It was a fairly quiet week for REITs with the market rattling around in a band.  We made some trades that proved successful having sold out of IRT right before the equity offering crashed its price and swapping out the FPI for AFCO before the arbitrage partially closed.

While the price of MPW has not reflected it, the company created a tremendous amount of value through its offering paired with the $1.2B acquisition.  It both improved MPW’s credit metrics and its FFO/share with expected accretion of around 10%.  Ed Aldag has a history of solid purchases and this just adds one more to his track record.  The only reason we are not buying on the price dip is because we already have so much given MPW being the largest position in 2CHYP.

Fund flows continue to be a factor as passive gains share over active.  The Vanguard REIT Index (VNQ) is now the largest holder of many REITs and is starting to have massive influence.  Lower active share means there is less intelligent money fixing the pricing of mispriced securities, so we anticipate more mispricing and more volatility.  Such an ETF boom has never happened before, but it could have major unforeseen effects.  We will be watching this closely.

Commentary may contain forward-looking statements which are by definition uncertain.  We retain no obligation to update or correct forward-looking statements should the available information change.  Actual results may differ materially from our forecasts or estimations.

2CHYP Portfolio Snapshot

09/30/2016 2CHYP Performance since inception

Performance Disclaimer.  Past Performance does not guarantee future performance.  Markets are uncertain and there is no level of return that we can guarantee.  Trading of equities can result in material or total loss of principal.

2CHYP Weekly Trade Confirmation Report