Earnings season has largely finished up for our pocket of the REIT universe.  The headline earnings numbers often grab most of the attention, but I like to focus on the underlying fundamental trends; the supply and demand that will drive growth or portend problems.

The mall REITs largely reported weak headline numbers, but the underlying health showed marked improvement.  Occupancy costs are down to nearly the lowest levels of this cycle and supply of malls is negative due to redevelopment as other property types.  This results in a situation where tenants are going to be far stickier going forward and with occupancy cost of ~11%, the tenant has far more to lose than the mall.  This will move negotiating power back to the landlords and I suspect rental rates will rise in 2020.

Senior housing is in trouble.  Welltower managed to grow through the quarter by sheer excellence of operations but if one looks at the property type as a whole it looks ugly.  SNH and Ventas got killed by oversupply and more deliveries are on the way.  The weakness of senior housing is not reflected in the multiples of the stocks so I think the market is in for a bit of a shock.

As the business cycle extends past a decade, competition is high and in a competitive environment advertising is essential.  Outfront Media is experiencing demand across its spectrum of customers and its New York MTA contract is progressing as intended.  We see healthy growth ahead that is not yet priced into this low multiple stock.

Within 2CHYP, UMH, UNIT, Arlington, Core Civic, and GNL reported this week.  Please check out our earnings updates in the portfolio analytics section of the website.

2CHYP Portfolio Snap Shot

2CHYP Performance: inception through end of October, 2019

2CHYP Weekly Trade Confirmation Report