REITs pause

While there was some minor jostling this week, most REITs ended up roughly where they started.  Our guess is that market participants are moderating their bets until there is more clarity as to the direction of policy and the economy.  That being said, there are always exceptions.

CBL & Associates (CBL) and City Office REIT (CIO) each moved substantially; up for CIO and down for CBL.  While we agree that Amazon is a threat to CBL, the market is pricing in a somewhat disastrous outcome with a P/FFO multiple under 5X.  Even with moderate damage, I think CBL is worth more than its market price.  We doubled down on the position to try to take advantage of the extreme pessimism.

As for CIO, we do not see the move as a time to sell because it was merely undoing the drop from the recent issuance.  It remains our top pick within the office sector due to its concentration in favorable submarkets along with a cheap P/FFO multiple and high yield.

These tempered markets provide relatively less opportunity for opportunistic trading, but if history is any guide, such longanimity will not last long.

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.

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