Jonathan Litt - L&B
@JonLitt
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Official account of Jonathan Litt, founder and CIO of investment management firm Land & Buildings. Former sell-side analyst.
Joined May 2012
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Blackstone, KKR & Starwood are all on the hunt to buy apartments. At a Goldman Sachs conference yesterday, Starwood said there is "wild bidding" and nothing is trading over a 4.5% cap rate. Blackstone owns stakes in 3 multifamily REITs and sees deep discounts in the sector today.
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A moment of silence for a guru, mentor, and friend Sam Zell. Zell's legacy will last for generations. Sam was more than a famed investor, he enjoyed educating the industry and newcomers alike on how to succeed. (1/2)
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Land & Buildings issues report stating that the New York City office market is facing an existential hurricane. Empire State Realty Trust $ESRT uniquely in the crosshairs. Click link for full report. (1/2)
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The housing market is a significant driver of the US economy and it is grinding to a halt. Mortgage rates near 7% have resulted in an 80% decline in refinancing and a 50% decline in mortgage applications. (1/2)
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A moment of silence for Arne Sorenson. Truly an exceptional CEO at Marriott and an extraordinary individual who passed yesterday at 62
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"We are currently experiencing the strongest housing market I have seen in my 30 years at Toll Brothers"…according to $TOL CEO, with strength ever since mid-May
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A moment of silence for Tobias Levkovich. Tobias was more than a colleague at Citi, he was a friend a confidant. Well known for his Panic/Euphoria barometer of the stock market as Citi's equity strategist, we are all at a loss as we mourn his friendship, guidance and camaraderie
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Blackstone's REIT, BREIT will again see a lot of ink spilled on $5B transaction with Univ. of California, the investment based on press release appears good for BREIT investors as it provides liquidity for redeeming investors, debt reduction and capital for new acquisitions(1/3)
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Cities are (almost) back! Equity Residential $EQR, the pure-play REIT for Class A coastal apartments, raised guidance as CEO Parrell sees "substantial signs of improvement as cities begin to reopen and affluent renters return…we see considerable positive momentum"
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Merger Monday
#1
— Realty Income $O is acquiring Spirit Realty $SRC for $9 billion. Growth for growth's sake as Realty Income is at the lowest share price since 2020 outside of pandemic low. Realty Income CEO Sumit Roy had already posted inferior returns to its proxy peers for
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A lot of ink will be spilled on Blackstone‘s $BX BREIT gating investor redemptions. It’s pretty simple though and investors are smart. You could sell BREIT up 10% this year and buy public REITS which are down 25%. An arbitrage hard to ignore.
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Blackstone's REIT AUM grew by $2B in 3Q22 as net inflows slowed, but remained positive. BREIT's NAV is up 9% YTD while publicly traded REITs are down 30%. Public REITs likely heavily discounted to underlying asset value once clarity on pricing emerges as debt markets normalize.
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Prologis $PLD trading near lowest valuation in past 5 years yet has highest embedded revenue growth (50%) in 40 years just by rolling expiring rents to market. Where else can you find the combination of low valuation and embedded growth without grandiose assumptions on TAM?
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Camden Property Trust $CPT CEO Ric Campo stated on 3Q earnings call apartments are trading at all-time high prices and cap rates are in the 3s in the private market. With apartment REIT implied cap rates in the 5s and 6s, many stocks are potential doubles from here.
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NY Post is taking a victory lap on a NYC office revival…with less than 30% of workers back in the office, 19% vacancy rates, and falling rents, I don't know what there is to celebrate
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We are all at a loss as we mourn Sam's passing, his sharp tongue, keen insights, and most importantly his friendship and humanity. Thank you, Sam! (2/2)
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Bank crisis not ushering in demise of CRE as headlines would indicate. Today Rexford announced $357M of warehouse acquisitions and Realty Income $O issued $1B debt at high-4% rate. Not all real estate is created equal and the "haves" have access to capital; L&B has $REXR position
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.
@Blackstone
's REIT buy box now includes shopping centers - announced $426M grocery-anchored shopping center acquisition in JV with $KIM. Reported cap rate sub 5% highlights discount to NAV in select publicly-listed shopping centers
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I would like to thank Green Street Advisors, the leading independent voice on REITs, for calling out Land & Buildings in their "Smart Money" note alongside Blackstone.
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Consistent with our public presentation on Tricon Residential $TCN made in October 2023 that highlighted an estimated 65% upside, Blackstone's purchase of TCN at a substantial premium is the right outcome for all shareholders. (1/2)
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Six Flags real estate would be valued at ~$2.8B, well above $1.7B equity market cap, when applying 7.3% cap rate from $433M Bowlero real estate sale announced by VICI Properties, validating L&B estimate of a potential double in the SIX stock. L&B has positions in $SIX and $VICI.
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Homeownership is increasingly unaffordable with the 40% rise in home prices and 8% mortgage rates. Renting a home is the best option for many families and Tricon Residential $TCN is a heavily discounted way to enjoy the tailwinds with upside from enhanced revenue management and
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Why are cell towers are one of the best performing real estate sectors over the past decade? Exponential demand growth for cellular data while new supply is highly constrained. NIMBY's are everywhere - as seen on a bike ride in Bedford, NY:
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"Las Vegas effectively sold out for the foreseeable future on the weekends", according to Caesars $CZR on earnings call. Leisure travel surge in full swing
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Build to rent single family homes is accelerating to meet surging demand from millennials moving to the burbs to start family. Designed with the renter in mind, low cap ex and buying wholesale should fuel external growth at American Homes for Rent AMH
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Alexandria $ARE has failed to respond to L&B's requests to clarify potentially misleading information discussed on its 3Q conference call and to avoid selectively disclosing certain information at its Investor Day Wednesday 11/27 this week. L&B statement issued today outlining
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$HST buying Hyatt Regency Austin at a 20-25% discount to pre-COVID valuations yet HST is trading above its pre-COVID stock price today. Which is right - private or public market pricing? L&B has a position in HST
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I was honored to be interviewed by Jim Grant & Evan Lorenz at Grant's Interest Rate Observer for their podcast discussing the winners and losers in real estate as interest rates rise among other topics.
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"RIP 40-year bond market rally" refrain is growing louder every day. Are prognosticators right? Crying wolf? Who knows? Keep in mind prognosticators who have been wrong for 20 years as forecasts have been up and to the right while the 10 years went down and to the right
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NYC Office long slog ahead. Leading commercial real estate broker suggest current vacancy/sublease at 22%, forecasters are saying could go to 30% with rents down 25%. What does that mean for office values? L&B estimates a 40% decline in value.
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The proposed merger of Six Flags and Cedar Fair does not maximize value for all shareholders and there are better alternatives available. We believe the right path forward is to monetize the Company’s real estate, which alone is likely worth nearly $30 per share based on
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Blackstone $30 billion question: where will they spend the money? It won't be office and retail, it will most likely be residential, logistics and life science and with $90 billion to put to work with leverage, (1/2)
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The tide is turning for Six Flags — L&B cell phone geolocation data estimates attendance was up 30%+ YoY over Labor Day weekend. $SIX real estate continues to be substantially undervalued. L&B has a position in SIX.
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@EconguyRosie
David your bear claw is grabbing way too much "real estate". A little balance is in order. Malls $CBL, Office $ERST others may well see loans defaults, however, Cell towers $SBAC , data centers $QTS, warehouses $PLD, single family for rent $INVH are enjoying surging demand
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If distressed real estate opportunities strike your fancy look no further then listed REITs. Merger Monday saw two companies being purchased: hotel REIT Hersha Hospitality $HT at a 59% premium and shopping center REIT RPT Realty $RPT at an 18% premium
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REITs poised to close gap vs. S&P 500 - REITs down 3% over past year while S&P up 28%
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Yesterday, I was invited on to CNBC to discuss how the work from home hurricane has hit life science offices, with attendance in Alexandria’s office/lab buildings down 50% as compared to pre-pandemic attendance. (1/2)
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Office REIT leverage levels are rising with lower asset values and interest coverage ratios are deteriorating. The ability to refinance is dwindling, leaving landlords in the lurch, just hoping the current return to office and rate environment changes materially. (2/2)
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Single-family rental REIT $RESI going private at 36% premium for $2.4 billion, highlights discount in public markets for SFR portfolios. $INVH and $AMH should continue to benefit from record-high occupancy levels and quickly rising home prices. L&B has positions in INVH and AMH
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Congratulations to CEO Bill Bayless, Chairwoman Cydney Donnell, and the American Campus team and Board. We are gratified Blackstone $BX sees the terrific opportunity we have long seen as $ACC shareholders and expect ACC to thrive in the private market.
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REITs have best fundamentals in my career (30 years, yikes), technical analyst Rich Ross from Evercore outlines below that REITs are well-positioned to be "up and to the REIT" versus the S&P.
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Whoa - look at the discount, Host Hotels & Resorts owns a high quality well located portfolio of hotels and is trading at 10x EBITDA a heavy discount to 13x EBITDA Pebblebrook Hotel Trust sale of The Hotel Colonnade Coral Gables in Florida. L&B has positions in $HST and $PEB.
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Blackstone's private REIT NAV was up in June by 0.4%, now up 7% YTD while public REITs are down 20% YTD. The private real estate index has only declined twice in last 25 years (and then modestly) while REITs have fallen 10%+ 13 times, on average by 22%.
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REITs trading near record cheap valuations to 10-Year Treasury and BBB corporate bond yields. With an improving economy and REIT cash flows poised to grow, REITs likely to re-rate higher
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A moment of silence for Wayne Hughes. A visionary and pioneer in the real estate sector who passed yesterday leaving a great legacy in $PSA and $AMH. L&B is a shareholder of PSA and AMH.
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Sobering mall outlook provided by Brian Kingston, CEO of Brookfield Property Partners ($BPY), one of the largest owners of regional malls in the US, see below (1/2)
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Shoes are a droppin' at office/lab REIT Alexandria $ARE as biotech tenant Atreca $BCEL terminated its headquarters lease on the west coast. L&B has a position in ARE
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REITs down 16% YTD vs $QQQ up 30% - eerily similar to end of ‘99 and are trading at 17% discount to post-COVID NAVs, similar discount to end of ‘99. Post ‘99 REITs rallied 170%, while we do not know what the future holds with certainty, it appears there is meaningful REIT upside
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SF office continues its freefall with vacancy now up to 33.9% in 3Q23 according to $CBRE . Absorption was negative 2M sqft despite growing AI demand.
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Prologis $PLD CEO Hamid Moghadam called out discounted valuations in the public market on its earnings call - we agree. L&B has a position in PLD
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Hotels - a tale of the cities and the suburbs. $APLE suburban, limited-service portfolio standing out from peers with occupancy up to 50% and positive cash flow. Urban full-service hotel owners burning cash and occupancy sub 20%. L&B has a position in APLE
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Go figure, warehouse REITs have sold off about 35% this year and now trade at a 4.5% cap rate, yet this week a C$6 BILLION warehouse portfolio sold at a 3.2% cap rate, the buyer could have saved a lot of loonies buying public REITs.
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Blue-chip apartment REIT AvalonBay is down 19% YTD, trading at a 5% implied cap rate, a valuation last seen in 2020. With 15%-plus growth in '22, shares look like a bargain. Consider $BX bought student housing REIT $ACC last month for a 4% cap ($13B) with lower growth prospects.
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Office demand could plummet by 20% in the coming years if employees end up working just 1 day a week less in office vs pre-COVID. Don’t get lulled into Vaccine Mirage in '21 thinking demand will return to normal post-vaccine. See Vaccine Mirage White Paper
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I'll be on
@CNBCFastMoney
today with host
@MELISSALEECNBC
. Tune in live at 5:30pm ET
#realestate
@CNBC
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It's not going to get easier to buy a home: 39M homeowners have mortgages at sub-4% rates and less than 5M are above current 5.25% rate. Expect single-family rentals to continue to win, L&B has a position in $AMH to capitalize on this trend.
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Verdict is in on Merger Monday with a big thumbs down — Realty Income $O shares have declined 3% reducing the premium paid for Spirit Realty $SRC to 12%. Healthpeak's $PEAK so-called merger of equals with Physicians Realty Trust $DOC fared poorly as the shares of the companies
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Apartment landlord Avalonbay $AVB reported tough results in 4Q20 with same-store revenue down -7.6%, but stability in the suburban portfolio and green shoots for occupancy and rental rates in the urban markets bode well for a strong multifamily rebound during 2021
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REITs likely have material upside if '98/'99 is guide. REITs are down 17% from pre-COVID highs in February, while NASDAQ is still up 10% - REITs appear poised to close the gap. In '98/'99 when REITs were left behind which then led to strong returns.
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Public Storage $PSA raising $500M of 5-year debt at sub-1% rates to take pay down preferreds yielding over 5% is just a sliver of the potential balance sheet and earnings accretion opportunity at the company. L&B has a position in PSA.
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Piedmont office REIT $PDM refinanced their unsecured debt at 9.25% for $400 million up from 4.45%, highlighting that the challenge for office has moved from work from home to a financing problem.
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Kudos to UC for moving quickly to take advantage of the opportunity. (3/3)
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Check out the
@CNBCFastMoney
interview for winning megatrends in real estate and the challenges faced by the NY office market
Has the coronavirus pandemic crushed real estate?
@JonLitt
discusses the trends and why NYC could be facing an 'existential hurricane'
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No relief for office landlords — vacancy rates approaching GFC levels in 2Q21 with few signs that the pain is ending
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DC office REIT JBG Smith $JBGS is feeling the pain we outlined in a CNBC Fast Money interview in May. Concurrent with 2Q earnings, they announced that nearly 20% of their office tenants plan to vacate over the next 18 months, likely leading to a material decline in earnings.(1/2)
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#NYC
was desolate this Saturday, despite
#reopening
on Monday. Our photographers found few people out and about despite the city entering its first phase of reopening.
#Retail
#Transportation
#TimesSquare
#Stayathome
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Single-family rental stellar results continue - $INVH reached 98.0% occupancy in October, another record. INVH hitting the gas on rent increases, with new leases up 6.6% y/y, bucking the trend of a typical seasonal slowdown
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While the market is on tenterhooks for hot inflation readings, the dramatic slowdown in the housing complex will likely lead to a cooling of inflation. Traditional inflation measures and the Fed's favorite PCE will take some time to cool given how it is measured. (2/2)
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The office market will eventually bottom but hard to see a light at the end of the tunnel as major corporations are now cutting jobs and closing offices.
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Real estate investors made a fortune from 30 years of interest rate declines, forecasts assumed current rates where too good to be true. US 10 year higher than most other developed markets, unlikely to see material change
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Big cities seeing large move-outs, surprisingly Houston and Fort Myers also top the list.
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Public real estate has generated among best absolute and risk adjusted returns across asset classes in past 2 decades - beating public equities and private real estate while providing diversification with low correlations. Full study in link
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Biden's proposed $45 billion bailout for office landlords has surprisingly received little attention. The White House plan to provide incentives to convert office to affordable residential is an admirable attempt to make lemonade out of lemons. Given the ~$1 trillion in office
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Merger Monday
#2
— Healthpeak $PEAK is merging with medical office REIT Physicians Realty Trust $DOC for $5 billion. PEAK adding to MOB exposures will dilute challenged life science exposure, however, not a ringing endorsement at all for lab space by issuing shares at implied cap
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REITweek is back and hopefully the last virtual NAREIT conference before we see everyone in Vegas this November. The real estate recovery is robust across the board with strong updates from apartments, single-family rental, storage, senior housing, and lodging among others.
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Today we're celebrating L&B's 12th anniversary. Since 2008, we have established L&B as a leading hedge fund in the real estate sector and highly effective in the world of shareholder activism. We are proud of our track record of strong outperformance. (1/3)
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L&B today issued a white paper titled The Work From Home Hurricane Has Hit Life Science Offices. Contrary to conventional wisdom, attendance in Alexandria’s office/lab buildings is down 50% as compared to pre-pandemic attendance. (1/3)
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Blackstone $BX appears to be backstopping at 11.25% return for UC out of its $1B investment in the venture, leaving BREIT investors no worse off, based on our understanding of the transaction. There would likely be a long line of investors to make the UC deal with Blackstone(2/3)
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The Simon v. Taubman trial begins Nov 16th. In August, Taubman did the unthinkable – both from a good business decision perspective and in the context of the litigation. (1/4)
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"Blue wave" on election day could see S&P earnings hit from a corporate tax hike, REITs do not pay corporate taxes and will be spared. A Biden win could reverse the REIT underperformance to the S&P after Trump was elected
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Migration out of cities was in place prior to pandemic, only accelerated during pandemic, and will continue for years to come. $AMH seeing residents in CA, NJ, and NJ looking to rent homes in other states. L&B has a position in AMH
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SL Green Realty $SLG reported earnings yesterday with occupancy down and a significant slowdown in leasing which was nearly in-line with the pandemic low in 3Q20, raising concerns on NYC office demand. Great team dealt a difficult hand.
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Kudos to Life Storage $LSI team for maximizing value in merger with Extra Space $EXR in a clear vote of confidence in the self-storage sector. Don't expect $PSA to engage in a bidding war, so we expect PSA stock to work higher with the deal overhang gone.
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The dominoes are falling as “remote first” work is normalized. Accounting firm PwC will allow all its 40,000 U.S. services employees to work virtually and live anywhere they want in perpetuity. The bull case for office is getting tougher and tougher.
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Easterly Government Properties $DEA, who has government agency tenants, ties tenant usage of their properties by citing steady electricity consumption, using the Alexandria $ARE playbook. Unfortunately, water consumption is likely a better barometer. Despite similar electricity
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Yesterday, I was invited on
@CNBC
Fast Money with
@MelissaLeeCNBC
to discuss how the "Winter is Coming" for office landlords and how investors looking for distressed real estate opportunities can find them in listed REITs. I want to thank CNBC for having me on the show.
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Six flags real estate monetization has interest — $VICI earnings call: "Has an awful lot of attributes that remind us in very good ways of our gaming investments…real investment merits for us, both strategically and economically." Stay tuned for $SIX earnings report Thurs (1/2)
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Easterly Government Properties (DEA) likely to see leasing challenges based on U.S. Government Accountability Office's report revealing that federal agency office buildings are desolate. (1/3)
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L&B will vote against the $HGV purchase of Diamond Resorts as we believe HGV is overpaying, ceding control to Apollo, and diluting the earnings growth and value potential of HGV as a standalone company. Press release and presentation at the link below.
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New York City office is facing an existential hurricane post-pandemic to learn more watch the video
#nycoffice
#RealEstate
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SL Green $SLG reported 1Q23 earnings and unfortunately did nothing to dispel the office bears. Manhattan occupancy was down 260bps just from 4Q22 and leasing activity slowed to a crawl in Feb/March. L&B has a position in SLG.
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REITs mispriced, underperforming S&P by 20% YTD. Retail and office may be challenged, but lots to like from data centers, single-family to rent to apartments and net lease. Disconnect in share prices to earnings as S&P earnings revisions post-COVID similar to REITs in '20 and '21
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Bill Gates says more than 50% of business travel will disappear in post-coronavirus world -- Secular headwind for office, hotels, and related real estate
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Office headwinds mounting as potential WeWork bankruptcy would allow $WE to cancel leases adding to increasing trouble in major markets like NYC and SF which WeWork controls ~1% of office stock, undoubtedly adding to vacancy and rental rate weakness.
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Six flags a Thrilling Real Estate Opportunity. L&B has a position in SIX.
Activist investor’s founder, Jonathan Litt, urges the theme-park operator to monetize its real estate to help reverse a decline in the shares via
@WSJ
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