on a straight-line basis. EGP is now 98.3% leased and 96.8% occupied, with another 79,000 square feet of operating properties purchased during the quarter. It also acquired 264,000 square feet of value-add properties and started construction on five more projects.

And here’s your earnings season bonus:

• Tremont Mortgage Trust (TRMT) says it’s still on track to merge with RMR Mortgage Trust (RMRM) this quarter. The move is having an immediate negative effect on its numbers, with net income down 95.9% year-over-year to $98,000. And adjusted distributable earnings fell 15.8% from $2.43 million to $2 million. However, President Tom Lorenzi says the “portfolio continues to perform well as we execute on our business objective…”

(Source: The Daily REITBeat)