Get started with iREIT + Hoya Capital today!
Sign Up for Top Stocks 2026 Now!
This video’s transcript was generated by a third party. It is not curated or reviewed and is provided for convenience and information purposes only. The accuracy and completeness of the transcript are not guaranteed.
Daniel Snyder: Hey everyone. Daniel Snyder from Seeking Alpha. Thank you so much for taking the time to join us today as we dive into the world of REITs, a sector that many of you love, but also has been down and out in various areas. So, today, we are joined by one of our favorite leaders in the REIT sector, David Auerbach from iREIT+Hoya Capital. And we’re going to dive into conversation with him in just a moment to get the lay of the land and what to expect for the year ahead. But first things first, let’s go ahead and get our quick legal disclaimer out of the way.
Past performance is no guarantee of future results. Any views or opinions expressed in the webinar do not reflect those of Seeking Alpha as a whole. Seeking Alpha does not take account of your objectives, of your financial situation, and does not offer any personalized investment advice. Seeking Alpha is not a licensed securities dealer, broker, US investment adviser, or investment bank. Information provided by the investing group does not constitute investing advice. Investing group leaders are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body. Any content and tools on the platform are offered for information purposes only.
Now, with that out of the way, I am excited, as I mentioned, to have David join us here today because I don’t know if you know this, but there’s a little conference going on out in the middle of America right now called the REITworld where he is. So, live from REITworld, we have David joining us today. David, how are you doing?
David Auerbach: Good, Daniel. Thanks for having me. Really appreciate it. Good to be here.
DS: Yeah. No worries. I mean, there is so much to dive into. Obviously, this is a big week where a lot of us are watching FOMC. The meeting is here about 24 hours from now. We’ll see. It looks like there’s a widely anticipated 25 basis point cut coming to us. We’ll see what happens. We’ll obviously be watching commentary, but I’m wanting to dive into everything REIT, interest rates, and more with you today. So, why don’t we go ahead and dive into the conversation. Let me go ahead and kick things off here by pulling up your presentation deck that you have for us today.
So, David, if you will, let’s start from the very beginning. How did you get into the world of REITs? How did you team up with Alex and Brad Thomas with the new iREIT+Hoya Capital when you guys merged? Can you give us the background to how you got to where you are today?
DA: I’ve been in the REIT industry for over 25 years now. I started by chance responding to a classified jobs ad in the local Dallas newspaper back in March of 2000. The ad said, got Series 763, call this number, and it wound up being a trading job at the firm known then as Green Street Advisors, what’s now known as Green Street. At the time, Green Street, was the preeminent REIT research and trading firm on Wall Street, based out of Newport Beach with the trading desk in Dallas. And so for, like, the dozen or so years that I was at Green Street, I got to watch the REIT industry grow up.
You’re talking about multiple companies coming to market, many new investors, and frankly, many new sectors that were born out of the original, call it, bread and butter sectors from back in the 1980s and 1990s. So, I got to watch this sector grow up. My joining up with Alex was just by random chance. I had launched an actively managed Residential REIT ETF coming out of the pandemic. I was with the team for a couple of years. And when they decided to go into a different direction for distribution, Alex and I have always maintained a pipeline of communication together.
We’ve grown up in this business over the past 10, 15 years together that I just reached out to him. Hey. What’s new? What can we do? And it wound up being where Alex is like, David, I love what you do. You’re so good at your social media. You’re so good at education. You’re so good at representing these companies in this industry. Why don’t you just keep doing what you’ve been doing for the past several years, but just do it for me? And at that point, it really wasn’t hard to argue because I was so familiar with the research platform that Hoya Capital had built, especially capped off by their weekly Sunday flagship recap notes.
I was seeing Hoya Capital in my inbox every single day, if not every single week. Same thing with Brad Thomas. Knowing Brad for 20 something years at this point, watching his research platform, and then when Hoya and iREIT merged, a couple years ago, very close to a year and a half, almost two years at this point, we realized there was a lot of synergies taking all of this great research educational content that we’re trying to provide and grow it to the masses. And so, obviously that covers REITs, but then other income sectors, MLPs, closed end funds, BDCs, our subscribers, our users, our followers, it’s not just REITs only.
A lot of these guys are focused on what I like to say the income side of the equation. We are bombarded with so many stories out there of crypto volatility, NVIDIA, Apple. We’re not saying yay or nay. We’re not knocking that, but REITs are such a boring sector. And boring is good because it’s slow and steady wins the race. And when you think about the long-term lease terms that are in place with so many of these companies, the rent bumps that are already in place, I like to say that anything that happens with the stock price of these companies is the extra cherry on top of your sundae.
When you buy REITs, you really should be leading on the income side of the equation, focusing on the dividend income stream that these companies publish or produce. So, it really was very easy to come together for us to decide on how we’d take this to the next level. And it’s been a fun 25 year roller coaster. That’s for sure. And I’m excited to see what’s ahead for the next 25 years.
DS: Yeah. I love, I mean, obviously, no one really may look to REITs and say you’re like, oh, wait. I want that value. I want that yield. I want that monthly income from REITs, which is one of the cool things about this.
DA: But, Daniel, to cut you off, see, again, this plays right into why I say this. I was talking about this with one of the management teams earlier today at this conference. I don’t think, the average investor realizes how much they are interacting with REIT-owned properties every single day. Here’s a perfect example. To facilitate and watch this webinar right now or record it and watching it on YouTube afterwards, you are utilizing a REIT-owned property, a data center that’s most likely owned by either a Digital Realty, an Equinix, somebody like that.
We are using REIT-owned properties every single day of our lives from the minute we wake up to the minute we go to sleep. And by the way, frankly, every single one of us basically carry a REIT-owned property in our pockets every single day in this thing called a cell phone. So, as a result, because we use these properties so much, we don’t think about the other side of it where it’s like, let’s take the first misconception. REITs are interest rate sensitive.
Does the average consumer wake up in the morning and before he pours that first cup of coffee say to himself, gosh, where’s the 10-year treasury at today? What’s the Fed interest rate looking like today? What’s the Fed going to do tomorrow? But they’re going to go and check their phone and go surf LinkedIn or Facebook or whatever it is. So, I feel like it gets lost in the noise that we use these properties so much. But what I call the mass media, the CNBCs, the Bloombergs that drive the headlines that get all the attention, that’s what gets lost in the noise because we may have one or two bad apple stories that are out there, and we can get into those. But there’s a 100 great stories that go under the radar that never get the time, attention, or focus, or frankly, is the engine in the car that’s driving it down the street that’s providing that income in your pocket.
DS: Well said. Well said. I mean, I know that there is a select group of people across America because I was recently talking to my best friend. He’s looking at trying to buy a house. Right? So, people that have specific case scenarios do focus on interest rates, but the rest of us, like you said, we are utilizing data centers. We go into stores that are triple net lease. We go and see all these, just daily things that are just normal to us, but we are powered by REITs in the background. So, well said.
I do want to mention as well, David is the Chief Investment Officer at Hoya Capital as well. Maybe we just quickly talk about the ETFs that you offer as well because you are the advisor on the Housing ETF, which is HOMZ, benchmarking the U.S. residential real estate industry. And then also there’s the Hoya Capital High Dividend Yield ETF, which is RIET as well. How did those ETFs come about? Were they always there for you?
DA: It’s very interesting how they were both born, frankly. Timing is everything, and the birth of HOMZ came out basically right during COVID when there was a huge demand for homes, for home ownership. And we saw what happened as people were relocating, migrating, moving out of parents’ basements, moving out of the first apartment to take advantage of that first homeownership opportunity. And at the time when you look at the various home or residential ETFs that were out there, there wasn’t a truly one size fits all overall wrapper that covered the sector. Everything had some, what I call, nooks and crannies associated with it. There wasn’t a true perfect play to cover all things housing. So, HOMZ is very unique because it covers the home builders, the residential REITs such as the apartment REITs or the single family rental REITs. Also, when you think about the home goods and furnishings and supplies, as well as the services side of it, think about your Coldwell Banker, or your Zillow as an example. So, it was a perfect way to play all things housing, which should hopefully play out as we see this, call it, housing supply demand imbalance start to right self it. As a result, you could see where the pockets of strength lie when home builders are, let’s say, technically out of favor because there’s an unaffordable housing product, therefore, the residential REITs are the winners.
So, because of that, in listening to our, investors, our followers, our subscribers, they came to us and said, okay, well, this is great. What about something that’s more income oriented? What about something that’s putting some more smash in my pocket? And that’s what led to the birth of RIET. So, going back to the example I said about the 100 stories that go under the radar that don’t get the coverage retention, here’s how I focus on the REITs sector. The REITs sector is like your traditional bell curve. You’ve got the top 10%. I call those your valedictorians, the salutatorians, the kids that graduated top of the class, the REITs are in the S&P 500.
You had the bottom 10% in your high school, the bullies, the troublemakers, the kids in detention, the REITs that are over levered, the REITs that have cut their dividends. Where we like to focus our attention, as I mentioned, is the middle of the ladder there. The middle of that spread of those 120 companies or so that are small-cap, mid-cap, the income-oriented names. Secondly, because of our rules oriented process, as far as I know at this moment, it’s still only the REIT ETF on the market that also has a slice of preferred stocks.
So, one-third of the names in the portfolio that represent 10% of the weighting are in liquid REIT preferred stocks. So, by trying to find the REITs that pay the highest dividends with the lowest leverage ratios in a rules-oriented process, we’ve been able to build a portfolio that right now is currently paying an annualized dividend on a monthly basis around 11%. And we’ve passed our three and five year track records on both, RIET, very liquid, and so we feel it’s a great way to play into, again, if, if, if, if the Fed cuts rates, if the 10-year treasury comes back in, if commercial sentiments, real estate sentiment starts to thaw, if conditions continue to improve, this is a great way to have exposure to some of those names.
One more point to note. In talking to some folks about high yield funds, and they mentioned certain constituents that are out there that are led by what we call the mega-cap names, the REITs in the S&P 500, the ultra, ultra large names. Those are not “high dividend yield” names. To buy a REIT that pays a 2%, 3% dividend yield is not a high yield necessarily. And so as a result, just because a, first of all, as you mentioned in your disclaimer, everybody has to do their own due diligence. They have to do their own research. But just because a company may have a 7%, 8%, 9% dividend yield or whatever, doesn’t mean it’s a junk/going concern.
It’s always important, as I like to joke, to peel back the layers of the onion and really understand the core fundamentals of this company. Remember REITs are only one tiny segment in the world of commercial real estate. And so when you hear about this commercial real estate wall of debt that’s coming due, you really need to go look at it at the company level to see if that’s true. And the cool thing about REITs is, and if you go to the Slide 3, if you go forward a slide or two, that slide right there, this is a perfect example.
I want to hammer on that transparency tab. Because when you look at the transparency tab, these publicly-traded REITs are putting out quarterly earnings summaries, quarterly earnings conference calls, press releases, regular news. They are telling you basically every single day what is going on at the company. And so, the investor can very quickly gauge the strength of that company based off of the disclosures that they’re making.
DS: Yeah. And this is a pretty broad universe. When people think about REITs, they may not think about all these different indices from healthcare to office, mortgage, strip center, hotel and lodging. So, if I can ask you the very broadest question of all is, what should investors be expecting from the REIT universe into 2026?
DA: Well, first of all, we could almost break out that table and add an extra 10 different subsectors to it. We see, healthcare is a great example because healthcare has senior housing. There’s assisted living. There’s medical office. There’s hospitals. You could break that out into a lot of different sectors. Where are we heading? Well, if the Fed cuts interest rates tomorrow, if the new dovish chairperson coming in sees 50 basis points to a 100 basis points of cuts in 2026, if the stars align, what you’re going to see is the REITs sector, frankly, in a perfect world, it should rally.
If REITs are interest rate sensitive and if interest rates are cut, REITs should be the primary beneficiaries of that. But at the core level of a REIT, remember a REIT is a tax structure. That’s all that it is, and the tax structure basically says that 95% of the debt income that’s earned by this company is passed through to shareholders in the form of dividends. So, for the longest time, it has been business as usual for these REITs, whether it’s the housing crisis of 2008 or 2009, 9/11, COVID, whatever the event is, a good management team puts the blinders on and just focuses on operations and fundamentals. And the true focus of these companies every single day that they wake up, and I’ve heard it in some of these meetings already, how do we find ways to maximize our revenue growth, to minimize our expense growth so that we can generate as much net income as we possibly can to pay out to shareholders. Plus, we also want to manage for a rainy day, and I think that’s a lesson that’s been learned by the industry over the course of several years.
What worked in the previous cycle that doesn’t work now or what didn’t work that may work then or what worked then that will work today. So, companies learn from previous cycles on what to do and what not to do. And therefore, as an example, focusing on dividends as an example. If REITs are dividend machines, if fundamentals are where they were pre-COVID, if not well far surpassed what they were doing pre-COVID. But the dividends haven’t caught up yet because a lot of the management teams are being more conservative saying, we can push out that extra 1 pennies or 2 pennies a share to shareholders, which could equate to, let’s just throw a number out there, a $100 million hypothetically. Are we better off taking that $100 million and using it to go out and acquire properties, improve our properties, whatever it is? They’re getting a little bit more, I wouldn’t say cautious, but they’re trying to figure out what is the best use for every single dollar that’s raised.
DS: Now, that’s a really good point. I want to ask you more about that because it seems like really since was the year 2022, I believe, it seems like the REITs side of things have been a little bit slower than this hyper growth tech AI, NVIDIA as you mentioned. But the M&A front, there hasn’t been a lot of groundbreaking headline, correct me if I’m wrong, please. There haven’t been a lot of big, like, correcting mergers and acquisitions going on with the space and that’s one of the things that you’re looking for, right, going into the new year that we will be seeing more M&A from these companies?
DA: So, you’re wrong. Okay. If you go back to March 2022, we’ve seen 36 – and there is a slide, by the way, that shows all the M&A that has occurred, it is, if you go to number 13. So, if you go to Slide 13, you’ll see all the different mergers that have happened going back to 2022. Now, by the way, speaking of March 2022 when the Fed started hiking interest rates, great time to try to launch an ETF right in the face of 10 interest rate hikes. Right? But here’s a good chart that shows all the different mergers.
Okay. So, 36 different REITs have explored options or merge or gone away since March of 2022. But in the past quarter, even including last night, there was a REIT merger. We’ve seen 11 different REITs in the past quarter merge, explore options, strategic alternatives, etcetera. So, the M&A frenzy is on for the REIT sector. And here’s a very easy way to look at it. Everybody’s favorite REIT on Seeking Alpha, the one REIT that gets more articles written than any other REIT is a company called Realty Income, the letter O, the monthly dividend company.
We’re not here to say Buy, Sell, Hold Realty Income, but here’s what we’re going to say. Realty Income is massive. I mean, massive. And when you’re a company that is massive as the size of Realty Income is, how do you continue to grow? And as a good example of that, you saw that this past week where they announced a several $100 million transaction with Blackstone on a city center in Las Vegas, or you go out and you buy yourself another REIT, another publicly traded company.
So, I think you are seeing signs that, again, as interest rates improve, the deal making machine will continue to grow. And I think, again, the thing to look at, though, is the lease-term that’s in place with a lot of these companies. So, you want to buy something risky, go out and buy a hotel because that’s a one night lease, but if you own an office building, a strip center, whatever, those are usually, let’s say, anywhere from 5-year to 10-year type leases all the way to companies like Safehold, which focus on 99-year ground leases.
So, if you are an office REIT that has grade A tenants with rent bumps tied to the CPI or whatever it is, you know what that escalating ladder is going to look like and what that payout and that rent stream is going to look like from your various tenants. So, they’re able to project pretty well to what the future holds. And, therefore if we’re trying to find ways of – we have a nationwide footprint. We’d really like to go out and grow in the Sun Belt. You know what we should go out and buy this REIT because they’re a bit local to the Sun Belt. So, I think you’re trying to find ways of companies that are trying to improve their localized forces and focus with boots on the ground and be local sharpshooters.
DS: Got you. So, thanks for clarifying the M&A front. I want to ask you as well. I think there’s a lot of conversation about hoping that an IPO market really picks up as well. And that’s across the entire stock market, not just specifically REITs, but when you look at the REITs sector, are you forecasting more companies coming to market, or is that a steady yet, just trickling along as it has been?
DA: So, the SEC still has not truly fully opened up yet since the government shutdown. There are at least one or two REITs that are currently in filing waiting for the green light to go public. One of which is a small office REIT called JOSS. So, JOSS is supposed to be coming anytime now. And I mean, like, it could be any day type of thing. But I’ve heard because of what’s going on in DC with the weather, blah, blah, blah, that the government still shut down, at least for the holidays. And so, yes, you’re going to see more activity coming to market.
If you go back over the past year and some of the various other things that I do with Hoya and some of the other firms that I talk to, there is a lot of interest on the sidelines of folks that want to come to market. And I get asked the question all the time, what do I need? And I basically tell them, you want to come to market, you need scale. You need a sizable portfolio. You really need to have something very value add compelling. As an example, we have, I think there’s over 10 apartment REITs that are out there right now in the publicly-traded market.
Do we need an eleventh apartment REIT? Do we need another net lease REIT out there? I feel like we’re in some of these sectors, you’re more right to see consolidation than expansion, but the office side of it is actually interesting because if the office market is dead, if return to office is dead, blah, blah, blah, all these headlines that we see, then why are we seeing an office REIT IPO on the horizon? Maybe that’s just another one of those signposts that commercial real estate sentiment is continuing to thaw.
DS: Can I ask you, is that more of a regional play across America, or is this a span of nationwide at this time still? Because as you mentioned, that has been a story for a long time of, well, out of office, people are going to work remote, that’s here to stay. But then you see pockets like New York, which have demanded people to go back to the office. So, should investors be looking at a region by region basis when they’re exploring these REITs and the properties they hold?
DA: I don’t even think it’s a region by region basis. Again, I’m sitting in Dallas, Texas. There’s some properties that are doing well. There are some properties that are not. You know what I mean? Great example. Look at guys like Blackstone. It’s, like, okay. I’m shifting gears a little bit, but Blackstone, guys who know the world backwards, forwards, inside and out, could be both buying and selling inside the same cities and the same asset classes. The investment market is wide open.
I do think, obviously, the Class A REITs, the best of the best assets, the One Vanderbilt owned by SL Green or a Highwood Sunbelt office property. Some of these other things, they’re going to do well. It’s your Class B, Class C vintage era office properties that are more likely to go away, but that could also finally play into that office to resi conversion conversation. Look, I was chatting with an industrial REIT earlier today who’s been talking about getting phone calls from residential owners that want to buy the property and convert the industrial warehouse to residential. And when I heard that, I went like, what? Like, it just caught me off guard, and it just shows that where there’s opportunity, you will see shovels on the ground.
DS: Yeah. It’ll be interesting to see how that plays out. Because I know personally, I’ve looked at some of the research behind that about how do you make these office buildings and replumb them and put the electric and windows and closets and make sure everything’s up to code. I wanted to ask you though, David, to switch a little bit here. Going into, as we mentioned earlier, the REITs sector is so large when you get into industries and all the different little niches that you can find. So with the sectors or the industries within this sector that have done really well this year, I wanted to bring up this chart that you have here in your deck. As who has done well this year? Are these going to be the same areas for us to focus next year as well, or are you going to look at a little bit of a switch up here on the indices?
DA: That’s a great question. And, obviously, it is going to be led by healthcare. When I say healthcare, that’s especially senior housing. You’re talking about a sector where there’s just not enough new supply to focus on the baby boomers and the folks that are moving into these properties every single day. So that is definitely a sector that jumps out. Billboard is very interesting, especially when you look at the Berkshire Hathaway angle. Warren Buffett did buy shares of Lamar Outdoor Advertising, in this past quarter. There is history with Warren Buffett in the REITs sector, so it’s something to keep an eye on.
Another sector that really is further down the list, but is getting a lot of attention is retail. I met with the folks from Tanger this morning, which is a great example of a company that’s talking about, look, how many outlet malls are being developed across the country right now? The answer is, really nothing. And a lot of these guys like to say, because there is no real new retail development that’s happening, our existing space becomes that much more valuable every single day to the tune of double-digit rental rate increases. The phone ringing off the hook with new prospective tenants wanting to plant their flag at some of these locations.
Regionalized approach. Again, talking to Tanger, having local retailers to open up shop at the local outlet mall to raise that local awareness. So, I think what you’re trying to see is that a lot of these companies are trying to listen to what their end consumers and tenants are trying to use. But do I think that, if we’re talking on December 09, 2026, does that chart look the exact same? Absolutely not.
Again, one thing to play out this year is that two letter dreaded, two headed monster called AI. Look at how AI has impacted pretty much every single sector on Wall Street, but also especially on the data center side of the equation. People forget how much data centers are being used for AI stuff, and yet it’s the third worst performing sector this year according to the table that you have. But basically every AI query and chat that’s being run is going through a data center, whether it’s owned by a Digital or an Equinix or again, one of these companies that are building out data centers themselves, it is data center power that’s generating all that AI output.
DS: AI is definitely going to be one of those things. I feel like a multiyear growth lever that we’re in right now.
DA: But here’s the way to think about this. I didn’t mean to cut you off. Here’s the way to think about this. Go back to that table. So, if you think about just even a couple of years ago, we didn’t have sectors out there such as cannabis or really billboard. Again, it’s one of those newer-ish type of sectors. So the question really becomes, if I’m looking at this table five years from now, what new sectors are going to be inside this table? Could there be an AI REIT class, let’s say? Could there be a solar REIT sector sleeve that’s out there?
Again, the goal is to try to be that first mover. And so, what’s the next innovative industrial properties that launch what is known as Cannabis REITs today. What is going to be the first Safehold or next Safehold to launch Ground Lease REITs? I think that’s the way that it’s interesting is, you’ve seen the sector start like this and just evolve dramatically. Does it now call like this, or do we see it continue to branch out even more and more further? Do we see dual listings?
I saw a question about European REITS. Do we see other companies choose to dual list between the U.S. and other markets? And there’s a couple of REITs that are dual listed in, like, Tel Aviv as an example. So, can we see that potential opportunity? When you look at some of the global REITs like a Prologis, a W.P. Carey, Realty Income, they could easily list on the London Stock Exchange or some of these overseas markets and be in a basically a 24-hour market cycle. And I think that’s one more thing to take away here.
Before we know it, sooner rather than later, and this is my opinion, this doesn’t represent the views of Hoya Capital. But in my opinion, we’re only frankly, I think, in a big picture, a matter of days away from really having a true 24-hour market cycle that you can go out and buy Simon Property Group at 2:00 A.M. or 2:00 P.M. as an example.
DS: I think that goes into the tokenization and everything. I think we’ve all been reading about. I do wanted to pivot though for a little bit because you had mentioned AI as a big thing to watch for next year, but also we can’t help but there’s going to be a new Fed Chair in May, if I remember right. There’s going to be a new Fed Chair, and the administration is very gung-ho on, I want interest rates down. And that goes into the table here, you see on the right side of your screen of what the Fed futures are looking at, Fed Watch futures from CME you are looking at. But then regards to interest rates being cut next year, I mean, how low should we be expecting to go in your opinion? And then how is that going to correlate with maybe even a multiyear rollout? Because it sounds like they want them 3% or under.
DA: I think we’re a long way away from seeing 3%. It would be great. I mean, we would be ecstatic on our little neck of the woods. I think it’s safe to say that they’re talking 25 tomorrow. I think Hassett, who’s supposedly the person that’s in the lead to be the Chairperson, has set 50 basis points next year. My gut tells me that that really means 50 to 75, if not more. I’m sure there’s going to be pressure from the White House to push further. Here’s the problem. And if you go back to the old efficient market hypothesis, the stuff that you learned in business school and all that stuff, if interest rates are cut, then the 10-year treasury rate should go down, blah-blah-blah. We haven’t seen that.
I like to always say the 4% the magic number on the 10-year treasury for REITs. If the 10-year is below 10%, it’s great for REITs above 10%, or above 4% it’s bad for REITs. And really, it boils down to the fixed income versus REIT dividend yield situation because REIT dividends right now are around 4 and change, and that’s on a market-cap weighted basis. If you equal cap weight those dividends, and again, that’s giving the same weighting to the smallest-cap REIT as you would to a Prologis or Realty Income, that number jumps to north of 6%.
So, that’s why we see the value in the small and mid-cap names. But if, here’s the problem that I see. If the Fed cuts, let’s say, 75 basis points between now and December 09, 2026, and yet the 10-year treasury still remains above 4%, we’re boxed in. We’re in this narrow band, and I think we need something to break out in some form or fashion for that to break.
Now, here’s one thing to note though. The actual REITs themselves, frankly, how do I say this? Don’t care. And why I mentioned that is, again, you are in the S&P 500. You’re AAA rated by S&P, blah, blah, blah. You know what the cost to borrow is. One of the companies got asked today, if you want to go out and buy five-year paper, what’s your number? And the company knew the answer like that. These companies know at a given moment every single day where they can go out and borrow five-year paper, 10-year paper, etcetera, but the takeaway here is that, no matter what is happening out there in the world of interest rates, in the 10-year treasury, the bond market, the debt market is wide open for the REIT sector.
The publicly-traded REITs have – and that’s a great chart right there that shows that. The publicly-traded REITs have frankly raised tens of billions of dollars of new capital this year because the lending window is wide open.
One other thing that we’ve noticed though is that you have started to see REITs tiptoeing back into the world of preferred offerings. We’ve seen a couple of preferreds being offered by the REITs, which we haven’t seen, frankly, in years and years. You’re seeing unique structures like convertible preferreds, forward equity offerings. A lot of companies have been very active on the share buyback front. These management teams are entrenched with the shareholders, meaning they’re on the front line as offensive and defensive linemen battling in the trenches. They’re trying to gain traction on the field every single day. And so if you’re, let’s say your name is Sumit Roy, you’re the CEO of Realty Income, and you own 25 million shares of stock as part of your long-term compensation, and Realty Income raised their dividend in 2025 by a penny. Guess what? Sumit just got a very nice “monthly bonus” in his pocket. So, clearly, he wants to see that dividend income stream continue to grow. And I think it all plays into with that.
The big issue that a lot of the companies are facing is, we borrowed money at COVID at a 2%, 3% handle when it was free money back then. A lot of that paper is renewing today at 5 and 6%. Oh, hey, that extra 3% of interest expense on a $100 million deal… that adds up. And what the companies are saying is, yeah, you’re right, but here’s what you forgot to note. Our rental stream, our income stream is up 3x since we took that deal down to whatever it is, that we can more than offset that interest expense increase with the amount of money that we’re earning from our bread and butter through tenants.
DS: Yeah. Correct me if I’m wrong, though, but that’s what you’re seeing here on the left side of the screen here with the interest expense to NOI right?
DA: Yeah. I mean, exactly. So, I mean, again, what you’re seeing, though, is, the market is wide open. It’s business as usual for a lot of these companies. The guys are putting up numbers that were far away blowing away what they’re putting up in COVID, but yet the dividends haven’t really caught up yet. And so, some of these sectors still have some recovery to go. We still see obviously, we talk about office. Hotels, another example of a sector that’s been weak this year because of a variety of reasons. But again over the big picture, what you really should look at is, what does the company’s dividend income stream look like over the course of 1, 3, 5, 10, 20, 25, 50 years, etcetera. That’s what you really should be thinking about.
DS: Yeah. You just mentioned office. The commercial real estate delinquency rates here, you have in the chart, that’s what that’s showcasing, right? Is that office is still…
DA: Yeah. But I would also note that on the office side that has plateaued. I mean, you are starting to see that turn a little bit. So, I think what you’re seeing and again, and it’s been very prevalent. I mean, you see the headlines from what’s going on in Downtown L.A. or some of these other markets where some of these office properties are trading at discounts, but remember, frankly, some of the best transactions that have occurred, at least in my career, have been in times like this where volatility equals opportunity.
Go in, put a little TLC in it, upgrade the property. And guess what? Three, five years from now, the guy that bought it for a $100 who sells it for $300 a foot, they’re the ones that have the last laugh. So, I think, again, it’s – one more thing to note. Who is a good partner with a lot of these REITs? It’s sovereign wealth funds, right? Or institutional investors. The sovereign wealth fund does not care about, frankly, what has happened in that one, two year window. The sovereign wealth fund cares about that investment over 25 years, 30 years. And, frankly, what’s that income stream look like to that fund over 25 years, 30 years? You’re talking some serious–.
DS: Yeah. Exactly. That’s what I think about when it comes to data centers still, right, as it continues to rollout worldwide.
DA: Well, but you’re seeing that or, like, single family rentals. Why do you think you’re seeing so many different players get involved in this space? It’s because we don’t have enough power. We don’t have enough data centers. We don’t have enough residential housing. We don’t have enough this. We don’t have enough that. Tell you what, we’re going to give you the capital that you need to be the answer to that solution. And therefore, we’re just going to sit back and watch this income roll in over 25 years.
That’s the next frontier for data centers. Forget the data center development. It’s like we’re the power developers. We’re going to complement the data center guy, and we’re going to be the right hand man to Digital Realty. So, if Digital wants to go and put in, I’m throwing a number out there, 25 gigawatts in the next five years in these 20 markets, we’re going to be right there next to them putting in those 25 gigawatts across those 20 markets. That’s the stuff to think about is, where the puck is going across the ice.
DS: Yeah. Brilliant, David. Absolutely brilliant. I wanted to get your viewpoint on one more thing. So, as I do a lot of video content here at Seeking Alpha, talk to analysts and leaders like yourself elsewhere as well. I always see in the comments from our audience people asking about mortgage REITs. So I was wondering if that’s one thing that we haven’t really touched on yet within our conversation today, specifically on the mREIT side of things. So, I noticed there, I’m sorry. Scroll back up here. You had a quick graphic somewhere about mREITs, compared to equity REITs. Can you give us a lay of the land of how you and iREIT+Hoya are thinking about the mREIT part of this universe?
DA: Obviously, it is a completely different ballgame versus playing the bricks and mortar publicly equity REITs. So, you can’t look at a Simon versus an Annaly Capital in the same frame. That’s number one. I think when we, again, see a lot of these headlines about CMBS delinquencies and some of the stuff that’s out there, you forget to realize who the tenants are for some of these mortgage rates. I’ll give you a great example.
We interviewed the CEO of AGNC Mortgage a couple of months ago at Hoya. And me growing up at Green Street, very well versed about the world of the public equity, bricks and mortar REITs, it was always anti – I wouldn’t say Green Street, it was anti-mortgage REITs, but it was much far riskier, much more sophisticated asset class, much more of a volatile roller coaster to play. And I spent 10 minutes talking to the CEO, and it completely changed my mindset about the world of mortgage REITs.
And he’s like, how did I change your mind? And, well, here’s the answer. The tenant’s the government, so Fannie Mae, Freddie Mac, Sallie Mae, Ginnie Mae, those are like the various tenants to some of these mortgage REITs. The income stream has been sound and solid across most of these sectors. The one or two anomalies are being worked out or they have been able to work out those issues. AGNC, again, a mortgage REIT, even through COVID and some of these volatility, never cut their dividend, have maintained their dividend, and they trade, like, 20 million, 30 million shares a day.
So, you don’t think about the liquidity on some of these names. I would, again, this is not representing Hoya. This is my personal opinion. If the average investor was going to start looking at mortgage REITs as a whole, I would always push them towards the biggest players in the sector, such as an Annaly Capital, NLY; a Blackstone Mortgage Trust, BXMT; or Starwood. And the reason being is, if Blackstone or Starwood go under, should something go belly up at one of those two companies, then, frankly, we have much, much bigger issues going on in the world of commercial real estate than Blackstone and Starwood going under. Does that make sense?
DS: Yeah. Well, it does to me, at least. I hope it does for every other viewer here as well. David, before we jump into some Q&A real quick, I do want to mention to everyone, if you love everything that you’ve been hearing today from David, I mean, his team is constantly updating this data constantly across everything in the world of REITs. I mean, that’s why he’s even at the REITworld right now tuning in with us. So, one…
DA: Here’s my name tag.
DS: There he is. It’s true. It’s true. I’m not making it up. I want to highly encourage you. I’m asking the team in the back here. If you can go ahead and drop the link to iREIT+Hoya Capital here on Seeking Alpha here in the chat. If you’re watching the replay, you can find that beneath the video as well. There is a 20% discount going on right now. So, go check that out. Obviously, REITs are a very powerful sector. I don’t have to say it because you can hear it straight out of David’s words, yourself. But, David, is there anything you want to add real quick before we dive into a Q&A section for a little bit?
DA: I would just, again, emphasize the slow and steady wins the race. Who cares what the Fed does tomorrow? It has no impact on the earning stream of these companies. I use an example on talking to a CEO a couple of months ago and using Liberation Day as the example. I’m not here to talk politics or get political, but what the CEO said to me was, David, over the course of the three days when tariffs started breaking, Liberation Day, all these headlines, here’s what didn’t change. My dividend didn’t change. My income stream didn’t change. We were out there signing new leases, but yet my stock price is down 30%.
What does that investor know that I don’t know when I run this company and I know what we are doing every single day? So, anytime I talk to from the most sophisticated investor to the most basic retail investor, I always say, you have to look at REITs with 25 to 50 year classes. Do not look at REITs on a day-to-day trading basis. Look at it over the course of a lease term that’s in place, 5 years, 10 years, 25 years, whatever it is, and focus on the income stream that you’ve earned from that company over the course of 10, 25 years.
DS: Well said. Alright. David, let’s go ahead and kick things off here with this first question here from Scott. It says, speaking of which, going back to the part of the conversation when we’re talking about M&A, are there any specific merger and acquisition opportunities you are specifically looking at or that we should be looking out for? Any of that come to mind.
DA: Yeah. I would say, on a sector by sector basis, I think Net Lease might be a sector that you’re going to see some consolidation. We have way too many players. I would point to some of the guys that might be over levered, that might be in a little bit of a more distressed type situation looking for some of that rescue capital, bailout capital type of stuff. For a lot of these companies, what they’re realizing is the cost to acquire is cheaper than the cost to develop. So, if I can go out and buy an existing, if I can go out and buy an existing platform for far less than what it would take me to go out and build that platform, that’s going to be on the horizon.
DS: Gotcha. I mean, makes sense to me at least. Makes sense to executive teams as well. Greg says here you highlighted that data centers may be a laggard going forward. What is the underlying reason? Has that area peaked?
DA: I don’t think it’s peaked. I mean, the reason being is because number one, it has been on fire for a few years now. How do you keep, when you’re peak, peak, peak, peak, peak, peak, peak, peak, how do you keep on peaking? I think it’s also you’re seeing a lot more players get involved in that space, especially talked about private guys. The biggest REIT IPO this year was Fermi, the Rick Perry-based data center REIT to build in Lubbock in Texas Tech campus, near Texas Tech. So, I don’t think it’s fully run its course yet. A great example is DigitalBridge.
The DigitalBridge stock price has been a freaking roller coaster. But if you read some of the management commentary where we haven’t even frankly scratched the surface on the amount of demand that is out there, you could see the post of why this is a sector that’s going to continue to be in demand for frankly the next several years and beyond.
DS: Alright. So, we have Susan here, who says great information. Thank you. Any REIT-preferreds, specifically? I know you’d mentioned those earlier. Any REIT-preferreds that you would suggest looking into at this time?
DA: That’s a very tough question because the REIT-preferred market today is much different than pre-COVID. It is a much more refined list of names that are out there. We have seen guys like Alpine Income Trust that did launch a preferred offering in the past month. We saw FrontView mentioned a launch of convertible. Again, playing out that boring is good, slow, and steady. The most prolific REIT-preferred issuer that’s ever been out there, and you’ve again, I’m not saying Buy, Sell, Hold, but Public Storage has always been the tried and true stalwart of REIT preferred offerings.
I would say based off of your risk tolerance, if you can justify a little bit of risk in your portfolio, there are some yield, there are some REITs that yield to call right now would blow your minds out of what you could potentially be yielding on some of these names that are out there. And if you have any questions, reach out to us at Hoya Capital. We’re not going to say, go out and buy this name, but we would obviously share our thoughts with readers about why we choose, why we like certain names. In our holdings, which are fully transparent, you can go to our website, download our ETFs holdings. You could see what REIT-preferreds we do own in the portfolio.
DS: Yeah. I mean and that’s a part of, like, a crucial part of your service, right? Having that direct communication to you guys that have been, your entire team, let’s be honest, your entire team with decades and many decades of experience. So, highly encourage everybody to take advantage of that.
DA: Thank you.
DS: William here says, what is your view on highly specialized REITs like Cold Storage, for example, that it may be highly impacted by market forces?
DA: So, actually, that was my first meeting this morning, was meeting with the Americold guys, and there’s only two publicly traded cold storage names that are out there. And that is a great, great question. And I think the answer is, a lot still has to play out because Americold and some of these names are global plays where the market conditions and fundamentals are different in Australia than they are here.
As an example, they briefly talked about finding opportunities with QSRs, Quick Service Restaurants, which is very prevalent in Australia and some other markets, but not as prevalent here necessarily. Another example, when they started talking about this, I’m like, wait. Didn’t you do this during COVID? Was focusing on cold storage of, like, flowers and pharmaceuticals and some of these other cold needed products that are out there?
So, I think, again, it shows a sharp management team that’s trying to focus on where’s that puck going, where’s the demand, where do we add value. Americold’s a unique story. Lineage is a unique story. It’s one of the newer sectors that’s out there. In fact, we broke it out as part of our subsector rankings because we’re starting to see some more of that shift that’s going there, but I think it is a sector to keep an eye on in the next year or two.
DS: Alright. Now, we got just a few more minutes here, so I’m going to run through a couple more of these. There was a question here. Oh, yeah. There it is. Jack says, do you expect to see more private equity buyouts of undervalued REITs in the current environment?
DA: Well, I mean, Blackstone is a good example. Obviously, we saw what they did with Alexander & Baldwin yesterday. Blackstone dictates where that market’s going. You’ve seen activist campaigns. You’ve seen, the Elliotts of the world that are trying to make some changes. So, yeah, I do think that you will see more private equity private players involved in the process. The KKRs of the world. Look at all the REITs that emerge.
Again we have that chart that you show of who the buyer was and it’s a hodgepodge of names that are out there. I do think the key though is looking towards, again, frankly, who these guys are partnering up with. It’s a good example. No, we don’t necessarily cover Australia, but you saw it this week in Australia where Brookfield and government of Singapore are acquiring national stores down in Australia, meaning that you are seeing sovereign wealth funds and institutional capital partnering with firms to take companies private.
DS: Alright. Let’s go ahead. I got to read this. This one’s a special name to me just because I’ve been doing webinars with Brad Thomas for many years now, and he would always tell us about VICI Properties. So, I imagine you are also in the loop with VICI. Everybody’s asking, what is going on with VICI? Is it time to double down? Is it time to exit? What is happening?
DA: The VICI management team is literally standing, like, right over here.
DS: Bring them over. No, I’m just kidding.
DA: So, it’s funny that you’re saying. I wish – they’re here for one day. They’re very quick. I’m, again, not representing the Hoya view. This is David’s view. I’m very biased. I love VICI. I love Vici, what they’re doing. There’s a variety of reasons why. You could focus on Vegas, how they are the king of the Las Vegas Strip. You could focus on Canyon Ranch, Bolero, what they’re redoing in Beverly Hills right now as a construction lender. I think the key is, I’m personally in Ed We Trust, the CEO.
I think it’s a very unique story that’s out there. It is completely different than buying GLPI, Gaming & Leisure Properties. It is a completely different play than going out and buying Wynn or MGM. It’s frankly, what VICI would tell you is, we’re not gaming REITs anymore. We’re an experiential REIT. So, I think that’s the key is, what is that next experiential offering that they invested.
DS: Alright. Now, let’s go ahead and wrap it up there. I know we’re about at the top of the hour. I want to remind everybody, iREIT+Hoya Capital here on Seeking Alpha, you’ve seen the link and within the chat. You can also find it beneath this video. But also we talked about the two ETFs that the team runs over here as well. That’s HOMZ, which is the Hoya Capital Housing ETF. And then you also have the Hoya Capital High Dividend Yield ETF, RIET. And for anybody that wants to reach out to David or Alex, they’ve dropped their – Alex is just here in the background, dropping your emails in the chat. So, feel free to reach out to them with your questions and also ask them questions about the ETFs if you’re interested in that as well.
David, I can’t say thank you enough. I mean, you’re being on the road at the middle of the conference, we’re jumping on today. Really appreciate it. I know everybody else that joined today did as well. But everybody, go check out iREIT+Hoya Capital here on Seeking Alpha. And, David, I’m going to give you the last word before we jump off here.
DA: Well, I want to – my last word’s actually going to answer one of the last questions that popped up here. Are REITs good for young investors? And that question gets me so excited because when I lead Education First, that is the first thing that I focus on. Are you, did you just have a baby last week and your baby is one day old? Did you just have a new grandchild that was born? Go out and buy that child or grandchild, I don’t care what the REIT is. Realty Income, Agree Realty, go out and buy a monthly dividend paying REIT and dividend reinvest those or reinvest those dividends. DRIP it. Because you’re talking about again, there’s a lot of research out there from Morningstar and some of these other guys that are out there that basically says, the younger that you are, the sooner that you start investing in REITs in your portfolio could be the difference between, frankly, 6 figures in your retirement account and 7 figures in your retirement account. And it’s all because the power of compounding dividends, and REITs provide that that frankly, no other sector offers.
And I’m not trying to sell our ETFs. I’m trying to sell the REIT sector as a whole that in this volatile market, the REIT sector is just going to climb along, be a little bit narrowband. Now, there’s troubles that are out there like Alexandria or Medical Properties or some other companies, but every single sector on Wall Street, outside of every sector, there’s always going to be one or two bad apples. But it’s up to guys like my partner, Alex, myself, Brad, others that are out there, to help investors find those good stories that are out there, not to sell the good story, but for the reader to understand, okay, I see why I should be looking at this.
Last point. Of course, every single CEO on Wall Street wants you to buy their stock. Jensen Huang, NVIDIA doesn’t say buy NVIDIA. Jensen says, here is why you should be buying this sector. My job is to basically try to explain why every single investor should be buying REITs. If our funds are the answer, that’s great. And if they’re not, that’s okay as well. It’s our job to make sure to help you find the best REIT stocks and funds that are tailored for what you, the end investor is looking for.
DS: Well said, David. I mean, I will say from my own personal investing and research, you guys are the only guys I go to for REITs.
DA: Thank you.
DS: I mean, I’ve never had to go to another source. So, if you want to find more of this information, like I said, check them out here on Seeking Alpha. David, thank you again so much. Alex, thank you for being in the background jumping on as well. And, everyone, we hope you have a great rest of the week, and we’ll see you here again in the next webinar. Take care.
DA: Thanks, Daniel.
Get started with iREIT + Hoya Capital today!
Sign Up for Top Stocks 2026 Now!
