Market Commentary | May 20, 2026

Higher for Longer

The direction of interest rates has, for an extended time, played a significant role in discussions of economics and investment. Here is where we stood this morning.

Our take is that the rates question has been resolved and that the Fed won’t cut rates further until oil prices recede dramatically or petroleum-induced inflation cripples the world economy.  For REIT investment, interest rates are no longer the controlling influence, and that’s a very positive change.

Real Estate is Business

On 05/18, S&P Capital IQ published an analysis indicating that a majority of equity REITs raised their earnings guidance in the 1st quarter reporting period. It seems even in the face of rising debt costs, managements are finding routes to greater profits.

Our objective is to position portfolios squarely in the path to earnings growth, collect dividends, and wait for share price appreciation. Despite higher rates, the share price appreciation is already happening.

Impatience

The futile anticipation of waiting for lending rates to fall has not prohibited large investor action.

• With higher debt costs, a company’s stock can be valuable currency, as it was with Public Storage’s (PSA) all equity acquisition of National Storage Affiliates (NSA) or NextEra Energy’s (NEE) proposed merger with Dominion (D).  
• Whitestone REIT’s (WSR) refinancing needs evaporated as they addressed numerous cash suitors who urgently wanted to own appreciating retail real estate.
• Transactional options might be presented to levered operators facing higher costs of capital (NXRT, BSRTF, BRT, to name a few) from the strong balance sheets of peers who want to grow (AVB, EQR, or CPT).

We are always working to find the right combination of value and growth, and current market conditions are shaping up to reward that effort.

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