We have been looking for a way to increase our exposure to retail real estate.

The reason is simple.

Retail real estate is performing very well today. For years, investors assumed that e-commerce would kill brick-and-mortar retail. But the opposite has happened. Retailers have increasingly realized that the best strategy is not online only, but omnichannel. They need both an online presence and physical stores to maximize sales, improve distribution, lower customer acquisition costs, and strengthen their brands.

Even e-commerce native retailers are increasingly opening physical stores.

At the same time, very little new retail supply has been built over the past decade. Developers focused on apartments, self-storage, industrial, and other sectors, while shopping centers and malls were largely ignored.

As a result, the retail real estate sector is now undersupplied.

Occupancy rates are high. Rent growth is accelerating. Landlords have regained pricing power. And the best malls are becoming increasingly valuable because they are difficult, if not impossible, to replicate.

This has already benefited us.

For example, our biggest mall REIT investment, Macerich (MAC), has recovered strongly from our cost basis of about $8 per share to around $26 today.

But the problem today is that U.S. mall REITs are no longer nearly as cheap as they used to be.

Macerich has rerated materially. Simon is again recognized as a blue-chip mall REIT. And while we still like both businesses, the easy money has already been made.

Therefore, we have been looking abroad for similar opportunities.

That brings us back to IRSA (IRS).

IRSA is Argentina’s largest listed real estate company and, in our view, one of the most attractive ways to gain exposure to high-quality mall real estate today.

We previously owned IRSA shortly after Javier Milei’s presidential victory and more than doubled our money in less than a year. We later sold our position to redeploy capital elsewhere.

Then, in October of last year, we reopened a position after the stock sold off ahead of Argentina’s midterm elections. At the time, the market was worried that Milei would lose political momentum, his reform agenda would stall, and Argentina would slide back into policy gridlock.

Instead, the opposite happened.

Milei’s party performed far better than feared, political risk declined, and the broader reform agenda gained more support.

Since then, the thesis has continued to progress well.

But IRSA’s share price has still lagged the recovery that we have seen in U.S. mall REITs, despite the company continuing to execute well. This creates an opportunity.

Today, we are adding to our existing IRSA position by buying 200 additional shares, increasing our position size by 20%:

Why IRSA?

Read more

Public REITs are being acquired at substantial premiums, yet buyers often still appear to be purchasing the underlying real estate at attractive valuations.

For several years, we have argued that REITs are undervalued relative to the value of the properties they own.

Public REIT share prices collapsed as interest rates surged, but private real estate values generally held up much better. This created unusually large discounts between the valuations assigned to properties in the public and private markets.

The market may debate the precise value of a REIT’s assets, but private buyers are now putting real money behind our thesis.

And we are no longer talking about one or two isolated transactions.

Buyout activity has accelerated across practically every major property sector, including:

• Apartments

• Industrial properties

• Self-storage facilities

• Shopping centers

• Healthcare properties

• Life science buildings

It is also happening across multiple countries, including the United States, Canada, the United Kingdom, and Australia.

In just the first quarter of 2026, five acquisitions of listed REITs were announced with an aggregate transaction value of approximately $26.1 billion, including assumed debt. By comparison, just five REIT M&A deals were completed during the entirety of 2025, representing $14.4 billion of value.

Meanwhile, the median U.S. REIT still traded at a nearly 20% discount to consensus net asset value at the end of the first quarter. The targets involved in the early-2026 deals were generally among the REITs trading at particularly large discounts.

This is important because private equity firms, pension funds, sovereign wealth funds, and large strategic REITs are typically among the best-informed buyers of real estate.

They have access to detailed property-level information, proprietary transaction data, financing relationships, and teams of professionals who spend their entire careers valuing real estate.

Today, many of these sophisticated investors appear to be reaching the same conclusion: The public REIT market is offering better value than the private real estate market.

Below is a recap of all the REIT buyouts we have seen over the past year. After that, I will discuss what this means for the REIT industry and investors going forward:

Two Important Precursors From Late 2025

Before reviewing the 2026 deals, two transactions that are often associated with the current wave should be clarified.

First, Australia’s National Storage REIT agreed in December 2025 to be acquired by a consortium led by Brookfield and GIC for approximately A$4 billion. The A$2.86-per-security offer represented a roughly 26% premium to the unaffected share price. The transaction was completed, and the REIT was delisted, in April 2026.

Second, Blackstone explored a potential takeover of the United Kingdom’s Big Yellow Group in late 2025. However, discussions ended in December without a formal offer. It was still another indication that private capital was actively evaluating listed self-storage portfolios.

Neither transaction was technically announced in 2026, but both helped set the stage for what followed.

The 2026 REIT Buyout Timeline

January 5: Minto Apartment REIT

• Buyer: Crestpoint Real Estate Investments and the Minto Group

• Buyer type: Private real estate investment manager and the REIT’s original sponsor

• Transaction value: Approximately C$2.3 billion, including debt

• Premium: 32% to the previous closing price

The year began with Canadian apartment landlord Minto Apartment REIT agreeing to be taken private.

Crestpoint Real Estate Investments partnered with an affiliate of the Minto Group to offer C$18 in cash for each Minto unit. This represented a substantial 32% premium to the REIT’s previous closing price.

The transaction was particularly noteworthy because apartments are generally viewed as one of the highest-quality and most defensive real estate sectors.

The properties were not facing technological obsolescence or a structural collapse in demand. Rather, the public market had simply assigned the REIT a valuation that allowed a private buyer to pay a large premium while still finding the transaction attractive.

January 28: Life Science REIT

• Buyer: British Land

• Buyer type: Publicly listed REIT

• Transaction value: Approximately £150 million

• Premium: 21% to the previous closing price

• Discount to asset value: Approximately 26% below EPRA net tangible assets

British Land then agreed to acquire the United Kingdom’s Life Science REIT through a combination of cash and British Land shares.

The offer valued Life Science REIT at 42.8 pence per share, representing a 21% premium to its unaffected closing price and a 15% premium to its three-month volume-weighted average price.

But here is the most important detail:

Even after paying this substantial premium, British Land was acquiring Life Science REIT at an approximately 26% discount to its EPRA net tangible asset value.

This perfectly illustrates the disconnect that exists today.

Public shareholders receive a large premium and may feel that they got a good deal. Yet the buyer can simultaneously acquire the underlying real estate at a significant discount to its estimated value.

Both sides can win because the starting public-market valuation was simply too low.

February 2: Peakstone Realty Trust

• Buyer: Brookfield

• Buyer type: Private real estate fund managed by a global alternative asset manager

• Transaction value: Approximately $1.2 billion

• Premium: 34.4% to the previous closing price

• Status: Completed in May 2026

Next came Peakstone Realty Trust.

Brookfield agreed to acquire the industrial REIT for $21 per share in cash, representing a 34.4% premium to Peakstone’s prior closing price. The transaction valued the company at approximately $1.2 billion and was completed in May.

Brookfield is one of the world’s largest and most sophisticated real estate investors. It understands replacement costs, leasing conditions, capital requirements, and private-market valuations better than almost anyone.

It is therefore meaningful that Brookfield concluded that buying an entire listed industrial REIT was more attractive than assembling a comparable portfolio one property at a time in the private market.

February 23: Veris Residential

• Buyer: A consortium led by Affinius Capital and Vista Hill Partners, with GIC

• Buyer type: Private real estate managers and a sovereign wealth fund

• Transaction value: Approximately $3.4 billion, including debt

• Premium: 23.2% to the unaffected price and 27.5% to the 30-day average price

Apartment REIT Veris Residential then agreed to be acquired for $19 per share in cash.

The consortium included Affinius Capital, Vista Hill Partners, and Singapore sovereign wealth fund GIC. The offer represented a 23.2% premium to Veris’ unaffected share price before reports of a possible sale and a 27.5% premium to its 30-day volume-weighted average price.

Again, the buyers were not inexperienced speculators.

GIC is one of the largest institutional real estate investors in the world, while Affinius and Vista Hill are specialist real estate investment managers.

They were willing to commit billions of dollars to acquire an apartment portfolio from the public market at a substantial premium.

March 16: National Storage Affiliates Trust

• Buyer: Public Storage

• Buyer type: Publicly listed REIT and strategic buyer

• Transaction value: Approximately $10.5 billion

• Premium: Approximately 34.7%

• Status: Scheduled to close end of July, subject to customary conditions

The next deal was one of the largest of the year.

Self-storage giant Public Storage agreed to acquire National Storage Affiliates Trust, or NSA, in an all-stock transaction valued at approximately $10.5 billion.

NSA shareholders are set to receive 0.14 Public Storage shares for each NSA share, which initially implied a value of approximately $41.68 per share and a 34.7% premium.

This transaction is especially important because the buyer is itself a publicly traded REIT with extensive operating experience.

Public Storage knows the NSA portfolio, operating platform, development economics, and self-storage market extremely well. It still concluded that acquiring the entire company at a substantial premium was an attractive use of its capital.

This was not a private equity buyer making an aggressive macro bet, looking to earn fees. It was the industry’s largest operator buying one of its listed peers.

April 9: Whitestone REIT

• Buyer: Funds managed by Ares Management

• Buyer type: Private alternative asset manager

• Transaction value: Approximately $1.7 billion

• Premium: 12.2% to the previous closing price and 26.5% to the unaffected price

Ares subsequently agreed to acquire shopping-center landlord Whitestone REIT for $19 per share in cash.

The offer represented a 12.2% premium to Whitestone’s closing price immediately before the announcement. However, the more relevant comparison is the unaffected price before reports emerged that the company was exploring a sale. On that basis, the premium was approximately 26.5%.

Whitestone owns open-air, service-oriented shopping centers in fast-growing Sunbelt markets such as Phoenix, Austin, Dallas, Houston, and San Antonio.

For years, public investors assigned low valuations to smaller shopping-center REITs, partly because of concerns about retail real estate and partly because smaller REITs generally trade at discounts due to their limited scale and liquidity.

Ares evidently saw the situation differently.

It recognized that necessity- and service-oriented retail centers in supply-constrained markets can generate durable cash flow and attractive long-term rent growth.

April 16: First Capital REIT

• Buyer: KingSett Capital and Choice Properties REIT

• Buyer type: Private real estate capital partnered with a public REIT

• Transaction value: Approximately C$9.4 billion

• Premium: 12% to the previous closing price, 17% to the 20-day average price, and 8% above reported NAV

Canadian shopping-center landlord First Capital REIT then agreed to be acquired by KingSett Capital and Choice Properties REIT.

First Capital investors are set to receive C$19.24 in cash and 0.3186 Choice Properties units for each First Capital unit. At announcement, this represented total consideration of C$24.40 per unit.

The offer represented:

• A 12% premium to the previous closing price

• A 17% premium to the 20-day volume-weighted average price

• A 21% premium to the 90-day average price

• An 8% premium to First Capital’s reported net asset value

Choice Properties is acquiring approximately C$5 billion of necessity-based neighborhood shopping centers, while KingSett is acquiring approximately C$4.4 billion of other assets and First Capital’s outstanding units.

This transaction is notable because the buyers were willing to pay above reported NAV.

It suggests that the highest-quality grocery-anchored and necessity-oriented retail assets may be worth at least as much as, or potentially more than, the values carried on REIT balance sheets.

April 20: Sila Realty Trust

• Buyer: Affiliates of Blue Owl Real Estate Capital

• Buyer type: Private alternative asset manager

• Transaction value: Approximately $2.4 billion

• Premium: 19% to the previous closing price and 25.6% to the 30-day average price

• Status: Completed in July 2026

Blue Owl then agreed to acquire healthcare-focused Sila Realty Trust for $30.38 per share in cash.

The offer represented a 19% premium to Sila’s previous closing price and a 25.6% premium to its 30-day volume-weighted average price. The transaction valued the company at approximately $2.4 billion and was completed on July 1.

Sila owns a diversified portfolio of healthcare properties.

Healthcare real estate can be operationally complex, and property quality varies significantly from one asset to another. Blue Owl had the resources to conduct extensive property-level due diligence and still concluded that purchasing the company at a substantial premium offered an attractive return.

May 12: Picton Property Income

• Buyer: LondonMetric Property and Schroder Real Estate Investment Trust

• Buyer type: Two publicly listed UK REITs

• Transaction value: Approximately $546 million

• Premium: Approximately 7% to the previous closing price

In May, two British REITs agreed to acquire Picton Property Income in an all-share transaction.

Picton shareholders are set to receive a combination of LondonMetric and Schroder REIT shares worth approximately 78.2 pence for each Picton share at announcement. This represented a roughly 7% premium to Picton’s previous closing price.

The premium was smaller than in many privatizations, which is typical for public-to-public mergers.

However, the deal still contributes to the broader consolidation trend. Three listed companies will effectively become two, reducing the number of separate REIT investment opportunities available in the UK market.

May 21: AvalonBay Communities and Equity Residential

• Transaction: Merger of equals

• Buyer type: Public-to-public REIT consolidation

• Combined enterprise value: Approximately $69 billion

• Premium: No conventional takeover premium

The largest REIT transaction of the year was the announced merger between apartment giants AvalonBay Communities and Equity Residential.

The all-stock merger is expected to create the largest publicly traded U.S. apartment REIT, with a combined enterprise value of approximately $69 billion and more than 180,000 apartment units.

AvalonBay shareholders are set to receive 2.793 Equity Residential shares for each AvalonBay share and will own approximately 51.2% of the combined company. Equity Residential shareholders will own the remaining 48.8%.

Because this was structured as a merger of equals, there was no conventional cash takeover premium.

It also differs from the privatizations discussed above. The properties will remain publicly listed, and the aggregate amount of publicly traded REIT equity will not disappear.

Still, the transaction materially reduces the number of large apartment REITs available to investors.

It is another example of the sector consolidating into a smaller number of larger and more efficient platforms.

June 24 / July 22: Prologis Approaches SEGRO And Submits Best And Final Proposal

• Potential buyer: Prologis

• Buyer type: Publicly listed REIT and strategic buyer

• Latest proposed value: Approximately £14.0 billion, or 1,031.7 pence per SEGRO share

• Latest proposed premium: Approximately 39% to SEGRO’s pre-bid price and 14% above its latest pro forma adjusted NAV

• Status: Best and final proposal submitted on July 22, following three prior proposals that had been rejected

In June, Prologis publicly disclosed that it had approached European industrial landlord SEGRO regarding a potential acquisition.

Its initial publicly disclosed proposal valued SEGRO at 925 pence per share, representing a 24.6% premium to SEGRO’s unaffected closing price.

Prologis later improved the terms. Its third proposal valued SEGRO at approximately 993 pence per share, or £13.5 billion in total. This reportedly represented a roughly 34% premium to SEGRO’s price before the approach became public and approximately 10% above its estimated net asset value.

SEGRO rejected the improved proposal, arguing that it continued to undervalue the company and its development platform.

But Prologis has now returned with what it calls its “best and final” proposal. The latest proposal values SEGRO at 1,031.7 pence per share, or approximately £14.0 billion in total. This represents a 39% premium to SEGRO’s unaffected closing price and a 14% premium to its latest pro forma adjusted NAV.

The proposed consideration consists primarily of Prologis shares, with a partial cash alternative of up to £3.5 billion, representing 25% of the total consideration.

The fact that Prologis continued to increase its offer strengthens the bullish signal.

Prologis is the world’s largest industrial property company. It possesses vast amounts of market data and has direct visibility into leasing, replacement costs, development economics, and asset values on both sides of the Atlantic.

Prologis clearly believes that acquiring SEGRO, even at a premium to its reported NAV, could create attractive long-term value.

Meanwhile, SEGRO’s board has so far resisted these approaches, arguing that the proposals undervalue the company and its long-term growth prospects.

Both sides appear to agree on one central point:

European industrial real estate is worth considerably more than SEGRO’s unaffected public-market valuation suggested.

July 20: LXP Industrial Trust

• Buyer: Brookfield and CPP Investments

• Buyer type: Global alternative asset manager and institutional pension fund

• Transaction value: Approximately $5.2 billion, including net debt and preferred equity

• Premium: 4.6% to the previous closing price, 12.3% to the 30-day average, and 19.8% to the 90-day average

• Status: Definitive agreement with a 40-day go-shop period

Most recently, Brookfield returned for another industrial REIT.

Brookfield and the Canada Pension Plan Investment Board agreed to acquire LXP Industrial Trust for $61.20 per share in cash. The transaction values LXP at approximately $5.2 billion, including net debt and preferred equity.

The headline premium was only 4.6% to LXP’s closing price immediately before the announcement, but the stock had already appreciated substantially.

The price represented a 12.3% premium to LXP’s 30-day volume-weighted average price and a 19.8% premium to its 90-day average price. The agreement also includes a 40-day go-shop period during which LXP can seek a superior offer.

This is Brookfield’s second acquisition of a listed U.S. industrial REIT in 2026, following Peakstone.

That is unlikely to be a coincidence.

Brookfield appears to believe that public industrial REITs provide a cheaper and faster way to acquire scaled logistics portfolios than competing for individual properties in the private market.

What Are These Buyers Telling Us?

No single acquisition proves that the entire REIT sector is undervalued.

A buyer may identify company-specific synergies, believe that it can operate the properties more efficiently, or have a lower cost of capital than the target.

But when the same pattern repeatedly occurs across different property sectors, geographies, and buyer types, it becomes much harder to dismiss.

Consider who is acquiring or attempting to acquire these companies:

• Brookfield

• Ares

• Blue Owl

• GIC

• CPP Investments

• Crestpoint

• KingSett

• Public Storage

• British Land

• Prologis

• Choice Properties

• LondonMetric

• Schroder REIT

These are not unsophisticated buyers chasing speculative assets.

They are among the largest and most experienced real estate investors in the world.

Moreover, many are paying premiums of 20%, 30%, or even closer to 40% to acquire these REITs.

Yet in many cases, they are still buying the assets at or below estimated private-market values.

Life Science REIT is perhaps the clearest example. British Land offered shareholders a 21% premium, yet it was still acquiring the company at a 26% discount to reported net tangible asset value.

Buyouts Provide Real Price Discovery

One of the challenges with valuing REITs is that net asset value estimates are ultimately estimates.

Analysts can debate the appropriate cap rate, replacement cost, development value, or private-market value of a portfolio.

An actual acquisition is different.

It represents a real buyer committing real capital after conducting extensive due diligence.

Every completed transaction therefore provides another private-market comparable for the remaining REITs.

When Public Storage agrees to pay a large premium for National Storage Affiliates, investors must reconsider whether the other self-storage REITs are also undervalued.

When Brookfield acquires two industrial REITs and Prologis pursues SEGRO, investors must reconsider whether listed industrial portfolios are being priced too cheaply.

When Minto and Veris are taken private, the implied values of other apartment portfolios become harder to ignore.

The deals gradually force public-market investors to update their valuation assumptions.

The Supply of Public REITs Is Shrinking

Buyouts also affect the supply-and-demand balance of the REIT market.

When a private buyer acquires a REIT, the company’s shares disappear from the public market.

Its former shareholders receive cash and need to decide where to reinvest it. Some will leave the sector, but many dedicated REIT investors, real estate funds, and income-oriented investors will redeploy at least part of the proceeds into other REITs.

The same amount of potential capital is then chasing a smaller selection of publicly listed companies.

Public-to-public mergers work somewhat differently. They do not eliminate the same amount of public equity because shareholders generally receive shares in the combined company. However, they still reduce the number of independent REITs available for investment and concentrate index and active-fund allocations in fewer companies.

This is not merely theoretical.

The number of listed U.S. REITs declined from 223 at the end of 2020 to approximately 189 in 2026. At the same time, aggregate market capitalization increased from roughly $1.2 trillion to $1.6 trillion, and the average listed REIT grew from approximately $6.5 billion to $8.7 billion.

The sector is becoming larger but more concentrated.

This could become especially important as investor sentiment continues to recover.

When capital was leaving REIT funds, the reduction in supply received little attention because demand was weak.

But as fund flows improve, institutional allocations recover, and generalist investors return to the sector, they will be competing to buy a smaller number of remaining REITs.

That should increase the scarcity value of high-quality public real estate platforms.

Bottom Line

The recent transactions are not isolated events.

Through July 27, we can identify at least 11 major agreed REIT transactions in 2026, in addition to Prologis’ live attempt to acquire SEGRO and the major late-2025 transactions that closed or influenced the market this year.

The targets include apartments, shopping centers, industrial properties, self-storage facilities, healthcare assets, and life science buildings.

The buyers include private equity firms, pension funds, sovereign wealth funds, and some of the world’s largest REITs.

They are frequently paying double-digit premiums, yet in many cases, the acquired properties still appear attractively valued relative to private-market comparables or reported NAV.

This tells us three things.

First, public REIT valuations remain sufficiently low to attract some of the world’s most sophisticated real estate investors.

Second, each acquisition creates new price discovery that can help close the valuation gap for comparable REITs.

Third, privatizations and mergers are steadily reducing the number of listed REITs, potentially concentrating recovering investor demand in a smaller pool of remaining companies.

The public market can ignore underlying property values for a while.

But eventually, private buyers step in and take advantage of the discrepancy.

That is precisely what is happening today, and it is one of the strongest positive signals we have seen for the REIT sector in years.

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Analyst’s Disclosure: I/we have a beneficial long position in the shares of all companies held in the CORE PORTFOLIO, RETIREMENT PORTFOLIO, and INTERNATIONAL PORTFOLIO either through stock ownership, options, or other derivatives. We also own a position in FarmTogether. High Yield Landlord® (’HYL’) is managed by Leonberg Research, a subsidiary of Leonberg Capital. All rights are reserved. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. The newsletter is impersonal and subscribers/readers should not make any investment decision without conducting their own due diligence, and consulting their financial advisor about their specific situation. The information is obtained from sources believed to be reliable, but its accuracy cannot be guaranteed. The opinions expressed are those of the publisher and are subject to change without notice. We are a team of five analysts, each contributing distinct perspectives. Nonetheless, Jussi Askola, the leader of the service, is responsible for making the final investment decisions and overseeing the portfolio. We do not always agree with each other, and an investment by Jussi should not be taken as an endorsement by other authors. Past performance is no guarantee of future results. Our portfolio performance data is provided by Interactive Brokers and believed to be accurate but its accuracy has not been audited and cannot be guaranteed. Our portfolio may not be perfectly comparable to the relevant index. It is more concentrated and may at times use margin and/or invest in companies that are not typically included in REIT indexes. Finally, High Yield Landlord is not a licensed securities dealer, broker, US investment adviser, or investment bank. We simply share research on the REIT sector.

Wireless communications tower infrastructure REITs have had a rough stretch over the last several years, driven primarily by macro headwinds and major tenant churn.

However, we believe that a fundamental shift has already begun that will ultimately create tailwinds for this niche of commercial real estate. We don’t know how long it will take for this shift to happen, but we are confident that it is underway.

At High Yield Landlord, we own two of the three major cell tower REITs:

• Crown Castle (CCI) -- Retirement Portfolio

• SBA Communications (SBAC) -- Core Portfolio

Both have, unfortunately, suffered poor performance in recent years for both macro and micro reasons.

The micro reasons for their poor performance are idiosyncratic:

• Crown Castle has been weighed down by multiple CEO shakeups and a fundamental strategy review that ultimately led to the sale (at a steep loss on cost basis) of the REIT’s fiber and small cell segment.

• SBA Communications went into the rate-hiking cycle several years ago with a high debt load and has been sacrificing growth for the sake of deleveraging ever since.

Both REITs’ micro headwinds are in the process of being eliminated. CCI is disposing of its small cell segment to deleverage, while SBAC has brought down its own net leverage ratio from ~8.5x in 2022 to the low-6x area this year.

Once these headwinds are in the rearview mirror, we believe both REITs will settle into a new equilibrium of roughly mid-to-high-single-digit annual AFFO per share growth rates.

At 2027 FFO multiples of ~17x for CCI and ~15x for SBAC, we see both REITs as being cheaply valued, especially given their improving fundamentals, recession-resistant cash flows, and strengthening balance sheets.

Below, we will explain the four major reasons why we see these two REITs as good values today.

1. Interest Rate Relief On The Horizon

By far the biggest potential catalyst for strong performance from the tower REITs would be interest rate relief.

Alongside net lease REITs, cell tower REITs are among the most interest rate sensitive sub-sectors in the real estate space. They sign 5-10 year contracts with carriers that feature 2-3% annual escalators and no cancellation clauses. While operating expenses are minimal, capital costs are fairly significant, because tower REITs have historically made ample use of debt (although less so in recent years).

All three of the major cell tower REITs have steady slates of debt maturities. This makes them quite sensitive to the level of interest rates, especially the BBB corporate bond yield.

Here’s a chart contrasting cell tower REIT cash flow multiples against the BBB corporate bond yield:

You can see that when rates shoot higher, tower REIT multiples reflexively contract. And when rates fall, tower REIT multiple inflects higher.

Today, with bond yields still elevated and lots of concerns about persistent inflation and “higher-for-longer” interest rates, tower REIT multiples remain depressed.

But as we have written about recently, we believe the CPI is near its year-over-year peak and should decline going forward.

The Cleveland Fed’s Inflation Nowcast, for example, forecasts the CPI to fall from May’s 4.2% to a rate of 3.9% in June and then 3.7% in July.

And the alternative inflation gauge Truflation likewise shows YoY consumer inflation falling in June.

Oil prices may remain volatile, but we think the general trajectory of the CPI should be downward for the remainder of the year (barring some other shock, of course). This should allow interest rates to ease lower as well.

As interest rates come down, cell tower REITs benefit due to both incrementally lower refinancing costs and lower yields on competing income investments. This should facilitate some upward re-rating of valuation multiples.

2. Unrelenting Growth In Mobile Data Demand

Read more

Our thesis that the CPI will trend lower over the remainder of 2026 is playing out nicely.

We have been making the argument for several months that the recent inflationary bounce is a temporary phenomenon driven by the Iran conflict. The oil supply disruption caused an overwhelmingly energy-driven bump in the CPI, but as the conflict wound down, inflation would cool.

In the medium- to long-run, tame money supply growth, a sluggish non-AI economy, stagnant labor market, weak housing market, Sunbelt apartment oversupply, stabilizing trade policy, and weakening paycheck-to-paycheck consumer will continue to pull inflation down.

The cooler-than-expected June 2026 CPI report lends support to that thesis, as we’ll show below.

The biggest threat to this thesis is a re-escalation of the Iran conflict resulting in a prolonged closure of the Strait of Hormuz.

This vital shipping waterway was choked off for three and a half months, from March through mid-June, although some ships did manage to make the transit by switching off transponders (”going dark”).

After the US and Iran reached a memorandum of understanding in June, traffic through the strait began to pick back up again.

Then the conflict resumed, becoming kinetic again.

Here’s the critical risk.

During the first several months of this conflict, oil prices were kept in check by a rapid release of US petroleum reserves -- even faster than the release in 2022 in the wake of the Russian invasion of Ukraine.

Also, China tapped into its vast petroleum reserves in order to limit its demand for imports.

But now, US reserves have reached critically low levels that won’t allow further withdrawals without risking the integrity of the salt caverns. And while China likely still has ample reserves, their primary benefit will go to the people of China.

The risk, in short, is that oil flows out of the Strait of Hormuz are once again cut off for a sustained period without the cushion of reserve releases to blunt the impact. That could cause oil prices to surge again, keeping inflation and interest rates elevated.

Already, since the MoU fell apart and hostilities resumed, the price of oil has been climbing steadily.

The risk of an oil-driven stagflation for a while longer is by no means out of the question.

We are not geopolitical analysts, but we do think that despite President Trump’s desire to neatly conclude the conflict as quickly as possible, the Iranians probably have the ability to sustain hostilities for quite a while, if they choose to do so.

But there’s some good news that drastically minimizes this risk to the US economy.

Over time, the oil intensity of real GDP (how much oil it takes to produce a unit of GDP) has fallen dramatically. If you expand that out to the intensity of all energy, the US economy has been getting less and less energy-intensive over time.

In such an environment, oil prices simply don’t matter that much to the overall US economy.

In fact, according to recent analysis put out by the Yale Budget Lab, since the beginning of fracking, a $10 rise in the price of a barrel of oil has only a very minor negative impact on real GDP over the next year and a negligible effect thereafter.

That is very different from previous eras.

As you can see, during the “Great Inflation” era of the 1970s, a spike in oil prices had a far more severe and long-lasting negative impact on real GDP.

Even in the 1990s and 2000s, the US economy remained quite sensitive to oil prices, albeit less so than in the ‘70s and ‘80s.

So, while a sharp but temporary spike in oil prices would surely raise inflation and interest rates, it would not likely be enough to send the US economy into recession. Moreover, the Yale Budget Lab found that a spike in oil prices had a relatively muted effect on core CPI, and that effect is spread out over multiple years.

That brings us to the June CPI and PPI reports released recently.

During the three months from March through May, both the consumer price index and producer price index surged on the back of oil prices, while core CPI edged higher only slightly.

But as you can see, all three retreated in June.

As we explained in last month’s inflation update article, the spike in the CPI was overwhelmingly driven by oil prices. But the core CPI, which strips out food and energy, rose primarily because of a quirk in the shelter metrics. The government shutdown last Fall caused a gap that resulted in artificially high shelter component readings in April and May.

Owners’ Equivalent Rent (Blue) & Rent of Primary Residence (Green) YoY:

We predicted last month that shelter CPI would come down in future months, and so far that prediction has been accurate.

Private sector aggregators of rent rates like Apartment List continue to show a soft multifamily market, albeit one that is past the worst of the oversupply headwinds. Rents should remain flat for a while longer, until the national average vacancy rate comes down further.

As such, the CPI’s shelter metrics, which lag real-time market rent rates by a year or more, should almost certainly continue their disinflationary path going forward.

Here’s an overview of the June CPI report, with three particularly important components highlighted:

Perhaps surprisingly, the overall index fell 0.4% month-over-month, driven primarily by the drop in oil prices but also by MoM declines in electricity, used cars, electricity, transportation services, and medical care.

It appears that higher gasoline prices caused some consumers to pull back on other forms of spending, which then led to price declines in those areas.

Notice, for example, that the large category of “commodities less food and energy,” which makes up ~19% of the CPI, has fallen 0.1% MoM for two consecutive months now.

All Goods Excluding Food & Energy YoY:

It appears that after the inflationary surge in this category following the “Liberation Day” tariffs, price growth is now veering back toward the zero line.

With wage growth fairly low and lower-income consumers fragile, many Americans lack the financial capacity to absorb higher gasoline prices without sacrificing other forms of consumption.

This is true also of the middle class, who tend to be the primary customers of airlines. Airline fares spiked in the wake of the Iran conflict and remained high in June.

Airline Fares Index:

Granted, the weight of airline fares in the CPI is only 1.1%. In core CPI, airfares account for only 1.4% of the total basket. But anyone who did book a flight recently has likely needed to cut back on other forms of spending.

That puts downward pressure on other parts of the CPI basket.

We think it is telling that the share of CPI items with price growth over 2.5% collapsed in June, and even its 6-month moving average appears to have rolled over.

This, we think, is another sign that higher prices at the pump are forcing consumers to cut back elsewhere, which ultimately translates into lower prices in those other areas.

Another obvious area where consumers are likely cutting back is restaurants.

While “Food At Home” (grocery) inflation remains steady at about 2.5% YoY, “Food Away From Home” (restaurant) inflation has been sliding this year.

Food At Home (Blue) & Food Away From Home (Green) YoY:

Restaurant price growth has now reached a post-COVID low of 3.4%.

That’s still higher than its ~2.5% average level during the 2010s, but the trajectory seems clearly downward, not upward or even sideways.

The Bottom Line For REIT Investors

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We are selling a small portion of our position in SEGRO (SGRO / SEGXF) today and reallocating the proceeds into VGP (VGP / VGPBF), further increasing the size of our position in the company.

This is not because our outlook for SEGRO has deteriorated.

Quite the opposite.

SEGRO’s share price has risen sharply since Prologis (PLD), the largest industrial landlord in the world, publicly disclosed its interest in acquiring the company.

We benefited from this surge, but VGP has not enjoyed the same repricing, even though the implications of Prologis’ offer are highly positive for both companies.

As a result, we are taking advantage of the takeover premium in SEGRO and reallocating some of this capital into VGP, which remains deeply discounted.

Prologis Clearly Wants SEGRO

We previously added to our investment in VGP following Prologis’ initial proposal to acquire SEGRO.

That proposal valued SEGRO at approximately £12.6 billion, or 925 pence per share, representing a roughly 25% premium to its unaffected share price. SEGRO rejected it, arguing that the offer was opportunistically timed and significantly undervalued the company.

At the time, we explained that the offer was an important validation of our broader European industrial real estate thesis.

Prologis is not a random private equity buyer looking to make a quick profit. It is the largest and arguably most sophisticated industrial real estate company in the world.

It knows these assets, markets, tenants, replacement costs, development economics, and long-term demand drivers better than almost anyone else.

Therefore, its willingness to pay a large premium for SEGRO was a strong signal that high-quality European industrial landlords were undervalued.

Since then, this signal has become even stronger.

After its original proposal was rejected, Prologis returned twice with improved terms. Its third proposal valued SEGRO at approximately £13.5 billion, or 993 pence per share. This represented a roughly 34% premium to SEGRO’s unaffected share price before Prologis’ interest became public.

SEGRO rejected this proposal as well, arguing that it continued to undervalue its scarce portfolio, development pipeline, and long-term growth prospects.

But Prologis has not simply walked away.

It has continued to publicly make its case and appeal directly to SEGRO’s shareholders, effectively encouraging them to pressure the board to engage in negotiations.

This tells us that Prologis is very serious about acquiring SEGRO.

There is no guarantee that a transaction will happen. Prologis currently has until July 22, 2026, to announce a firm offer or state that it does not intend to proceed, unless the deadline is extended.

But whether or not the takeover ultimately succeeds, Prologis’ persistence is highly revealing.

The world’s largest industrial landlord has repeatedly increased its proposal because it sees substantial strategic and financial value in SEGRO’s European portfolio, development pipeline, land, power capacity, and data center opportunities.

The Same Logic Applies to VGP

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I recently sat down with Dan Joseph, Principal and Chief Investment Officer of Apparent Capital, to discuss the opportunities he is seeing in today’s REIT market.

Dan and I first met at REITweek in New York City during a roundtable discussion with the management team of AH Realty Trust (AHRT), a REIT in which both Apparent Capital and High Yield Landlord are invested. What makes Dan’s perspective particularly interesting is his extensive experience investing in private real estate across several property sectors, combined with his active involvement in the public REIT market.

In this interview, we discuss many individual REITs, current REIT valuations, and where Dan sees the most compelling opportunities at a time when many REITs continue to trade at substantial discounts to the value of their underlying assets.

Here is a list of topics with timestamps for your convenience:

1:10 - Introduction to Dan Joseph

6:15 - Real estate bear market

7:25 - REITs vs. private real estate

10:30 - Dan’s REIT investment strategy. Includes discussions on Seaport Entertainment Group (SEG), American Healthcare REIT (AHR), VICI Properties (VICI), and Simon Property Group (SPG)

14:30 - VICI Properties (VICI)

18:05 - EPR Properties (EPR) and its potential merger with VICI Properties (VICI)

23:04 - Favorite property sector to invest in today. Includes discussions on Welltower (WELL), American Healthcare REIT (AHR), CareTrust REIT (CTRE), Chiron Real Estate (XRN), Simon Property Group (SPG), Macerich (MAC), Cousins Properties (CUZ), AH Realty Trust (AHRT), Public Storage (PSA), Equinix (EQIX), Rexford Industrial Realty (REXR), Prologis (PLD)

33:20 - Senior housing REITs

38:00 - AH Realty Trust (AHRT)

46:00 - Conflicts of interest in the REIT sector

49:30 - Seaport Entertainment Group (SEG)

You can learn more about Apparent Capital by clicking here.

You can also reach out to Dan via email: dan@corridorventures.com

Finally, please note that we have exceptionally posted this article without a paywall. If you found it valuable, consider joining High Yield Landlord for a 2-week free trial.

We expect to share a Trade Alert with our paid members tomorrow, and by starting your free trial today, you will also gain access to it. You will also get immediate access to my entire REIT portfolio, our exclusive REIT CEO interviews, and much more. We are the largest and highest-rated REIT investment newsletter online, with over 2,000 paid members and more than 500 five-star reviews.

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Analyst’s Disclosure: I/we have a beneficial long position in the shares of all companies held in the CORE PORTFOLIO, RETIREMENT PORTFOLIO, and INTERNATIONAL PORTFOLIO either through stock ownership, options, or other derivatives. We also own a position in FarmTogether. High Yield Landlord® (’HYL’) is managed by Leonberg Research, a subsidiary of Leonberg Capital. All rights are reserved. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. The newsletter is impersonal and subscribers/readers should not make any investment decision without conducting their own due diligence, and consulting their financial advisor about their specific situation. The information is obtained from sources believed to be reliable, but its accuracy cannot be guaranteed. The opinions expressed are those of the publisher and are subject to change without notice. We are a team of five analysts, each contributing distinct perspectives. Nonetheless, Jussi Askola, the leader of the service, is responsible for making the final investment decisions and overseeing the portfolio. We do not always agree with each other, and an investment by Jussi should not be taken as an endorsement by other authors. Past performance is no guarantee of future results. Our portfolio performance data is provided by Interactive Brokers and believed to be accurate but its accuracy has not been audited and cannot be guaranteed. Our portfolio may not be perfectly comparable to the relevant index. It is more concentrated and may at times use margin and/or invest in companies that are not typically included in REIT indexes. Finally, High Yield Landlord is not a licensed securities dealer, broker, US investment adviser, or investment bank. We simply share research on the REIT sector.

We are buying more shares of VGP (VGP / VGPBF) today, making it a large position in our International Portfolio.

We recently initiated a position in the company, and since then, an important new development has further strengthened our conviction.

Prologis (PLD), the largest industrial landlord in the world, has made a major offer to acquire SEGRO (SGRO / SEGXF), one of Europe’s largest industrial and logistics landlords.

The proposal valued SEGRO at £12.6 billion, or 925 pence per share, and represented a roughly 25% premium to the prior closing price. SEGRO’s board rejected the proposal, saying that it undervalued the company and was opportunistically timed. Even so, SEGRO’s share price surged by more than 20% after the offer became public, and it is being speculated that Prologis is now preparing to make a bigger offer.

We also own SEGRO, so we benefited from this move.

But I think that the more important point is what this says about the broader European industrial real estate sector.

Prologis is not a random financial buyer. It is the most sophisticated industrial real estate platform in the world. If Prologis is willing to pay a major premium for SEGRO, it is a strong signal that high-quality European logistics and industrial assets remain undervalued in the public market.

This directly supports our thesis on VGP.

VGP has many similarities with SEGRO.

Read more

REITs have suffered one of the worst five-year stretches in their history.

First came the pandemic, which created huge uncertainty over rents, occupancy, tenant health, and the future of many property sectors.

Then came the ultra-low interest rate period that followed the pandemic, which encouraged a lot of new development and eventually led to oversupply in sectors like apartments, self-storage, life science, and industrial.

Finally, interest rates surged at the fastest pace in decades, putting pressure on valuations, increasing financing costs, and crushing market sentiment.

At the same time, capital moved away from REITs and into the hottest trade of the moment: tech stocks and AI.

As a result, REITs significantly underperformed the broader market.

Lots of REITs lost a lot of value, and some of our own investments have also performed poorly in recent years

One of the most painful examples today is Alexandria Real Estate (ARE). We remain down more than 50% from our cost basis, and that is obviously frustrating.

But we have not lost hope, and neither should you. The most important skill in REIT investing is patience and discipline.

REITs are real estate businesses. Their cash flows, leases, assets, development pipelines, and balance sheets play out over many years. But the stock market reprices them every second, often based on fear, greed, and short-term narratives.

This creates volatility, but it also creates opportunity. The key is to think like a landlord, not a trader. In today’s article, I am going to remind you of some examples from our portfolio, hoping that this will help you stay calm and focus on the long-term potential. I will at the end also get back to the case of Alexandria Real Estate (ARE).

The Market Often Gets It Wrong

Publicly traded REITs can be extremely volatile.

This often surprises investors because the underlying assets are typically much more stable than the share prices.

An apartment building does not lose 50% of its value in a few months.

A self-storage facility does not suddenly become worthless because interest rates moved higher.

A well-located mall does not go from being worth $30 per share to $5 per share and then back to nearly $30 per share in just a few years because the real estate itself changed that much.

What changes is sentiment.

The market is not perfectly efficient. In fact, the market often has no idea how to value REITs, especially during periods of stress.

This is why patience and discipline are so important.

If your long-term thesis remains intact, the worst thing that you can do is to panic sell at the bottom. Instead, the better approach is to recheck the long-term thesis, focus on the real estate, and keep accumulating if the long-term opportunity remains compelling.

We have done this many times in the past, and it has been a major driver of our returns.

Helios Towers: A 50% Drop That Turned Into A Huge Win

Helios Towers is probably the best recent example.

We first invested in Helios in November 2022 at 120.9p per share.

At the time, we thought that the market was undervaluing the company. It owned essential infrastructure assets in Africa, demand for mobile data in the region was growing rapidly, and the company had a long growth runway ahead of it.

But the market did not agree with us at first.

The share price kept dropping.

We bought again at 94.35p.

Then again at 87.30p.

Then again at 73.65p.

Finally, we bought again at 60.30p.

From our first purchase price, the stock had dropped by roughly 50%.

That was painful. It would have been easy to lose confidence, assume that the market knew something that we did not, and sell at the bottom.

But we did not.

We rechecked the thesis, concluded that the long-term opportunity remained intact, and kept accumulating more while the stock was hated.

That discipline made all the difference.

Today, Helios has become one of our biggest winners. We just recently sold some at 241p, earning us an average total return of roughly 176% on our purchases.

This is the type of investment that looks obvious in hindsight, but it was not obvious while we were living through it.

At the bottom, the market was telling us that we were wrong.

But in reality, it is the market that was wrong. The business continued to execute, the balance sheet fears eased, and the stock recovered strongly.

If we had sold when the stock was down 50%, we would have locked in a painful loss. Instead, by focusing on the underlying business and continuing to buy at lower prices, we turned a painful drawdown into a huge win.

That is the power of patience and discipline.

EPR Properties: Buying Through The Panic

EPR Properties is another great example.

We started investing in it too early.

Our first purchase was $66.20 in 2018. We then bought more at $78.73, $73.38, $70.72, and $67.83.

Then the pandemic hit.

Movie theaters closed. Experiential real estate became one of the most hated sectors in the entire REIT market. Investors feared that theaters, attractions, and other experiential properties would never recover.

The stock collapsed.

At one point, we were buying more at just $16.59 per share.

That was a brutal drawdown.

Many investors gave up.

But we kept accumulating because we believed that the market was overreacting. EPR had real challenges, but we did not think that its properties were permanently impaired.

We bought again and again, eventually making 32 transactions, with an average purchase price of about $46.06.

Today, EPR has recovered strongly, and what once seemed like a catastrophic investment has turned into a pretty good one, all things considered. We earned significant dividend income and ultimately sold our position for about $60 per share, resulting in outperformance relative to the broader REIT market (VNQ).

But it only worked because we remained patient during the worst part of the cycle. If we had sold when sentiment was at its lowest, we would have locked in a major loss.

Instead, we kept buying the dips, lowered our cost basis, and allowed time to work in our favor.

Macerich: From Disaster To Major Recovery

Macerich may be the clearest example of how inefficient the market can be.

We first bought it at over $40 per share.

Then it collapsed all the way to about $5 at the lowest point of the pandemic.

If the market were perfectly efficient, this type of move should not happen unless the underlying business had permanently deteriorated to a similar degree.

But that is not what happened.

The market panicked.

Malls became hated. Leverage became feared. Investors assumed the worst.

But the assets were still there, and most rents were still being collected.

The balance sheet needed work, but the company had time.

We did not lose faith. We kept accumulating, and today our cost basis is only about $8 per share.

The stock has already recovered to roughly $25, and when including dividends, this has become another huge win for us.

Again, this was not easy.

It required patience and discipline.

And it required us to trust our analysis rather than letting the market tell us what to think.

Alexandria Could Become A Similar Story

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Most REIT sectors are now up significantly in 2026.

The average REIT rose by roughly 11% over the last quarter alone, and this recovery has been broadening as investors begin to recognize that REITs remain heavily discounted, while fundamentals are improving across many property sectors.

But one REIT sector is still hitting 52-week lows today:

Cell towers.

They are all trading near their 52-week lows, even as most REITs have recovered:

We recently bought more shares of SBA Communications (SBAC), which remains our top pick for investors seeking to maximize total returns in the tower space.

Today, we are also buying 63 more shares of Crown Castle (CCI), which is our top pick for income-oriented investors in this sector.

CCI recently traded around $76 per share, well below its 52-week high of $115.76, and at today’s price, CCI offers a roughly 5.5% dividend yield.

We think the market is overly focused on near-term headwinds and underappreciating the long-term opportunity.

Below, we discuss the recent dip, the temporary issues weighing on the stock, and why we believe this is an attractive opportunity to buy a higher-quality, cleaner, pure-play U.S. tower REIT at a depressed valuation.

Why Did Cell Tower REITs Dip?

The market appears to believe that the long-term growth prospects of cell tower REITs have meaningfully deteriorated.

We disagree.

There are two likely reasons why investors have turned more negative on the sector.

The first one is temporary.

The second one is not material.

1. The DISH Issue Is Temporary

The most immediate issue is DISH.

DISH defaulted on its payment obligations earlier this year, and Crown Castle responded by terminating the agreement and pursuing recovery of the payments owed under the contract. The company has amended its pending litigation to include a breach-of-contract claim, and management is seeking to recover the remaining payments owed under the original contract.

As I understand it, DISH is arguing that it should be excused from these obligations under force majeure, essentially claiming that regulatory or government-related actions prevented it from performing as originally expected. Crown Castle disputes this. Its position is that DISH had contractual payment obligations, failed to meet them, and that CCI was therefore within its rights to terminate the agreement and pursue recovery.

To be clear, I am not a legal expert, and I do not know whether Crown Castle will ultimately be successful in court. Therefore, I am not underwriting our investment thesis based on a legal recovery. If CCI recovers some of the money, that would be upside, but we are not relying on it.

The more important point is that the DISH issue is quantifiable and temporary.

For 2026, Crown Castle expects $240 million of total headwinds from DISH terminations and Sprint cancellations. Of this, $220 million is related to DISH and $20 million is related to Sprint.

That sounds like a large number, and it is painful in the short term. But it needs to be put into context.

Crown Castle’s 2026 site rental revenue guidance is roughly $3.85 billion at the midpoint. Therefore, the DISH impact represents about 5.7% of annual site rental revenues, and the Sprint impact represents about 0.5%. Combined, these two headwinds represent roughly 6.2% of annual site rental revenues.

So this is not immaterial, but it is also not thesis-breaking.

It is a one-time tenant-specific reset that is making the headline numbers look much worse than the underlying business.

This was already visible in the first quarter. Crown Castle reported that organic growth, excluding Sprint cancellations and DISH terminations, was strong at 3.1%. However, this was more than offset by a $49 million DISH termination impact, $5 million of Sprint cancellations, and a $26 million decline in straight-line revenues and amortization of prepaid rent.

In other words, the reported numbers look weak because a roughly 6% tenant-specific headwind is being recognized all at once.

But underneath that, the core tower business is still growing, and that is the key point.

DISH is painful, but it does not tell us that demand for towers is disappearing. It does not tell us that carriers no longer need CCI’s infrastructure. It does not tell us that the long-term growth story is broken.

It tells us that one tenant defaulted, CCI is disputing the matter in court, and the company is now moving past it.

Once this headwind is lapped, the underlying organic growth rate should become much clearer. Management already expects roughly 3.3% organic contribution to site rental billings in 2026, when excluding DISH terminations and Sprint cancellations.

That is why we view the current weakness as temporary. It is a one-time revenue reset from a specific tenant issue, which may or may not be recovered in court, layered on top of a tower business that continues to grow organically.

This is masking the quality of the business today, and that is helping create the opportunity.

2. Satellite Fears Are Overstated

The second concern is the reemergence of satellite-related fears, especially with renewed attention around SpaceX (SPCX) following its IPO.

We think this fear is being overstated.

Starlink is a real business and worth monitoring, but it is not a serious replacement threat to tower infrastructure in cities and suburbs.

Satellite connectivity is best suited for rural areas, dead zones, emergency connectivity, and backup coverage. It is not a substitute for terrestrial wireless networks in dense population centers.

The reason is simple physics.

Towers are far closer to users. They can handle far more data density, with lower latency and lower cost per gigabyte. A satellite must serve an enormous geographic area from far away, which sharply limits how much traffic it can handle simultaneously.

This is why satellite connectivity can be useful in places where tower infrastructure does not exist, but it is not well suited to replace towers where most mobile data traffic actually occurs.

This point is especially important as data consumption continues to grow.

The more data people consume, the more important terrestrial networks become.

Satellite may help fill the gaps, but towers remain the core infrastructure for modern wireless networks.

Even on Crown Castle’s own earnings call, management indicated that carrier densification behavior has not materially changed and that the satellite impact is currently “de minimis.”

We agree. The market is treating satellite as a major obsolescence threat, but the actual impact on tower demand appears minimal.

Crown Castle Is Now A Much Cleaner Business

Crown Castle has gone through a major transformation.

The company sold its fiber and small cell businesses, which had long been a source of investor frustration. Those businesses required heavy capital investment, failed to produce the returns originally expected, and contributed to higher leverage and put pressure on the dividend.

The sale was unpopular in the short term because it reduced cash flow and forced the company to reset its dividend.

But we think it was the right long-term decision.

Crown Castle is now a much cleaner business. It has become the only large, publicly traded, U.S.-focused pure-play tower company. American Tower (AMT) and SBA Communications (SBAC) also own high-quality tower portfolios, but both have exposure to international markets, which brings additional currency, political, and regulatory risks. Crown Castle is now focused on the U.S., which remains one of the most attractive wireless infrastructure markets in the world.

The company completed the sale of its fiber and small cell businesses for $8.5 billion, and management expects to use the proceeds to repay approximately $7 billion of debt and repurchase approximately $1 billion of shares.

This transaction simplifies the business, improves the balance sheet, reduces capital intensity, and allows management to focus entirely on making Crown Castle a best-in-class tower REIT.

Management has also executed a restructuring of its tower and corporate organizations, which is expected to reduce annualized run-rate costs by $65 million.

Again, these are near-term disruptions that should improve the long-term quality of the company.

The market is punishing Crown Castle for the messy transition, but we think investors should look beyond it.

Growth Should Reaccelerate

The biggest question is not whether Crown Castle will grow again.

The bigger question is when that growth will show up in the numbers.

Today, growth is being masked by DISH, Sprint churn, rising interest expense, and the transformation of the business. But once these headwinds are absorbed, the underlying tower business should return to growth.

Management believes that the current 3.5% organic growth, which is already strong, should represent the low point.

Carrier activity has paused after the initial 5G buildout, but the long-term demand drivers remain intact:

• mobile data consumption continues to grow,

• fixed wireless access is gaining adoption,

• new spectrum deployments will eventually require more equipment,

• AI applications should increase data usage,

• and 6G will create another future investment cycle.

The market seems to assume that tower growth is permanently impaired, but we think that is wrong. Wireless data usage has grown for decades, and every major new technology cycle has ultimately required more equipment, more densification, and more tower infrastructure.

AI could make this even more important.

AI applications are likely to require far more data movement, including more uploading of photos, videos, and real-time information. This matters because mobile networks were historically more download-heavy, but many future AI applications may require far more two-way data traffic.

Autonomous vehicles, robotics, smart infrastructure, AI assistants, augmented reality, and real-time video-based AI tools could all increase the need for faster, denser, more reliable wireless networks.

More data consumption ultimately means more demand for infrastructure, and cell towers sit at the center of that infrastructure.

This is why we believe the long-term growth prospects remain compelling, even if the exact timing is difficult to predict.

The consensus of analysts also appears to expect a meaningful rebound in growth, which you can see below. They expect 10%+ annual AFFO per share growth through 2030 once we move past the impact of lease cancellations:

I am not so sure about the exact timing of when growth will accelerate, but I don’t think that it is a question of if but when.

Edge Computing Adds Optionality

Longer term, Crown Castle may also benefit from the rise of edge computing.

Edge computing means moving computing power closer to the end user, rather than relying entirely on large centralized cloud data centers that may be located hundreds or thousands of miles away.

This matters because many next-generation applications will require extremely fast response times.

AI inference, autonomous vehicles, robotics, smart factories, augmented reality, virtual reality, and other real-time applications cannot always afford the latency that comes from sending data back and forth to a distant cloud facility.

This is where Crown Castle’s existing tower portfolio could become more valuable.

CCI already owns a large network of tower sites that are often located close to population centers, traffic corridors, and other areas where data is created and consumed. Many of these sites already have key infrastructure in place, including power, fiber backhaul, secure physical locations, and available ground space.

That makes them potentially attractive locations for small edge-computing facilities, where data can be processed locally before being sent back to the broader cloud network.

In other words, Crown Castle may eventually be able to monetize its tower sites in a new way that could create significant new cash flow.

Historically, the value of a tower site has primarily come from leasing vertical space on the tower to wireless carriers. But edge computing could create an opportunity to also monetize the horizontal space at the base of the tower by hosting small data-processing equipment, servers, batteries, cooling systems, or other infrastructure needed to support low-latency applications.

This could be especially valuable because Crown Castle would not need to create an entirely new platform from scratch.

It already owns the physical locations.

It already has relationships with wireless carriers.

And many of its sites already have the basic infrastructure needed to support additional use cases.

To be clear, this opportunity is still early and should not be viewed as a major near-term earnings driver.

It is growing fast, but Crown Castle is still in the trial phase, and it remains uncertain how quickly edge computing will scale and how much economic value tower owners will ultimately capture.

But the optionality is meaningful.

If AI adoption continues to accelerate and more data needs to be processed closer to the end user, tower sites could become increasingly important local infrastructure hubs. In that scenario, Crown Castle would benefit not only from continued demand for wireless connectivity, but also from the growing need for distributed computing infrastructure across the country.

Valuation Is Depressed

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The entire story of the stock market in the second quarter of 2026 can be summed up in two letters: AI.

By far the biggest trend in the market right now is the artificial intelligence infrastructure buildout, which is denting free cash flows and investor sentiment for the hyperscalers while gifting semiconductor and tech hardware companies with fast-growing profits and stock prices.

Follow the money back far enough, and you’ll find that the source is what I call the “capex waterfall” -- about $1 trillion (and rising) being spent per year by the hyperscalers and other data center developers.

Megacap corporations like the five above are devoting all or most of their free cash flows to the AI infrastructure buildout, and a huge portion of that is flowing directly to chipmakers’ and tech hardware companies’ bottom lines.

This chart below tells the story better than words can. AI infrastructure suppliers have surged this year (after two very strong years in 2024-2025!), while the Magnificent 7 (MAGS) containing most of the hyperscalers is down slightly year-to-date. And tellingly, the S&P 500 excluding the tech sector (SPXT) is up only a little over 4% so far in 2026.

If you also excluded the energy sector, which is enjoying a one-time boost to earnings from the Iran conflict and its associated oil price spike, the US stock market would actually be down slightly this year.

Here’s a chart from Apollo Global Management’s Torsten Slok illustrating this phenomenon:

So what feels like a strong market this year boils down almost entirely to an incredible surge in AI-related stocks.

That’s it.

It is truly remarkable how dependent the stock market has become on the AI megatrend. By one measurement, tech & tech-related stocks now account for almost 60% of total stock market capitalization.

Notice that this is about 6-8 percentage points higher than the peak of the Dot Com bubble in 2000.

Meanwhile, shockingly, all defensive sectors (including REITs) combined now account for only about 15% of total market cap, while cyclical sectors account for somewhere in the high-20% area.

On its own, these charts above would scream bubble. Price movements like that look extremely stretched and totally unsustainable.

But then you look at the analyst consensus earnings growth over the next few years, it’s even more impressive than the price growth!

It doesn’t seem possible, but price movements have corresponded strikingly well with earnings estimates.

The market appears to be roughly efficient, at least insofar as earnings estimates can be trusted.

The tech sector (led overwhelmingly by chipmakers and hardware companies) foresees annual earnings growth of more than 40% over the next 3-5 years, according to the analyst consensus.

The biggest question in the market right now, then, is this:

Will the capex waterfall remain in place? Or will the tide turn and see hyperscalers begin to cut back on their capex plans?

As long as the capex waterfall continues, the AI-led bull market continues.

I’ve researched and analyzed various dividend-paying ETFs to tap into this AI infrastructure megatrend and gone back and forth about which ones I like best.

As of now, I own a mid-sized position in the FT Vest NASDAQ Technology Target Income ETF (TDVI), which pays a roughly 7% yield and tracks the First Trust NASDAQ Technology Dividend ETF (TDIV). I consider the latter a well-designed ETF in terms of its portfolio holdings, but it does have significant exposure to a few of the big spenders like Oracle (ORCL) and Microsoft (MSFT).

Lately, I have begun to favor instead the ProShares S&P Technology Dividend Aristocrats ETF (TDV), which has an expense ratio of 0.45% (somewhat high for my taste) but also sports a very strong portfolio of dividend-growing tech companies that are overwhelmingly on the supplier side of AI infrastructure rather than the spender side.

The ETF yields only ~1%, but I do believe it will be a very strong long-term dividend growth fund. Since I’m in my mid-30s and nowhere near retirement age, I think accumulating shares in TDV makes sense right now.

Perhaps even more than TDV, though, I like the Virtus Reaves Utility ETF (UTES), an actively managed fund overseen by the utilities experts at Reaves Asset Management. Over 30% of the portfolio is in the three big independent power producers, which I believe will be major beneficiaries of the AI infrastructure megatrend.

UTES yields only ~1.5%, but I think it will also prove to be a fantastic long-term dividend growth ETF thanks to robust growth in demand for electricity in the coming years.

REITs: Hedge Against A Potential AI Bubble

While I am allocating to what I believe will be beneficiaries of the AI capex waterfall, that does not mean I’m abandoning or selling REITs.

Real estate still makes up over 40% of my total portfolio. Really, I am just allocating incremental capital to AI capex beneficiaries.

I believe my large overweight to real estate should act as a great hedge against an AI bubble burst, if this is a bubble and if it bursts violently at some point.

Why REITs as a hedge? Well, in the years after the Dot Com bubble peaked, REITs performed swimmingly, basically ignoring the bloodshed in the tech sector.

I don’t know if this AI bull market is or will become a bubble. But if it does, I believe REITs will drastically outperform during its bursting, just as they did in the early 2000s.

That makes a REIT allocation worthy of inclusion in one’s portfolio, especially if one is heavily invested in tech.

Top 10 Holdings

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Table of Contents

1. Opening Notes

2. Changes Portfolio Holdings

3. Changes to HYL Ratings

4. The Core Portfolio (Our Main Portfolio)

5. The Retirement Portfolio (Our Secondary Portfolio)

6. The International Portfolio (Our Optional Portfolio)

1. Opening Notes

This second quarter was another important one for REIT investors.

The big theme was the AI immunity trade.

As investors became increasingly concerned about the disruption that AI could cause to many asset-light businesses, capital began rotating toward businesses that are harder for AI to disrupt.

REITs were one of the main beneficiaries.

Despite interest rates remaining elevated and even rising, the REIT sector surged by roughly 10% during the quarter:

This is exactly the trend that we have been highlighting for a while.

So far, AI has mainly disrupted the digital world: software, advertising, content creation, customer service, coding, and other asset-light industries.

But as AI becomes more powerful and is combined with robotics, autonomous vehicles, and humanoids, the disruption will increasingly spread into the physical world as well. This will likely make investors even more concerned about obsolescence risk across large parts of the market.

But REITs are different.

They own essential, scarce, physical assets that AI cannot simply replicate, replace, or make irrelevant.

You cannot create new high-quality real estate with a few lines of code. You still need land, zoning, permits, infrastructure, building materials, labor, financing, and years of development before new supply can come to market.

And even then, the demand for well-located, high-quality properties should continue to grow over time. The economy will still need industrial parks, apartment communities, grocery-anchored shopping centers, data centers, cell towers, healthcare facilities, timberland, and many other forms of mission-critical real estate.

In fact, many of these assets may become even more valuable in an AI-driven world because they provide the physical foundation that the digital economy still depends on.

That, of course, does not mean that all REITs are immune. Some property sectors will be hurt, while others will benefit. But as a group, REITs are far more insulated than most other businesses, and the market is starting to recognize this.

Even then, I think we are still early.

REITs have recovered some ground, and the chart below has not been updated in a few quarters, but valuations remain historically low, and many high-quality names still trade at large discounts to the fair market value of their properties.

In other words, most REITs have rallied, but they are still cheap.

Moreover, the AI immunity trade is not the only tailwind benefiting REITs right now. Rent growth is now also accelerating in many property sectors as new supply slows, demand continues to grow, and landlords regain pricing power.

At the same time, M&A activity is heating up.

Several REITs have already been bought out, and at High Yield Landlord, we have profited from three of these takeovers in the last quarter alone:

Takeover #1: Whitestone REIT (WSR):

Takeover #2: Sila Realty Trust (SILA):

Takeover #3: Caesars Entertainment (CZR):

Buyback activity is also clearly accelerating:

This is important.

REIT management teams know their assets better than anyone. If they are buying back stock more aggressively, it likely means that they see the disconnect between private market values and public market prices.

They may also sense that fundamentals are improving and that the window to repurchase their own shares at such cheap prices may be closing.

Put differently, REITs are benefiting from several forces at once:

• AI disruption is pushing capital toward real assets.

• Rent growth outlook is improving.

• M&A activity is accelerating.

• Buybacks are increasing.

• Valuations remain low.

That is a powerful setup. In fact, I suspect that if it had not been for the war in Iran, the oil price spike, and the renewed inflation and interest-rate fears, REITs would have surged even more during the quarter.

The good news is that those fears now appear to be easing.

Oil prices have come back down, inflation expectations are moderating again, and the 10-year Treasury has already pulled back from its recent highs. If this continues, the market’s focus will likely shift back from “war-driven inflation risk” to “AI-driven deflation and rising unemployment,” which could bring rate cuts back on the table.

Economists at the Pantheon expect the new Fed Chair Warsh to hold rates steady this year, and finally give President Trump the rate cuts he has been asking for in early 2027, by cutting rates by 75 basis points to address the excess unemployment.

This could push REITs a lot higher already in the near-term.

How Are We Reacting?

We are doubling down on our efforts to make sure that we are positioned to maximize the gains of this recovery.

This is likely to lead to more capital recycling.

During Q2, we already sold four positions and redeployed the capital into opportunities that we believe offer better risk-to-reward.

We expect to do more of the same in Q3.

Our goal is not simply to own REITs. Our goal is to own the best-positioned REITs as this recovery gains momentum.

That means focusing on companies with:

• discounted valuations,

• improving fundamentals,

• strong balance sheets,

• capable management teams,

• growing dividends,

• and clear catalysts for upside.

As part of this effort, we are spending more time and money meeting management teams face-to-face.

I recently spent time in New York City at REIT Week and met with many REIT management teams. You can read our coverage here:

• Exclusive Interview: VICI Properties

• Exclusive Interview: Agree Realty Corporation

• Exclusive Interview: BSR REIT

• Roundtable Meetings: NNN REIT, Prologis, First Industrial, Invitation Homes, Rexford Industrial

• Roundtable Meetings: Rayonier, AH Realty Trust, Realty Income, EPR Properties

• Roundtable Meetings: W.P. Carey, Kimco Realty, EastGroup Properties, Crown Castle

• Final Takeaways From REIT Week Conference

These meetings are valuable because they help us better understand which companies are executing well, which management teams are allocating capital intelligently, and which opportunities the market may be underappreciating. We already increased our positions in Agree Realty (ADC) and Rexford Industrial (REXR) as a result of these meetings, and also initiated a new one in VGP (VGP / VGPBF). You can read our trade alerts by clicking the links below:

• Agree Realty Trade Alert

• Rexford Industrial Trade Alert

• VGP Trade Alert

In September, I will also attend the EPRA Conference in Milan, which is the biggest annual REIT conference in Europe. Some American REITs that invest heavily in Europe, such as W. P. Carey (WPC) and Realty Income (O), are also expected to attend.

I will again cover the conference for High Yield Landlord, and I expect it to create more opportunities for us to refine the portfolio and recycle capital into better ideas.

By the way, you can get a chance to win a free ticket to the conference if you complete this short survey by clicking here

Finally, in case you missed it, we just held our quarterly webinar and discussed many of our top holdings, recent trades, and the opportunities that we are most excited about today.

You can listen to the recording here:

I also want to remind you that our book, The REIT Advantage, is still available for free to all members of High Yield Landlord.

I strongly encourage you to take the time to read it, as I truly believe it can help you make better investment decisions.

You can claim your free copy by clicking here.

Thank you for all your support, and as always, let us know if we can help with anything.

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2. Updates to Our Portfolio Holdings:

We have had 14 “Trade Alerts” in Q2 2026:

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Over the past year, we have published several articles explaining why we think AI is set to significantly disrupt the economy, financial markets, and equity valuations.

In short, I think that a large fraction of today’s businesses are likely to suffer significant AI-driven value destruction over time, just as SaaS companies already have.

This should ultimately benefit the rare assets that are immune to AI disruption.

We are already seeing this play out through what I have called the “AI Immunity Trade”. REITs are up sharply this year, even as interest rates have surged, because more capital is starting to rotate away from AI-disrupted businesses and into AI-resilient real assets.

I recently came across the following piece from Groundbreaker, an independent analyst focused on real assets, and I thought it made some very interesting points.

The core idea is that the asset-light era may be coming to an end, and that this could greatly benefit hard asset businesses like REITs.

It is a long essay, about 6,000 words, but it is very comprehensive and well worth the read. I received authorization from the author to repost it here.

I agree with his take, and it is one of the main reasons why I am so bullish on REITs and maintain such large exposure to them.

If you find his analysis useful, you can also follow him by clicking here.

Hard Asset Reckoning: The End Of The Asset-Light Era

On February 3, 2026, roughly $285 billion in market capitalization evaporated from the software sector in a single trading session. Salesforce was down 30% on the year. Workday had dropped more than 40% from its twelve-month high. Atlassian had lost 35%. The iShares Expanded Tech-Software ETF (IGV) entered a technical bear market, off more than 20% for the year - in five weeks. Analysts coined a term for it: the SaaSpocalypse.

The catalyst was not a recession, a credit event, or a geopolitical shock. It was the proliferation AI. Two assumptions the entire software industry had been priced on broke at once: that producing useful software was hard, and that the number of humans using it would only grow. AI broke both.

For thirty years, building enterprise software at scale required engineering teams, multi-year roadmaps, and tens of millions of dollars of capital. AI-assisted code generation has collapsed that cost curve. A motivated team can now ship a credible internal tool or feature that a $20B SaaS incumbent charges handsomely for - in weeks, not years. When the production function for software is commoditized, the premium collapses with it - most steeply for the companies whose moat was the software itself rather than the system of record beneath it.

And as recently as yesterday - Zscaler stock collapsed roughly 30% in a single session after beating Q3 on both lines but guiding softer for the next quarter. Wall Street treated a single soft guide as confirmation that demand itself, not just multiples, is now the story. Even strong cybersecurity names are no longer being granted the benefit of the doubt.

The clearest single statistic: the IGV software index now trades at roughly 7x forward EV/sales, down from a 2021 peak above 12x. The premium the market once paid for software being scarce and defensible has been structurally re-rated away.

On the same days software cratered, Caterpillar, Deere, Southern Copper, and Constellation Energy traded at or near record highs. The market was not panicking. It was reallocating - away from business models built on the assumption that code is scarce and atoms are cheap, toward business models built on the recognition that code is becoming free and atoms are becoming priceless.

This article is about that reallocation: why the thirty-year dominance of asset-light business models is ending, why the next ten to twenty years will belong to owners of hard, physical, scarce assets, and why the investors who understand this shift earliest will capture some of the most asymmetric returns of their careers.

I. The Asset-Light Orthodoxy: How We Got Here

The intellectual origin

The preference for asset-light business models did not emerge from nowhere. It was a coherent response to conditions that prevailed from roughly 1995 to 2020. The internet made distribution free. Cloud computing made infrastructure rentable by the hour. Software-as-a-service made enterprise tools accessible without capital expenditure. The rational strategy was obvious: own the code, rent the atoms. Build the platform, let someone else build the data center. Design the marketplace, let someone else own the inventory.

The financial logic was seductive. Asset-light companies posted higher returns on invested capital because there was less capital to invest. They carried wider margins because they had fewer physical costs. They scaled faster because scaling code costs nothing at the margin, and they were more resilient in downturns because variable costs could be cut instantly while asset-heavy competitors were stuck paying for fixed infrastructure. During the 2020 shock, asset-light companies recovered roughly 2.5x faster than asset-heavy peers.

The market rewarded the strategy lavishly. At the 2021 peak, the median enterprise-software company traded at 12–13x revenue. The entire venture-capital industry was oriented around the model: build a SaaS product, acquire customers at a loss, demonstrate recurring revenue, point to a land-and-expand trajectory, and raise at an ever-higher multiple. By 2021 there were over 15,000 SaaS companies globally. Software had, as Marc Andreessen famously declared, eaten the world.

The hidden consequence: systematic underinvestment in physical assets

But while the smartest capital in Silicon Valley poured into code, something else was happening - or precisely, not happening - in the physical world. Capital expenditure on hard assets across the American economy was declining as a share of GDP. Infrastructure was aging. Bridges deteriorated. Power grids strained. Water systems corroded. Mines closed. Farmland was converted to suburbs. Refineries shut down. Pipelines went unbuilt.

The numbers are stark. The American Society of Civil Engineers has graded U.S. infrastructure a D+ or C− for over two decades. More than $1 trillion in water-infrastructure upgrades are needed; the power grid requires an estimated $2.5 trillion to meet projected demand. The U.S. lost an average of 4.3 acres of farmland every minute from 2000 to 2022. Domestic mining capacity for critical minerals declined for decades. Since 2020, the housing-construction shortfall has grown to an estimated 3–5 million units.

This underinvestment was not accidental. It was the logical consequence of a capital-allocation regime that systematically rewarded asset-light models and punished capital intensity. Every dollar that went into a SaaS startup was a dollar that did not go into a power plant, a water-treatment facility, a mine, a pipeline, or a farm. The market was extremely efficient at funding the highest-return, lowest-capital-intensity opportunities - and extremely inefficient at maintaining the physical substrate on which everything else depends.

The result is a paradox only now becoming visible: three decades of optimizing for asset-light models created the conditions under which hard assets are more valuable than they have been in a generation. The scarcity was manufactured by the orthodoxy itself.

II. The AI Inflection: Why Asset-Light Moats Are Dissolving

What AI can replicate - and what it cannot

This is the critical analytical framework for the next decade. AI can replicate anything fundamentally informational: code, content, analysis, pattern recognition, workflow coordination, data processing, customer-service scripts, marketing copy, legal review, financial modeling. These are the activities asset-light businesses are built upon. When AI produces 90% of the quality at 1% of the cost, the moat of being the best software tool for a task dissolves.

What AI cannot replicate is anything fundamentally physical: an acre of irrigated farmland, a copper deposit, a water right, a natural-gas pipeline, a data center with power interconnection, a port terminal, a timber stand, a semiconductor fab, a rail network, a transmission line. These assets exist in the physical world, are constrained by geology, geography, regulation, and physics, and cannot be conjured by an algorithm regardless of how intelligent it becomes.

The market is beginning to reflect this. As of mid-2026, infrastructure-investment volumes are outpacing global GDP growth, the utilities sector has entered what analysts describe as a capital-expenditure super-cycle, and the irony is complete: AI - the most powerful informational technology ever created - is the greatest catalyst for physical-asset revaluation in modern history, because AI itself requires staggering quantities of electricity, cooling, land, water, and physical infrastructure to operate.

Big Tech is no longer buying bits - it is buying atoms

Nothing illustrates the inversion more vividly than the hyperscalers’ own balance sheets. At the beginning of 2026, the five largest cloud providers were guiding to $660–$690 billion of 2026 capital expenditure. Then first-quarter earnings landed in late April. Every major hyperscaler raised its guide. Microsoft set calendar-2026 capex near $185 billion; Alphabet raised toward $180–$185 billion; Meta lifted its range to $125–$145 billion; Amazon held at roughly $200 billion. Together, the four largest now plan to spend on the order of $700–$725 billion this year - up roughly 77% from 2025’s record $410 billion, and more than triple 2024.

Approximately 75% of that spend targets physical infrastructure rather than chips alone. Microsoft attributed about $25 billion of its 2026 figure to component-price inflation; Amazon’s free cash flow is expected to turn negative on the build-out; Alphabet’s CEO described the company as “compute-constrained.” Every dollar is demand for electrons, copper, fiber, water, and land. AI is not dematerializing the economy. It is rematerializing it at unprecedented scale.

AI is the most asset-heavy technology ever deployed

This deserves to be stated plainly, because it inverts thirty years of intuition. Every prior wave of computing was celebrated for dematerializing the economy - the PC, the internet, mobile, the cloud, and SaaS all promised to do more with fewer atoms, replacing warehouses with websites and filing cabinets with servers somewhere out of sight. AI breaks the pattern. It is the first major general-purpose technology in modern history that is more physically intensive than what it displaces, by orders of magnitude. The “cloud” was always made of concrete, copper, and water; AI simply makes that physicality impossible to ignore.

Consider the bill of materials:

On power, U.S. data-center demand is projected to climb from roughly 80 gigawatts toward 150 by 2028 - the equivalent of bolting Spain’s entire electricity system onto the grid in three years. Meta’s Louisiana campus is expected to consume more than twice the power of New Orleans.

On water, a single large campus can evaporate up to five million gallons a day - the draw of a town of fifty thousand - and roughly two-thirds of new sites are being built in already water-stressed regions.

On materials, the copper alone required to wire AI and the broader electrification it accelerates may oblige the world to mine as much copper in the next twenty-five years as has been mined in all of recorded human history - before counting the steel, concrete, fiber, transformers, and switchgear now on multi-year backorder.

On land, the campuses themselves are becoming small cities: gigawatt-scale sites now run six to ten million square feet of building footprint on thousands of acres of contiguous, fiber-connected, power-served real estate - a combination of attributes that exists in very few places in the United States and cannot be manufactured by zoning reform alone.

And this doesn’t even include the power generation. A single gigawatt of solar requires roughly five to ten thousand acres of land. A gigawatt of nuclear, can evaporate hundreds of millions of gallons of cooling water annually. Even natural gas requires upstream pipeline corridors, water for cooling, and decade-scale permitting timelines for new long-haul capacity. The implication is that AI’s physical footprint is recursive: each new gigawatt of data-center load compounds into thousands of acres of generation footprint and millions of gallons of additional water draw.

This is the deepest reason the bits-to-atoms reallocation is structural rather than cyclical. The dominant technology of the era does not merely coexist with hard assets; it is the largest new source of demand for them. The same force commoditizing the informational economy is, by physical necessity, the most powerful bid for the physical one.

III. The Winners: Hard Assets in the Age of Digital Abundance

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I recently attended REIT Week in NYC, which is the biggest annual REIT conference in the world.

The conference brings together the management teams of most major REITs and gives investors the opportunity to participate in roundtable discussions, ask questions, take notes, and better understand how these companies are navigating today’s market environment.

I already shared my company-specific takeaways in a separate series of articles. In this article, I want to take a step back and focus on the broader conclusions that I took away from the conference.

These broader takeaways are important because they help explain why REITs have started to recover, why sentiment is improving, and why I believe that the opportunity remains attractive.

Oversupply

The single most important takeaway from the conference was that the oversupply headwind is finally approaching an end.

Following the pandemic, interest rates were exceptionally low, capital was abundant, and property values were high. This led to a major wave of new development across apartments, self-storage, industrial, life science, and other property sectors.

Because real estate development takes years, many projects that were started in 2021, 2022, and 2023 are only now hitting the market in 2024, 2025, and 2026. This has pressured occupancy rates, slowed rent growth, increased concessions, and hurt same-property NOI growth in several sectors.

In my opinion, this has been an even bigger headwind than interest rates for many REITs. Interest rates hurt market sentiment, but oversupply hurts property-level fundamentals.

The good news is that new construction starts have now collapsed in most sectors. Higher interest rates, higher construction costs, and lower property values mean that most new projects simply do not pencil out anymore.

Developers will not build if they cannot earn a profit.

As a result, supply should decline meaningfully in 2027 and remain low for several years thereafter. This matters because real estate supply is visible far in advance. If starts are low today, deliveries will also be low a few years from now.

This is especially important for apartments. I heard directly from the CEO of Mid-America Apartment Communities (MAA), the largest Sunbelt apartment REIT, and the tone was bullish for the coming years. The same was true for BSR REIT and others.

The Sunbelt apartment market has been pressured by elevated supply, but that supply is now being absorbed, new starts have collapsed, and demand remains healthy. This sets the stage for a strong acceleration in rent growth as we get closer to 2027.

The key point is simple: the biggest headwind for many REITs is fading. If oversupply was the main reason why fundamentals disappointed in recent years, then the end of oversupply should be a major catalyst for stronger growth in the coming years.

Interest Rates

Interest rates were another major topic at the conference.

Right now, the market is worried that the war in Iran could lead to higher inflation and, therefore, higher interest rates. Energy prices have risen, inflation expectations have increased, and long-term interest rates have moved higher.

But the main takeaway from the macro panel at REIT Week was that this surge in rates should likely prove temporary.

This is also our view.

The recent inflationary pressure is largely tied to an external shock. War can disrupt supply chains, push energy prices higher, and create near-term inflation, but these effects are typically not permanent.

Higher energy prices eventually lead to more drilling, more supply, and changes in consumption patterns. Wars also do not last forever, and this one appears politically unpopular, increasing the odds that solutions will eventually be found.

More importantly, the broader inflation picture appears much better than the market fears. The post-pandemic inflation surge has largely normalized, the economy is relatively weak, and AI could become a powerful deflationary force over time.

AI can reduce labor costs, automate tasks, improve logistics, lower customer service costs, and increase competition across many sectors. All of this should put downward pressure on inflation.

This does not mean that rates will collapse overnight. The path will likely remain volatile. But the longer-term direction still appears to be lower, not higher, according to the macro experts.

That matters a lot for REITs. Lower rates would reduce borrowing costs, improve acquisition spreads, increase property values, and make REIT dividend yields more attractive relative to bonds.

If lower rates coincide with improving fundamentals as oversupply fades, REITs could benefit from both, much faster growth and expanding valuation multiples.

AI

AI was one of the most discussed topics at the conference, and not just because of data centers. The broader theme was the AI immunity trade.

We started discussing this over a year ago, before it became mainstream. Our thesis was that AI would disrupt many businesses by breaking down barriers to entry, increasing competition, reducing pricing power, and compressing profit margins.

As investors become more concerned about AI disruption, they will increasingly look for sectors that are more resilient. Real estate is one of the most obvious beneficiaries.

People will still need housing. Companies will still need warehouses. Consumers will still need grocery-anchored shopping centers. Society will still need healthcare facilities, cell towers, farmland, timberland, and other essential real assets.

AI can change how these assets are managed, but it is unlikely to make them obsolete. This is why REITs are increasingly being viewed as AI-resilient assets.

This is the reason why REITs have performed well this year despite higher rates. More investors appear to be rotating toward sectors that are less exposed to AI disruption.

But the AI story is not only about immunity. Several property sectors could also directly benefit from AI.

Apartments and self-storage are highly management-intensive. AI can help with leasing, virtual tours, pricing, customer service, maintenance scheduling, renovation decisions, and expense control. This could improve same-property NOI growth over time.

Industrial real estate could also benefit if AI accelerates e-commerce. Prologis (PLD) discussed this point directly. AI can make online marketing more personalized, lower customer service costs, improve logistics, and make it easier for entrepreneurs to launch e-commerce businesses. More e-commerce means more demand for industrial space.

Timberland could also benefit from better productivity tools for more efficient harvesting and land conversions to energy-related uses.

The key point is that AI is not necessarily a threat to REITs. In many cases, it may be a major tailwind. In a world where many businesses face growing disruption risk, essential real assets may become increasingly valuable.

M&A

Another major takeaway was the sharp increase in M&A activity. We have already benefited from several REIT buyouts this year, including Whitestone REIT (WSR), Sila Realty Trust (SILA), National Storage REIT (NSR), and Caesars Entertainment (CZR). Four buyouts in six months are significant, and we expect more to come.

There have also been rumors around other REITs in our portfolio, including Uniti Group (UNIT), SBA Communications (SBAC), and others.

The reason for this increased M&A activity is simple: sophisticated buyers can see that the window of opportunity may not remain open for much longer.

Many REITs still trade at steep discounts to the private market value of their assets. At the same time, the oversupply headwind is likely approaching an end, rent growth should improve, and the long-term direction of interest rates is likely lower.

That is a compelling setup for private equity firms and larger REITs.

This was also reflected in conference attendance. It was noticeably harder this year to get meetings with management teams than it was in 2024 or 2025. There were simply more investors participating.

The opportunity is no longer completely ignored, but valuations remain attractive. This is why buyers are acting now, before the recovery becomes obvious to everyone.

Data Centers

I also discussed data centers with several investors and REIT CEOs, and the tone I heard was often more cautious than expected.

This may surprise some investors because data centers are one of the hottest property sectors in the market today. Demand is strong, AI is driving growth, and tenants include some of the strongest companies in the world.

But the concern is the terminal value.

One prominent REIT CEO asked what the odds are that today’s data centers will look the same as data centers 20 years from now. His answer was essentially 0%.

That is the key risk. Huge amounts of capital are being invested in this space, and with that will likely come major innovation. Power needs, cooling systems, chip architecture, location requirements, and building designs could all change dramatically.

If that happens, some of today’s data centers may face obsolescence risk.

Developers can earn attractive yields today by signing long leases with high-credit tenants. But what is the building worth at the end of the lease? That is much harder to answer.

The market is currently focused almost entirely on near-term growth. Very few investors appear to be thinking deeply about terminal value.

This is why we have been cautious on data center REITs. We are not saying that data centers are bad investments in all cases, but we think the sector is more speculative than many investors appreciate.

That is also why we have preferred to get exposure more indirectly, through an asset manager with permanent capital that earns fees from managing these investments, rather than owning the assets directly.

Europe

The final takeaway is that Europe is becoming more interesting.

A growing number of investors and REITs appear to be looking at Europe because investment spreads are often more attractive. Interest rates are lower than in the US, yet cap rates in many sectors are not necessarily much lower. This can create better investment spreads.

European-listed real estate has also significantly lagged US REITs this year. While American REITs have rallied, many European REITs have missed out on the recovery and, in some cases, sold off further.

Part of this is tied to the war in Iran and its potential energy consequences for Europe. The market is worried that higher energy prices could lead to more inflation and delay rate cuts.

But in my opinion, the market is being too short-term oriented. European REITs often trade at much deeper discounts to NAV than their US peers. Interest rates are lower, balance sheets have improved, and new supply is more limited, resulting in more consistent rent growth.

This is creating interesting opportunities. We expect to discuss a few new European REITs in the near term, and some may eventually make their way into our portfolio.

Bottom Line

The main takeaway from REIT Week is that the setup for REITs is improving.

The oversupply headwind is fading. Interest rates remain volatile, but the longer-term direction is likely lower. AI is increasing the demand for resilient real assets. M&A activity is accelerating. Data centers may be riskier than the market appreciates. And Europe is becoming more interesting as discounts remain large.

This does not mean that every REIT is attractive. We still need to be selective and focus on balance sheet strength, management quality, asset quality, and valuation.

But the broader cycle appears to be turning in favor of REITs. The past few years were painful because REITs faced the double headwind of higher interest rates and oversupply.

Now, oversupply is fading, and we expect interest rates to eventually follow.

That creates the potential for a much better environment in the coming years. This is why we remain bullish and continue to believe that REITs offer some of the best risk-to-reward opportunities in today’s market, especially given their low valuations and the increased M&A activity.

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Analyst’s Disclosure: I/we have a beneficial long position in the shares of all companies held in the CORE PORTFOLIO, RETIREMENT PORTFOLIO, and INTERNATIONAL PORTFOLIO either through stock ownership, options, or other derivatives. We also own a position in FarmTogether. High Yield Landlord® (’HYL’) is managed by Leonberg Research, a subsidiary of Leonberg Capital. All rights are reserved. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. The newsletter is impersonal and subscribers/readers should not make any investment decision without conducting their own due diligence, and consulting their financial advisor about their specific situation. The information is obtained from sources believed to be reliable, but its accuracy cannot be guaranteed. The opinions expressed are those of the publisher and are subject to change without notice. We are a team of five analysts, each contributing distinct perspectives. Nonetheless, Jussi Askola, the leader of the service, is responsible for making the final investment decisions and overseeing the portfolio. We do not always agree with each other, and an investment by Jussi should not be taken as an endorsement by other authors. Past performance is no guarantee of future results. Our portfolio performance data is provided by Interactive Brokers and believed to be accurate but its accuracy has not been audited and cannot be guaranteed. Our portfolio may not be perfectly comparable to the relevant index. It is more concentrated and may at times use margin and/or invest in companies that are not typically included in REIT indexes. Finally, High Yield Landlord is not a licensed securities dealer, broker, US investment adviser, or investment bank. We simply share research on the REIT sector.

Important Reminder!

I am excited to announce that we will be hosting our fourth live Q&A webinar, exclusively for subscribers of High Yield Landlord.

This is your opportunity to connect directly, ask questions, and dive deeper into REITs, real estate, and anything else we cover in the newsletter.

Event Details

• Format: Live Zoom Q&A

• Date & time: Wednesday 07/01/2026 at 1PM EST

• Access: Free and exclusive to subscribers, but registration is required. Click here to register and secure your spot!

• Spots available: Only 300 — first come, first served

How It Works

• You will be able to ask questions live in the Zoom chat during the session

• You can also leave your questions in the comment section below in advance — I will try to answer as many as possible

• If you cannot attend live, I will post a recording afterward for all subscribers

Reserve Your Spot

Due to limitations in our Zoom plan, we can only accommodate 300 participants for the live session.

If you would like to attend live, please reserve your spot as soon as possible — click here to register.

Looking forward to seeing many of you there!

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TRADE ALERT - Retirement Portfolio June 2026

Transaction Summary: I bought another 150 shares of Rexford Industrial Realty (REXR), increasing our position size by 20%.

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REITs have rallied significantly so far into 2026.

The average REIT is now up by about 13% year-to-date, and this has been driven by a combination of factors.

First, more investors are beginning to recognize the appeal of the “AI immunity trade”. A lot of capital has been concentrated in sectors that may be disrupted by AI, including SaaS and other asset-light technology businesses. But as investors start to reassess those risks, some of that capital is now rotating into sectors that are far more resilient to AI disruption.

REITs are a great example of that. They own essential, hard-to-replicate real assets. AI may change how businesses operate, but it will not replace the need for housing, warehouses, cell towers, hospitals, grocery-anchored shopping centers, casinos, farmland, timberland, and other real estate assets.

Second, REIT valuations were historically low coming into the year. Many REITs were trading at steep discounts to the private market value of their real estate, and this has not gone unnoticed.

Private equity players like Blackstone (BAM) and Brookfield (BAM) have become increasingly aggressive, buying REITs at large premiums to capitalize on this opportunity. We have already profited from four buyouts so far this year, and there have been several others across the REIT sector.

Third, REIT fundamentals are also improving.

Rent growth is expected to accelerate in 2027 for many property sectors, and at the same time, interest rates could move lower. That is a powerful combination. REITs are now seeing the light at the end of the tunnel, and many of them have become more aggressive with buybacks.

As you can see from the chart below, REIT buybacks are now historically high by REIT standards:

This makes a lot of sense.

If a REIT is trading at a large discount to NAV, and it can sell assets at private market values to buy back its own shares at a much higher implied cap rate, that can be highly accretive to shareholder value.

Put all of this together: improving fundamentals, the AI immunity trade, better market sentiment, aggressive buybacks, and private equity buyers going after undervalued REITs, and it is not surprising that REITs have rallied.

But that is just the average.

Beneath the surface, there are still some very compelling opportunities, and one of them is Rexford Industrial Realty (REXR), to which we are adding more capital today.

Why Rexford?

One of my main takeaways from the recent REIT Week conference in New York City was that Southern California industrial real estate fundamentals are finally turning the corner.

This was not just the message from Rexford itself.

It was also the takeaway from listening to the roundtable discussions of Prologis (PLD), First Industrial Realty (FR), and EastGroup Properties (EGP). These are among the most sophisticated industrial landlords in the world, and all of them appear to be seeing the same thing:

Demand is improving, while new supply under construction has already dropped to historically low levels. Net absorption has not yet turned positive in every Southern California submarket, but it has already turned positive in some of them, and the broader direction is clearly improving.

This matters a lot for Rexford because it owns one of the best-positioned industrial portfolios in the country.

Rexford focuses exclusively on infill Southern California industrial real estate. These are dense, supply-constrained markets with very limited land available for new development. Over the long run, that has made them some of the strongest industrial markets in the entire country.

There is simply no more land available:

The recent weakness was not caused by a structural impairment of these assets.

It was caused by the bumpiness of the pandemic.

During the pandemic, e-commerce demand exploded, supply chains were disrupted, retailers overstocked inventories, and many tenants leased more space than they truly needed. Developers responded by building more space, and then, as the economy normalized, some tenants paused expansion plans or gave back excess space.

That created a temporary oversupply issue.

But temporary is the key word here.

Read more

I am excited to announce that we will be hosting our fourth live Q&A webinar, exclusively for subscribers of High Yield Landlord.

This is your opportunity to connect directly, ask questions, and dive deeper into REITs, real estate, and anything else we cover in the newsletter.

Event Details

• Format: Live Zoom Q&A

• Date & time: Wednesday 07/01/2026 at 1PM EST

• Access: Free and exclusive to subscribers, but registration is required. Click here to register and secure your spot!

• Spots available: Only 300 — first come, first served

How It Works

• You will be able to ask questions live in the Zoom chat during the session

• You can also leave your questions in the comment section below in advance — I will try to answer as many as possible

• If you cannot attend live, I will post a recording afterward for all subscribers

Reserve Your Spot

Due to limitations in our Zoom plan, we can only accommodate 300 participants for the live session.

If you would like to attend live, please reserve your spot as soon as possible — click here to register.

Looking forward to seeing many of you there!

Jussi Askola, CFA

Transaction Summary:

• We sold our position in Caesars Entertainment (CZR).

• We redeployed the proceeds into SBAC Communications (SBAC), Sun Communities (SUI), International Workplace Group (IWG), and Blue Owl Capital (OWL).

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We are issuing a trade alert today to let you know that we are selling our position in Caesars Entertainment (CZR) and redeploying the proceeds into several of our existing holdings.

Before getting into the details of the trade, I want to take a small victory lap.

This is already our fourth buyout of the year.

First, National Storage REIT (NSA) received a buyout offer.

Then came Whitestone REIT (WSR).

Then Sila Realty Trust (SILA).

And now Caesars Entertainment (CZR).

This is not a coincidence.

We have said for a while that M&A activity would likely accelerate across listed real estate companies because valuations have become far too low relative to private market values. Strategic buyers, private equity firms, and other well-capitalized investors are taking advantage of the public market’s excessive pessimism, and we are benefiting from that.

Time and time again, we have managed to identify potential buyout targets before the deals were announced, and this has now become an important source of value creation for our portfolios.

That said, I also want to be transparent: Caesars was not a huge win for us in absolute terms.

Our average purchase price was $29.15, and with the stock now trading slightly above $30, we are getting out only with a modest gain.

But in context, I still view this as a very good outcome.

Our initial timing was unlucky. We began buying Caesars in 2024, and shortly afterward, cyclical companies, including gaming stocks, sold off heavily. At the lowest point, we were down nearly 50% from our first purchase.

But we remained patient, bought the dips, lowered our cost basis, and are now exiting the position with a small gain.

That is a win.

Why We Are Selling Now

Fertitt has agreed to acquire Caesars for $31 per share in cash.

The deal was announced a little while ago, but we did not sell immediately because the spread to the offer price was still too wide. We felt that the discount provided enough upside to justify holding.

That has now changed.

With the stock now trading above $30, most of the upside has already been captured. Investors who continue holding are essentially waiting for the remaining few percentage points between the current share price and the $31 offer price.

In my view, that is no longer attractive on a risk-adjusted basis.

This deal could take quite some time to close. It is a major transaction in the casino space, and the buyer already owns casinos in several markets. This could create regulatory complexity, potential market overlap issues, and a longer approval process.

Until the deal closes, the stock is likely to become dead money.

And in the unlikely but still possible scenario that the deal fails, Caesars could drop significantly.

So the trade-off is no longer compelling:

We could wait for a few more percentage points of upside, but we would be accepting deal risk, regulatory risk, and opportunity cost.

We would rather take the gain, eliminate the risk, and redeploy the capital into opportunities that we believe offer much better upside from here.

What We Are Buying Instead

We are selling our full position in Caesars and redeploying the proceeds into four of our existing holdings:

1) SBA Communications (SBAC) is one of the positions that we are increasing today. Earlier this year, the stock surged on reports that KKR (KKR) and Brookfield (BAM) had both approached the company to discuss a potential buyout, with a rumored potential price of around $250 per share. In the end, no deal was reached, and the stock has now slid back to roughly where it traded before the rumors emerged, at around $180 per share. We are taking advantage of this weakness to increase the size of our position. In our view, the interest from some of the world’s largest and most sophisticated private equity investors is a strong signal that the public REIT market is undervaluing this platform. SBAC is a massive tower REIT with a $20 billion market cap, and yet private capital still saw enough value to explore a potential transaction. We view that as positive external validation, but we now get to buy the stock again at a much lower price. We also continue to believe that towers should benefit over the long run from the AI revolution, which should increase mobile data consumption and force carriers to keep investing in their networks. SpaceX / Starlink is worth monitoring, but we do not view it as a serious replacement threat to SBAC’s towers. Starlink is best suited for dead zones, rural areas, and backup connectivity. It is not a substitute for tower infrastructure in cities and suburbs because satellite connectivity is slower, more expensive, and capacity-constrained by simple physics: towers are much closer to users and can handle far more data density. Near-term growth has been held back by temporary churn from carrier consolidation and refinancing headwinds, but we expect conditions to improve in 2027 and accelerate further in 2028, potentially returning SBAC to high single-digit annual growth. If that happens, we think the stock will return closer to fair value at $250 per share. We bought 55 shares, increasing our position size by 30%.

Read more

I recently attended REIT Week in NYC, the biggest annual REIT conference in the world, where I participated in roundtable discussions with a number of REIT management teams.

In Part 1, I shared my main takeaways from my meetings with NNN REIT, Prologis, First Industrial, Invitation Homes, and Rexford Industrial.

In Part 2, I covered Rayonier, AH Realty Trust, Realty Income, and EPR Properties.

Today, in Part 3, I will cover the remaining four REITs:

• W.P. Carey

• Kimco Realty

• Crown Castle

• EastGroup Properties

As before, I will focus on the unique insights that I gained from the management discussions, rather than repeating generalities about these companies.

W.P. Carey (WPC)

• W.P. Carey appears to have a much cleaner story today after years of strategic repositioning. It has exited office, recently also sold its operating self-storage assets, and simplified its portfolio into a more focused net lease REIT.

• Investment activity is running ahead of expectations. The company raised its 2026 AFFO guidance and now expects $1.5 billion to $2 billion of investment volume this year, largely focused on industrial assets, with attractive cap rates and spreads.

• Europe remains a major opportunity. Borrowing costs are lower there, while cap rates are similar to the US or even slightly higher, allowing W.P. Carey to earn wider spreads. The current pipeline is now roughly half weighted toward Europe.

• Internal growth is a key differentiator. About half of the portfolio has inflation-linked leases, and recent fixed escalators are often closer to 2.5% to 3.5%, giving W.P. Carey more visible same-store growth than many net lease peers.

• The balance sheet is well-positioned, with about $650 million of forward equity, a nearly fully undrawn $2 billion revolver, and enough funding to cover this year’s investment guidance. Combined with a roughly 5% yield and mid-single-digit growth potential, the stock appears positioned for low double-digit total returns before any multiple expansion.

EastGroup Properties (EGP)

Read more

I recently attended REIT Week in NYC, the biggest annual REIT conference in the world, where I participated in roundtable discussions with a number of REIT management teams.

In Part 1, I shared my main takeaways from my meetings with NNN REIT, Prologis, First Industrial, Invitation Homes, and Rexford Industrial.

Today, in Part 2, I will cover four more REITs:

• Rayonier

• AH Realty Trust

• Realty Income

• EPR Properties

As before, I will focus on the unique insights that I gained from the management discussions, rather than repeating generalities about these companies.

Rayonier (RYN)

• Rayonier’s main message was that its stock trades at a sizable discount to private market values. Management noted that the company is currently valued at about $1,850 per acre, while high-quality timberland can trade at up to $3,000 per acre in the private market.

• Rayonier believes that its portfolio is above average, which would imply that the discount to private market value is significant.

• Because of this discount, the company has been actively buying back shares. In Q1, it only bought back about $31 million of stock, but this was partly because it was restricted by blackout periods related to its pending merger and earnings release. This seems to imply that Rayonier may become more active with buybacks going into Q2.

• Management also emphasized its commitment to maintaining a conservative balance sheet. Debt to EBITDA is about 3x based on mid-cycle earnings, which they view as conservative. The main takeaway is that Rayonier believes the public market is valuing its timberland at a large discount to private market values, and it is using buybacks to take advantage of this gap.

AH Realty Trust (AHRT)

Read more

I recently had the opportunity to meet with the CEO and CFO of BSR REIT (HOM.U:CA; BSRTF) at REIT Week in NYC.

Daniel M. Oberste, President and Chief Executive Officer

Thomas Cirbus, Chief Financial Officer

BSR is one of our largest positions in the Core Portfolio, and we recently named it as one of our Top Picks for 2026.

The reason is simple.

BSR owns a portfolio of young, affordable apartment communities in the Texas Triangle, mainly Dallas, Austin, and Houston, which are some of the fastest-growing markets in the country.

Despite that, the stock trades at a steep discount to NAV.

Its NAV is in the mid $16s per unit, but the stock recently traded closer to $11.50, or roughly 70% of NAV.

The market is discounting BSR because its recent results have been weak.

Texas has faced significant apartment oversupply in recent years, hurting occupancy, rent growth, and same property NOI. BSR also went through a major portfolio transformation last year, selling a large portion of its portfolio to AvalonBay (AVB), repurchasing its Class B units, and recycling capital into higher growth value-add opportunities.

This created a temporary drag on AFFO per unit because there is a lag between selling stabilized assets and redeploying the proceeds into new properties that are still in lease-up.

But the key point of our thesis is that this weakness is temporary.

BSR’s NAV has now stabilized, and its same property NOI is expected to return to growth already in the near term. Its markets continue to enjoy strong population and job growth. New supply is expected to fall sharply in the coming years. And management is actively working to close the gap to NAV through buybacks, capital recycling, and potentially other strategic actions.

This latest meeting strengthened that view.

The biggest takeaway is that management sounded very confident that a recovery in the apartment sector, especially in BSR’s markets, is increasingly inevitable as we move into 2027.

The Recovery Is Becoming Inevitable

Read more