Editor’s note: Welcome to part two of your REIT Sheet issue for March/April. This issue of TRS contains the updated version of our entire REIT databank, which currently tracks 85 companies. It’s still in build mode and I welcome reader suggestions for inclusion. I’m also featuring Alexandria REIT (NYSE: ARE) for conservative fresh money and Simon Property Group (NYSE: SPG) for the more aggressive.–RC

The S&P 500 Real Estate Sector Index got out of the gate quickly in 2023, closing February 2 with a year-to-date
gain of 13.11 percent. That wasn’t nearly enough to reverse the Index’s 2022 loss of -26 percent including dividends paid. Nor was it enough to move us out of the cautious stance in which we ended last year.

As it’s turned out, REITs’ surge was largely a false breakout. Since early February, the index has dropped a little over -10 percent, cutting its year-to-date gain to a little over 1 percent. And as our table “Top and Bottom Performing REITs in Q1 2023” highlights, quite a few REITs have done far worse.

In the most recent REIT Sheet update, I stated the view that despite being still solid on the inside, even the highest-quality REITs would likely head lower in an overall stock market slide. We still want to own them. But we also want to stay cautious with fresh money.

I’m going to repeat that advice here. The Federal Reserve appears to have at least temporarily quelled what at one time appeared to be a budding banking crisis—largely because the Biden Administration has demonstrated that it will act to bail out any financial institution it deems would present systemic risk by failing.

But so long as the Fed continues squeezing the economy by driving up interest rates, they’re going to expose weak points. And in the meantime, they’re going to depress investment by driving up the cost of money for all but the best placed individuals and corporations.

As I’ve also pointed out, the central bank crimping investment now all but assures inflation will be higher than ever when it eventually reverses course. And that will be a major upside driver for our favorite REITs, since inflation while the economy is growing pushes up the value of property and rents…