Q1 is off to a strong start for us overall.

Most notably, residential REITs have surged following stronger-than-expected results, which is especially good news given that residential remains our largest property sector allocation.

We invested heavily in the sector when sentiment was still weak, expecting valuations to recover as fundamentals improved and interest rate fears gradually eased.

However, our biggest loser has remained Alexandria Real Estate (ARE), which continues to disappoint.

It just reported Q1 results, and the stock gave up its recent gains and dropped right back to new 52-week lows.

As a result, we are using this weakness to add another 100 shares to our position, increasing our position size by nearly 10%:

In case you are not familiar with the company, I recommend that you start by reading our latest update by clicking here.

A Short Recap

When we first invested in Alexandria, it was viewed as one of the highest quality REITs in the world, and for good reason.

It owned Class A life science properties, had long leases with steady rent escalations, generated strong same property NOI growth, maintained a BBB+ rated balance sheet with very long debt maturities, and had a long history of dividend growth backed by a conservative payout ratio.

The original thesis was simple.

The company was dealing with temporary oversupply, but its long leases and strong balance sheet were expected to limit the near-term damage. As demand gradually caught up to supply, Alexandria’s cash flow growth would recover, sentiment would improve, and the stock would rerate higher.

That thesis then got hit from two sides.

First, the oversupply issue proved more severe than expected.

Second, and more importantly, the new administration created major disruption across the life science industry through a series of policy actions and threats, including funding cuts, tariff threats, pricing pressure, regulatory chaos, and broader uncertainty.

That caused biotech funding to weaken, the IPO window to shut, and leasing demand for life science space to deteriorate materially.

So what we originally expected to be a 2 to 3 year recovery became more of a 4 to 5 year story.

That was a major negative development. It led to lower cash flow, weaker occupancy, balance sheet pressure, and ultimately a dividend cut.

There is no point pretending otherwise. We got in too early.

What Changed In Q1?

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US industrial real estate now appears to be at or slightly past its cyclical trough.

The national average vacancy rate hovers in the high-6% to low-7% area. The construction pipeline has bottomed at a historically low level and now appears to be gradually inching higher. Market-rate rent has returned to slight growth after a years-long downtrend.

Fundamentally, the bottom is in. The industrial sector has turned a corner.

This chart illustrates the industrial real estate cycle over the last five years:

Coming out of the pandemic, in the red-hot economy of 2021-2022, net absorption significantly overwhelmed new supply. But then the economy cooled right as a big wave of new supply came to market from 2023-2024.

Only in the last few quarters has tenant demand rebounded meaningfully, reaching close to the level of completions.

Here’s a simplified version of the chart above, showing the bulge of new supply in 2023-2024 amid a soft leasing environment.

In Q1 2026, net absorption still hadn’t quite reached the level of new supply additions, but the trajectory is in landlords’ favor.

Top real estate services firms like CBRE and Cushman & Wakefield project that industrial vacancies will gradually decline over the course of this year.

Another green shoot sprouting up after a few years of oversupply is the return to slight growth in asking rents.

Q1 2026 saw the first quarter of positive asking rent growth since Q1 2024.

While no one is projecting wildly strong rent growth this year, it is favorable to see this metric moving in the right direction again.

Before moving on to the earnings updates for our industrial REITs, we would like to correct the record on a common talking point about industrial real estate.

It is often mentioned, even in some industry reports, that reshored manufacturing is (or is expected to be) a significant and growing source of leasing demand. Plenty of headlines and politicians would like for this to be the case.

We simply don’t see it in the data.

The only significant source of growth for US manufacturing is technology equipment and semiconductors. Output for all other types of manufacturing is stagnant or declining over time.

Total Manufacturing Production (Green) Vs. Semiconductor/Tech Hardware Manufacturing (Blue):

You might think that the CHIPS & Science Act of 2022 is the primary reason for this growth in US manufacturing output of tech hardware. But as you can see, growth in this part of manufacturing has been a trend for the last decade or more.

Various government policies from both Democrats and Republicans have tried to reverse this long, slow decline in the US manufacturing sector to no discernible avail.

That is largely because pro-manufacturing policies like tax incentives are offset by inadvertently anti-manufacturing policies such as tariffs on inputs and deportations of manufacturing workers.

Manufacturing tenants account for only about 10% of big-box industrial leasing, and even less of total industrial leasing.

The bull case for industrial REITs does not rest on a broad-based resurgence of manufacturing in the United States.

Instead, industrial real estate fundamentals are largely tied to the growth of retail sales and especially e-commerce sales.

Since the beginning of 2017, US retail sales (nominal) are up over 50%, while e-commerce sales have grown over 200%.

But to be clear, the more important metric to watch for industrial real estate is real (inflation-adjusted) retail sales. This measures volumetric or unit-level growth of retail sales rather than the dollar-value of retail sales.

If you overlay real retail sales against industrial net absorption, you will find significant correlation between the two.

A huge spike in real retail sales in 2021-2022 led to three years of stagnation thereafter. That explains both the surge in net absorption in 2021-2022 as well as the anemic net absorption from 2023 through 1H 2025.

Fortunately, as you can see if you look closely, real retail sales turned upward in the early months of 2026. If that becomes a new growth trend (perhaps after the Iran-related inflation recedes), then an uptrend in industrial net absorption should follow.

In short, resilient consumer spending and especially continued growth in e-commerce is the primary driver of demand for industrial space. Manufacturing does not contribute meaningfully to net absorption.

Let’s now take a look at the Q1 2026 earnings update for our three industrial REITs:

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This is Jussi. I am writing this to you as I have just crossed back into Ukraine. Right now, I am sitting in the passenger seat of a pickup truck that I am bringing with a friend to frontline soldiers in desperate need of an evacuation vehicle.

This time, I am not just going to Kyiv and then returning home. I am going much further and will remain in Ukraine for ten days.

I expect that I will be fine, so there is no need to worry. But moments like this are always a powerful reminder of how different our lives are from those of the men fighting this war every day.

For most of us, danger is something we read about in the news. For them, it is daily life. They live with drones, missiles, artillery, and constant uncertainty, all while continuing to defend their country, their families, and the freedom of the broader West.

It is also a reminder of how much something as simple as a vehicle can matter. The truck we are bringing is not a luxury. It is a tool that can help evacuate the wounded, move soldiers quickly, and save lives when every minute matters.

That is why I am writing to you today.

We are launching another fundraiser to support Ukrainian frontline units. Our goal is to raise about $100,000, or roughly €87,000, to buy four vehicles for soldiers in urgent need. Thanks to support from family and friends, we have already raised about $30,000, which means we are already one-third of the way there.

I will personally bring these vehicles to Ukraine again in July. It will already be my 10th trip since the war began.

I hope that you will consider helping us. The need remains enormous, and the impact of these donations is very real. We have already seen firsthand how the vehicles and equipment we provide make a difference, and with your help, we can do it again.

How We Are Helping: ‘Freedom Convoys’

This war resonates deeply with me as a Finn, given our long history of resisting Russian aggression. As a reserve intelligence officer, I also know that if this conflict ever escalated, I would be among the first called back to defend my own country.

Recognizing those stakes early in the war, I knew I had to get involved. That realization led me to help organize what we now call our “Freedom Convoys.”

We quickly identified critical gaps in the support Ukraine was receiving, and one of the most urgent was the shortage of basic transportation. While Ukraine has received sophisticated weaponry, it often lacks the vehicles needed to move troops and equipment efficiently. This shortage has cost countless lives, as soldiers struggle to evacuate the wounded or escape artillery fire simply because they lack the means to move fast enough.

To help close this gap, we began purchasing trucks and equipping them for combat. Each vehicle is fitted with camouflage, mud tires, drone jammers, and night vision to withstand the harsh conditions at the front.

At first, these efforts were entirely self-funded. I purchased several trucks myself, proudly placing the Finnish and Ukrainian flags side by side as a symbol of solidarity.

But as the war intensified, so did the need. That is when we turned to our community for help, and I am proud to say that the High Yield Landlord community rose to the occasion in an extraordinary way.

Thanks to your generosity, we have now raised over $750,000, allowing us to buy and deliver about 45 fully equipped trucks filled with critical supplies to Ukrainian soldiers. I am constantly humbled by this outpouring of support. Some of you have donated $30,000 or more, while many others have contributed between $1,000 and $10,000. Even the smaller donations, $100 to $500, have added up to make an incredible difference.

Together, we are making a real and measurable impact.

The Next Convoy: How You Can Help

I will head back to Ukraine for my 10th trip in July, and I am again raising donations from family, friends, and my community here at High Yield Landlord.

Our goal is to raise about $100,000 (€87,000) in order to buy four vehicles that will be equipped with mud tires, night vision, and drone jammers. With the donations of friends and family, we are already at nearly a third of the goal, and hope to complete this with your help:

These trucks will then be donated to four specific units that have been selected by our team based on their critical needs:

• 505 Battalion, 37th Marine Brigade

• ‍Black Raven 93rd Separate Mechanized Brigade

• 6th Special Operations Detachment of the Timur Special Group

• 426th Unmanned Systems Regiment

Each unit has recorded personal messages for you, explaining how critical this support is. You can watch their videos on our website by clicking here.

Here is one example:

On our website, you will also see that we have set up incentives for each donor:

• Badges of Honor: All donors will receive a badge as a keepsake of their contribution, something you can proudly display as a symbol of your support for Ukraine.

• Personalized Vehicles: Based on your donation, you can also have your country’s flag, company logo, or a personal message placed on one of the trucks we send to the frontlines.

• Join the Convoy: For our largest donors, there’s the incredible opportunity to join me on this next convoy to Kyiv! My brother, Joni, will also join this one. Imagine seeing the difference you are making firsthand, meeting the soldiers you are helping, and experiencing Ukraine’s resilience up close. If this interests you, make sure to read the Q&A below.

I have said this before, and I will repeat it again: for most of us, it makes no real difference whether we have an extra $1,000 in our account or not, but it makes a huge difference for the people in Ukraine.

In my mind, this is the best kind of charity because the volunteers work for free, we take all the risks ourselves, and we top up your donations with our own money. Typically, if you donate $1,000 to a charity, you would be happy if half of that actually goes into helping people. Here, it is the opposite. Every dollar you give goes directly to the cause, and we stretch your donation by contributing our own time, resources, and funds. It’s a true value investment in the future of freedom, and that is why I am putting my own money into this effort.

Click here to visit our website and donate

Q&A Section

(1) How can I donate?

We have set up a website to raise donations, and you can donate with a wire transfer, credit card, Apple Pay, PayPal, or even crypto.

Click here to visit our website and donate

(2) Is my donation tax-deductible?

If you are a U.S. donor, you can make a tax-deductible contribution through our 501(c)(3) partner. For instructions, please visit our 501(c)(3) donation page by clicking here.

Please also inform me if you make such a donation. Here is my email address: jaskola@leonbergcapital.com

Thank you!

(3) What is your organization?

Its name is “Help99” and you can learn more about it by clicking here.

We are backed by many high-profile politicians and entrepreneurs who support our efforts and regularly join us on our convoys. Here is what we have achieved so far:

We are also well-connected in Ukraine. As an example, our group has previously met with Ukraine’s then Foreign Minister, Dmytro Kuleba:

(4) What are the badge designs? How can I get my badge?

You will see three different designs on our website by clicking here.

NAFO, short for the North Atlantic Fella Organization, is a clever play on ‘NATO.’ It represents a grassroots social media movement aimed at countering Russian disinformation while crowdfunding aid to support Ukraine’s fight for freedom.

The badge on the right is the logo of the Osprey group, which belongs to the 26th Unmanned Systems Regiment. One of my Finnish friends is fighting in Ukraine in this exact unit.

The badge in the middle brings a Finnish touch, showing a happy Fella fighting for Ukraine. It reads “Happiest Fella Nation,” as Finland won the happiest country award for the 8th year in a row.

The badge on the left is the logo of the 6th Special Operations Detachment of the Timur Special Group.

After donating, you will be requested to provide an address for the delivery of the badge. We ship worldwide!

(5) I want to donate and join the convoy. What should I know?

The minimum donation to join our convoy is $11,500 (€10,000). That might sound like a lot, but for what you’re getting, it is truly exceptional.

This is a once-in-a-lifetime experience, the kind of trip that money alone can’t typically buy. Access like this requires the right relationships, and we have taken care of everything: the paperwork, the logistics, the planning. All you have to do is show up and be part of something extraordinary.

Worried about safety? You are not alone, but the reality is far less dramatic than it may seem. Foreign presidents, diplomats, and even celebrities now visit Kyiv regularly. Ukraine is a large country, and the fighting is far from the capital. Kyiv itself is well-protected with advanced air defenses, and civilian casualties are now rare relative to the size of the city.

This will be an unforgettable journey. You will meet me, the full crew, and most importantly, Ukrainian defenders on the ground. You will stay two nights in a nice hotel in Kyiv (yes, it has a bomb shelter), explore this beautiful and resilient city, and take part in meaningful, memorable activities.

And most of all, you will make a real impact on this war.

One of our members, Stan Miller, made a generous $25,000 donation in 2023 and joined us on one of our convoys. He made a 5-minute video about the experience:

Since then, many more members have joined our convoys, and every single one has said that it was well worth the cost.

Our next trip will start in the second half of July and will last five days (please send me an email at jaskola@leonbergcapital.com for the exact dates).

You will fly into Tallinn, Estonia, a day or two before we start the convoy. From there, we will drive all the way to Kyiv, Ukraine, passing through Latvia, Lithuania, and Poland along the way, five countries in one unforgettable journey!

You will be paired with at least one other person per car so you can take turns driving and rest when needed. We also stop every few hours for breaks, meals, and coffee.

Can’t drive? No problem. Just let me know in advance, and we will arrange additional drivers.

We will take care of all the necessary paperwork ahead of the trip to ensure smooth entry into Ukraine. All you need is a passport that’s valid for at least 6 months beyond your entry date.

Once we arrive in Kyiv, we will park the cars, check into the hotel, freshen up with a shower, and head out for a well-deserved dinner to celebrate another successful convoy.

Kyiv currently has a midnight curfew, so we will return to the hotel before then, but the lobby bar stays open later if you are not quite ready to turn in.

The next day, we will meet with Ukrainian soldiers to deliver the vehicles and supplies. You will have a chance to talk with them, take photos, and witness firsthand the impact of your support.

We will also spend time exploring Kyiv, and if the schedule allows, visit places like Bucha and Hostomel Airport. While we can’t guarantee anything in advance, every past trip has included meaningful and memorable experiences.

We plan to spend two nights in Kyiv, giving you time to enjoy the city, try Ukrainian cuisine, and take part in additional activities.

After our time in Kyiv, we will board an overnight train to Warsaw, which has sleeping compartments. It is surprisingly comfortable!

From Warsaw, you can catch your flight home or stay an extra night or two at a local spa or hotel. That’s what I usually do. Warsaw is a beautiful city, and even its top hotels are very affordable.

Your donation covers most major expenses, including:

• Hotel accommodation in Kyiv

• Welcome dinner on the first night

• Train ticket back to Warsaw

If you are interested in joining the next convoy, send me an email at jaskola@leonbergcapital.com, and I will share more details.

You can also watch this documentary by YouTuber Artur Rehi (700,000 subscribers), who regularly joins our trips:

(6) What are the exact dates of the convoy?

The trip is scheduled to begin in the second half of July.

Once you reach out, I will share the exact dates so we can coordinate your arrival in Tallinn, Estonia.

If you are interested, please email me at jaskola@leonbergcapital.com

(7) I can’t join in July. Can I join another convoy?

Yes! If you donate $11,500 or more but can’t join this convoy, you are welcome to participate in a future one when the timing works for you. We organize convoys every month.

Just let me know so we can reserve your spot. This specific campaign may not be repeated, so it is best to confirm your interest early.

(8) Can I take a friend with me?

Of course!

As long as the donation is at least $11,500 per person, you can take as many people as you want with you. We can always buy additional cars and supplies with the funds.

(9) Do you have any other questions?

Please let me know in the comment section or send me an email at jaskola@leonbergcapital.com, and I will be happy to help!

Let’s stand with Ukraine and show the world that, when freedom is under attack, we come together to defend it.

Click here to visit our website and donate

Thank you for your support!

Jussi

Important Note: We recently initiated a new position in Invitation Homes (INVH) for our Retirement Portfolio and shared our initial thoughts in a trade alert that you can read by clicking here.

Since then, its share price has risen a little, but it still remains one of the best opportunities in today’s market, in our opinion. In today’s follow-up, we share a more detailed investment thesis, discussing the good and the bad, and explaining why we think that the company presents significant upside potential.

Invitation Homes Investment Thesis

Invitation Homes (INVH) is one of the largest and most scaled landlord-operators of single-family rental homes in the United States, with over 80,000 homes under management.

Most of those homes are owned outright, while the rest are in joint ventures or INVH’s third-party management platform.

The REIT enjoys an investment-grade (BBB/BBB+) balance sheet and unique relationships with homebuilders. It also recently acquired ResiBuilt, a developer of build-to-rent homes in the Southeast with over 1,400 homes in development.

By all measures, INVH is a blue-chip company and industry leader in the single-family residential space.

And yet, because of low investor sentiment, INVH today trades at a ~30% discount to net asset value.

It also trades at a mere 13.1x FFO multiple, or roughly 15.5x AFFO.

This is close to its lowest valuation in company history:

The REIT now offers a dividend yield of 4.5%, which is well-covered at a payout ratio in the low-70% of AFFO area.

INVH boasts a strong occupancy rate of 96% with no slippage in the first few months of 2026, and single-family rentals have an attractive growth runway ahead from the combination of homebuying unaffordability and a demographic bulge of middle-aged Americans over the next decade.

So what’s the problem? Why is INVH’s stock price languishing and its valuation so low?

There are three headwinds that have pushed down investor sentiment right now. We will cover each one below.

Ultimately, though, we think the bad news has been thoroughly priced into INVH’s stock, leaving little to no downside (outside of a major recession).

We foresee at least 35% upside to fair value from here. And while we wait, INVH’s 4.5% yield pays us to wait, and we expect a return to mid-single-digit growth next year.

1. Housing Supply Surge

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Another Big Win For Us, Our 12th REIT Buyout

At High Yield Landlord, our investment strategy is built on buying real estate at a steep discount to fair value through the often mispriced public REIT market.

The goal is simple.

We aim to earn an abnormally high yield while we wait, and then profit further as the discount to fair value gradually closes.

Because of this, it is also quite common for us to benefit from buyouts. When public REITs trade at steep discounts to the value of their underlying real estate, it often attracts larger investment firms that see an opportunity to acquire the entire company at a premium, and still get a good deal.

Over the years, we have now profited from 11 such buyouts.

This includes:

• Frontyard Residential

• MNR Real Estate

• Urstadt Biddle

• Hersha Hospitality

• STORE Capital

• American Campus Communities

• PS Business Parks

• Tricon Residential

• Apartment Income REIT

• National Storage REIT

• Whitestone REIT

And now, we have another one.

Sila Realty Trust (SILA) has agreed to be acquired by Blue Owl Capital (OWL) in a $2.4 billion transaction at a 25.6% premium to its 30 day volume weighted average price.

This is a big win for us because Sila was the second largest holding in our Core Portfolio, representing 7.3% of it.

We first invested in the company in August 2024 after selling Global Medical REIT, now known as Chiron Real Estate (XRN), and in hindisght, that was a very good decision:

This also marks the third REIT buyout from our portfolio in just over one month.

First, our Australian Top Pick, National Storage REIT (NSA), got bought out by Brookfield (BAM). Then, Whitestone REIT (WSR) got bought by Ares (ARES). And now, Sila is getting bought by Blue Owl.

So what do all of these investments have in common?

They all traded at steep discounts to net asset value, and that eventually caught the attention of major private equity firms that were willing to pay large premiums to acquire them, while still believing that they were buying at attractive valuations.

This is exactly why we remain so bullish on the REIT market today.

It continues to offer patient long-term investors the opportunity to buy high quality real estate at deeply discounted prices. In many cases, we are quite literally buying dollars for 50 cents.

And I think there is a high likelihood that we will see many more similar transactions in the coming months because we currently own a number of positions that could also become buyout targets.

Just looking at our current Core Portfolio:

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As High Yield Landlord members know, we are constantly updating our inflation outlook.

As the facts on the ground change, our outlook changes.

While it would be impressive to give a macro or inflation outlook and then stick to it for multiple months or quarters, that just isn’t realistic. We constantly have to update our view as we learn new things and as other expert forecasters issue their own outlooks.

We are sure that our outlook will change in a few months’ time. But here’s how we see the inflation landscape today.

Unfortunately, there is significant bad news to absorb, but there is also long-term good news to keep in mind.

Bad News

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Today, more than 30 countries have adopted REIT-like regimes, creating a broad and diverse opportunity set for investors:

Our International Portfolio is optional and designed for those seeking greater diversification to achieve better risk-adjusted returns.

Personally, I target allocating at least 25% of my REIT exposure to non-U.S. markets. Some members may choose to allocate more, while others may prefer to remain focused on domestic opportunities. Ultimately, it depends on individual preferences, risk tolerance, and return objectives.

The aim is to equip you with the tools and insights needed to go beyond the U.S. market, enabling you to identify and evaluate opportunities across Canada, Europe, South America, Asia, and even Africa, all from the comfort of your home.

The portfolio currently includes 18 positions, with 8 in Europe, 6 in Canada, 3 in Central and Latin America, and 1 in Africa.

In today’s article, we give updates on our Central and Latin American Top Picks

IRSA (IRS):

We first initiated a position in IRSA following Javier Milei’s election victory, expecting that a shift in economic policy and a move away from prior frameworks would attract international capital and drive a rerating of Argentine assets.

This played out as expected, with the stock more than doubling in under a year. We later exited to redeploy our capital, but recently reinitiated a position following a sharp sell-off ahead of the midterm elections, which were driven by fears that the reform agenda would lose momentum and lead to policy gridlock.

Instead, the outcome reduced that risk. The administration strengthened its position in Congress, improving its ability to advance its policy agenda. This was a positive development for markets and removed a key overhang on Argentine equities.

Since then, there has not been much fundamentally new to report, but the outlook remains favorable. Argentina is gradually shifting toward a more market-oriented framework, with efforts to reduce regulation and bureaucracy, improve the business environment, and restore access to capital.

This shift is already having tangible effects. Real estate values are rising, and importantly, mortgage markets are beginning to function again. The lack of financing had long suppressed property values, and as credit availability improves, it should support further upside over time.

Importantly, IRSA’s underlying business continues to hold up well. Despite political uncertainty and the near-term economic adjustment, including reduced government spending and other austerity measures, the company has delivered resilient cash flow performance in 2025. This reflects the quality of its assets, primarily trophy malls in Buenos Aires with strong locations and high barriers to entry.

The near-term adjustment is meaningful, but it is part of a broader effort to stabilize the economy over the long term.

If Argentina continues on its current path and successfully stabilizes its economy, the upside for real estate values could be substantial. IRSA is uniquely positioned to benefit from this, offering exposure to some of the highest-quality real estate in the country while still trading at roughly a 40% discount to net asset value, even though that NAV is conservatively estimated.

In our view, it remains the single best way to gain exposure to Argentine real estate.

Management also continues to act in a shareholder-friendly manner. They are actively repurchasing shares at a steep discount to NAV, creating significant value for shareholders, and have guided to pay a roughly 10% dividend yield again this year while still retaining capital to buy back shares and fund new investments.

As such, the thesis remains intact. The macro backdrop is improving, the company continues to execute well, and the valuation remains deeply discounted. As Argentina continues to recover and investor confidence returns, we expect IRSA to benefit significantly, both through rising asset values and a narrowing of its discount to NAV.

Corporacion Immobiliaria Vesta (VTMX):

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Transaction: We bought today another 180 shares of Series A preferred equity of Innovative Industrial Properties (IIPR), increasing our position size by 18%.

We took a hard look at the risks and continue to think that the 10.6% dividend yield is excessive relative to the risks. Below, we share our latest analysis:

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The recovery of REITs ultimately depends on one variable more than any other: interest rates.

Yes, fundamentals matter, and yes, sector and stock selection matter.

But in the short to medium term, REIT valuations are still heavily driven by the same force that drives all long-duration assets, the discount rate investors apply to future cash flows. When that discount rate rises, REIT multiples compress. When it falls, REIT multiples expand.

That is why the entire REIT debate increasingly comes down to one question:

Is AI going to be deflationary or not?

If AI becomes a powerful deflationary force, then interest rates could trend lower over time. If interest rates trend lower, REITs will likely rerate higher, especially the high-quality names with durable cash flows and visible long-term growth. In other words, if AI-driven deflation is real, then a significant portion of the REIT recovery is not only plausible, it becomes likely.

The market is still treating AI primarily as a stock-picking theme. Buy the chipmakers and the data center winners and sell the software losers. That may be true, but it misses the bigger picture.

AI is not only a technology, it is a general-purpose productivity shock. And productivity shocks have consequences for inflation, wages, and ultimately interest rates.

Why AI is highly likely to be deflationary

Deflation is not about prices falling everywhere all at once. It is about persistent downward pressure on the marginal cost of producing goods and services. AI is uniquely positioned to create that pressure because it scales, improves, and spreads faster than past technologies.

Here are the main channels.

1. AI pushes the marginal cost of knowledge work lower

A large share of modern inflation comes from services. Services inflation is largely labor inflation. AI directly targets labor-intensive service activity, especially tasks that are repetitive, standardized, and digital.

This includes:

• Customer support, sales development, and basic account management

• Bookkeeping, compliance support, and basic legal drafting

• Marketing production, content creation, translation, and editing

• Entry-level analysis, research synthesis, and reporting

• Coding assistance, testing, documentation, and maintenance tasks

When the marginal cost of these activities falls, service prices face downward pressure. Even if the final price does not immediately fall, the rate of price increases slows. That is disinflation, and it tends to pull interest rate expectations down over time.

2. AI changes labor bargaining power

Inflation is not only about costs, it is also about negotiating power. When workers are scarce and difficult to replace, wages rise, and inflation becomes sticky. When replacement becomes easier, wage growth cools.

AI does not need to eliminate every job to be deflationary. It only needs to:

• Reduce the number of workers required per unit of output

• Increase substitution options for employers

• Create a credible threat of automation in more occupations

That shifts bargaining power away from labor, which is disinflationary.

3. AI creates a supply shock, not only a demand shock

Many discussions focus on AI as if it is just demand for chips and data centers. But the macro impact is more about supply. AI improves the economy’s capacity to produce output with fewer inputs, especially labor.

When supply expands faster than demand, inflation falls. When productivity rises meaningfully, central banks can achieve growth without inflation, which historically leads to lower policy rates over time.

4. Competitive markets force pass-through over time

Even if companies initially keep the savings as margin expansion, competition tends to force pass-through eventually.

The pattern typically looks like this:

• Phase 1, productivity gains boost profits

• Phase 2, competition compresses pricing power

• Phase 3, consumers capture more of the gains through lower prices, higher quality, or both

That is how deflationary forces spread. They are not always immediate, but they become difficult to avoid once adoption reaches scale.

5. AI-powered robotics extends deflation beyond services into physical goods

Most discussions about AI today still focus on software, data, and knowledge work. That alone is deflationary, but it only addresses part of the economy. The next phase, which is already underway, is the integration of AI into robotics and automation in the physical world.

AI-driven robotics has the potential to dramatically reduce the cost of producing goods by:

• Lowering labor requirements in manufacturing, logistics, and warehousing

• Increasing utilization rates by enabling round-the-clock production

• Reducing error rates, waste, and downtime

• Allowing production to be reshored or near-shored without higher labor costs

Historically, goods inflation has been constrained by globalization and automation. AI-powered robotics accelerates that trend by making machines more adaptable, cheaper to deploy, and capable of handling a wider range of tasks that previously required human intervention.

As robotics improves, the marginal cost of producing many goods declines. Even if demand rises, increased productive capacity limits price increases. That dynamic is inherently deflationary.

This also matters geopolitically. Governments may seek supply chain resilience and domestic production, but AI-driven robotics allows this to happen without reintroducing labor-driven inflation. In other words, reshoring does not have to be inflationary if machines do most of the work.

Once both services and goods production face sustained productivity gains, the deflationary impulse becomes broader and harder to offset. That is when interest rate expectations tend to adjust more decisively.

The key objection: governments can offset it

The strongest counterargument is fiscal policy.

If AI weakens labor income and creates political pressure, governments may respond with:

• Larger transfer programs

• Expanded unemployment support

• Public sector job creation

• Tax credits, subsidies, and industrial policy

• Some form of basic income or wage support

These policies can be inflationary, especially if they are deficit-funded. So the question becomes, will the government response cancel out the deflationary impulse of AI?

My view is that it will not, at least not quickly.

Governments are slow, rigid, and reactive

Major policy changes typically come with delays:

• Data arrives with a lag

• Policymakers debate causes and blame

• Legislation takes time

• Budgets, agencies, and programs take time to implement

• The response is often incremental at first, not immediate and decisive

Even if governments eventually respond in a meaningful way, the transition period can still be deflationary, because the productivity shock happens faster than the policy adjustment.

That lag matters for markets. Markets reprice on expectations and forward-looking probabilities. If the next several years are characterized by disinflationary pressure and weaker labor bargaining power, then interest rates can move lower well before governments fully adapt.

This is especially important for REITs, because REIT valuations respond quickly to changes in rate expectations.

Why this is bullish for REITs

REITs are today discounted due to the higher interest rates for the most part:

When interest rates fall, several positive things happen at once:

1. The discount rate falls, and valuations rise

A lower required return increases the value of stable cash flows. This is the simplest and most powerful driver of REIT reratings.

In a lower-yield environment, it becomes harder for investors to earn sufficient income from fixed-income investments, making REIT dividends more competitive and boosting demand for their shares. Historically, this has often led REITs to trade at premiums to NAV.

Beyond that, private market cap rates also tend to reflect long-term interest rate expectations. Lower rates typically support higher real estate values, which lifts REIT NAVs and reduces perceived risk.

2. The spread becomes attractive again

As REIT valuations recover and their cost of capital declines, acquisition spreads widen, allowing them to return to faster external growth.

In recent years, it has been very difficult for REITs to pursue accretive acquisitions. That could change quickly if interest rates decline and equity multiples recover.

3. Refinancing pressure eases

Lower rates reduce interest expense and improve coverage ratios. That supports faster FFO growth and reduces tail risk, particularly for REITs with higher leverage.

Conclusion

The REIT recovery is not only a rates story, but it does matter a lot, and the rates story increasingly depends on AI.

If AI drives a sustained productivity shock that cools wage growth and service inflation, then the most likely path is lower interest rates over time. Even if governments eventually respond, they are unlikely to do so quickly enough to prevent a meaningful disinflationary transition period.

That is why I believe AI is not only a technology theme, it is a macro theme, and it is one of the most underappreciated bullish forces for high-quality REITs today.

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.

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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.

Over the past year, we have had a few setbacks in our portfolio.

Most notably, RCI Hospitality (RICK) had a legal case filed against it, leading to sharp losses, and Alexandria Real Estate (ARE)’s fundamentals greatly deteriorated as a result of the healthcare policy chaos.

But in the midst of this, it is easy to overlook that we have also had our fair share of winners, and Whitestone REIT (WSR) is a great example of that.

We first invested in the REIT in 2021, after selling its close peer, Brixmor Property Group (BRX), for an 87% return, and noting that WSR had become more opportunistic.

We then had the chance to repeatedly interview the company’s CEO for High Yield Landlord, which gave us the confidence to hold on to it through periods of intense volatility and gradually accumulated a larger position.

We also speculated that WSR could potentially become a buyout target as it owned the best portfolio in its group, and yet, traded at one of the lowest valuations relative to its net asset value.

That’s exactly what has happened. Just now, WSR announced that it has agreed to a $1.7 billion buyout from the private equity giant Ares (ARES).

This closes our investment in WSR.

Our average cost basis is $8.8 and we are today selling it at $18.92, just shy of the acquisition price of $19. We also earned significant dividend income along the way.

This is a great example of what we ideally aim to achieve at High Yield Landlord. We look for opportunities to acquire high-quality real estate at a steep discount via the public REIT market, often due to some sort of near-term concerns, and then look for potential catalysts to unlock this hidden value.

WSR worked out great, and we are especially happy about it, given that it has been one of our most heavily covered investments here at High Yield Landlord, with a total of 7 management interviews since we invested in the stock.

1. Oct. 01, 2022 - Interview With Dave Holeman, CEO Of Whitestone REIT - Strong Buy Reaffirmed

2. Apr. 13, 2023 - Interview With The CEO & COO Of Whitestone REIT - Strong Buy Reaffirmed

3. Jun. 13, 2023 - Interview With Whitestone REIT - REITweek Conference Part 3

4. Dec. 30, 2023 - Interview With The CEO Of Whitestone REIT - Strong Buy Reaffirmed

5. Aug. 13, 2024 - Interview With Whitestone REIT (Strong Buy Reaffirmed)

6. Mar. 28, 2025 - Interview With Whitestone REIT - Strong Buy Reaffirmed

7. Oct. 23, 2025 - Interview With Whitestone REIT - Strong Buy Reaffirmed

Now, what are we doing with the proceeds of this sale?

Read more

Something unique about High Yield Landlord is that we do not limit our coverage to U.S. REITs, but also actively research opportunities across global markets.

Today, more than 30 countries have adopted REIT-like regimes, creating a broad and diverse opportunity set for investors:

Our International Portfolio is optional and designed for those seeking greater diversification to achieve better risk-adjusted returns.

Personally, I target allocating at least 25% of my REIT exposure to non-U.S. markets. Some members may choose to allocate more, while others may prefer to remain focused on domestic opportunities. Ultimately, it depends on individual preferences, risk tolerance, and return objectives.

The aim is to equip you with the tools and insights needed to go beyond the U.S. market, enabling you to identify and evaluate opportunities across Canada, Europe, South America, Asia, and even Africa, all from the comfort of your home.

The portfolio currently includes 18 positions, with 8 in Europe, 6 in Canada, 3 in Central and Latin America, and 1 in Africa.

In today’s article, we give updates on our 6 Canadian Top Picks:

Northview Residential REIT (NRR.UN:CA)

We invested in Northview Residential REIT (NRR.UN:CA) about two years ago, and it has already become a very successful investment:

And yet, it still remains cheap.

The Canadian apartment REIT continues to trade at a significant discount to its net asset value and at one of the lowest FFO multiples in its peer group, despite delivering some of the strongest growth in the sector.

Recent results once again highlight the strength of the story.

In 2025, FFO per unit grew by 31.7% to $2.37. Even when excluding insurance proceeds, which inflated results, the underlying FFO per unit still grew by 14.9%, which is one of the best growth rates in its peer group.

At the same time, the FFO payout ratio improved materially, dropping by 830 basis points to just 56.6%, providing a much stronger margin of safety for the dividend.

Operational performance also remained solid.

Same-property NOI grew by 4.2%, driven by strong rental growth across the portfolio. Average monthly rents rose by 6.2%, even as occupancy remained stable at a high 95.4%.

At the same time, management has made significant progress on non-core asset sales and deleveraging.

The company exceeded its non-core asset sale target, completing $164 million of dispositions. The proceeds were largely used to reduce debt, including a $122.7 million reduction in its credit facility, contributing to a 240 basis point improvement in leverage.

Importantly, these asset sales also validate the company’s valuation.

Non-core assets were sold at prices exceeding their IFRS carrying values, despite being among the weaker parts of the portfolio. This suggests that the reported NAV is conservative and likely understates the true value of the underlying real estate.

Interest expense declined by $12.5 million, driven by lower debt balances, improved financing terms, and a more favorable interest rate environment. This was a key driver of the strong FFO growth in 2025.

Putting it all together, the company is executing exactly as planned. It is growing its cash flow, improving its balance sheet, and recycling capital into higher-quality assets, all while maintaining one of the highest dividend yields in the Canadian residential sector.

The key concern remains leverage.

At around 62% loan-to-value, the REIT still carries more debt than most of its peers. However, this figure is somewhat misleading.

Northview values its assets using a relatively high cap rate of around 6.5%, reflecting its focus on smaller, less competitive markets. In contrast, many peers focus on major urban markets where cap rates are closer to 4% to 5%, resulting in higher asset values and lower reported LTVs.

When looking at other metrics, such as debt-to-EBITDA, the difference is far less pronounced, with Northview at around 10x, broadly in line with peers. This is still elevated, but manageable, especially given the REIT’s low payout ratio, well-staggered debt maturities, and strong NOI growth.

Importantly, this market positioning is not a weakness, but a strength in today’s environment.

Northview’s focus on secondary and more rural markets has allowed it to avoid much of the oversupply that has recently impacted primary markets. While major cities have seen a wave of new development, smaller markets have remained more supply-constrained, benefiting from strong housing demand and rising affordability pressures.

This is a key reason why the REIT has been able to deliver such strong rent growth and operating performance.

At the same time, net asset value per share is now rising again, yet the stock remains heavily discounted.

It is currently trading at roughly a 35% discount to NAV and 9.9x AFFO, one of the steepest discounts in its peer group. As the company continues to strengthen its balance sheet and complete the sale of non-core, non-residential assets, which still represent about 15% of rental income, we expect this discount to gradually close.

In the meantime, we are paid well to wait with a 6.6% dividend yield that’s well-covered and paid monthly.

RioCan (OTCPK:RIOCF / REI.UN:CA)

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As we have explained in previous updates on our specialty REIT holdings, this group of REITs has little in common with each other other than that they do not fit in any of the traditional real estate categories.

Notably, two of our holdings, SBAC and UNIT, have recently become buyout targets, with SBAC receiving takeover interest from large infrastructure funds and UNIT attracting interest from T-Mobile and TPG. This further highlights the disconnect between public market valuations and private market demand for these assets.

Over time, especially as data centers have proliferated, non-traditional real estate sectors have increased their share of REIT market capitalization.

The only two commonalities between our specialty REIT holdings is (1) each one’s strong market position in their particular niche and (2) inflation-resistant property assets.

CCI and SBAC each own a critical mass of wireless communication towers that give them enviable scale advantages.

NLCP is one of an elite few cannabis REITs with any access at all to public markets, even if currently only over-the-counter. It also owns a strong and nationally diversified portfolio of cannabis properties.

CUBE is one of the largest and most efficient self-storage REITs in the US with a growing third-party asset management platform, allowing storage operators to maintain control of their businesses while benefiting from CUBE’s scale, brand, and operating efficiency.

Lastly, after merging with PotlatchDeltic earlier this year, RYN is the second-largest owner of timberland in the nation with over 4 million acres, putting it behind only Weyerhaeuser (WY). While timber remains RYN’s primary business, linking it to the cyclicality of that commodity, the REIT’s massive land holdings in the South provide numerous options for value creation from higher and better uses (renewable energy, carbon storage, or real estate development).

While CCI, SBAC, and CUBE tend to be more defensive and recession-resistant, NLCP and RYN enjoy significant inflation protections and benefit from stronger economic growth.

Let’s now turn to the Q4 2025 earnings updates for our specialty REITs.

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This is the next installment in our monthly series on the portfolio of our macro analyst, Austin Rogers. Please note that our main focus will remain on the HYL Portfolios, but since many of you have expressed interest in knowing how Austin manages his portfolio, we are posting this to give you extra value.

Greetings from central Texas!

It’s springtime here. The bluebonnets are in bloom, the weather is lovely, and the grays & browns of winter have been replaced by a proliferation of green everywhere.

In my portfolio, however, it has been more of a mix between green and red.

REITs and other moderate-yielding dividend growth stocks enjoyed a strong start to the year as the overstretched AI trend gave way to rotation into value stocks. Then, in late February, bombs dropped in Tehran, setting off an ongoing conflict that quickly resulted in the closure of the Strait of Hormuz, through which 1/5th of global oil volume typically flows.

REITs and other rate-sensitive dividend payers hate higher oil prices, because higher oil prices pulls up overall inflation, which then pull up interest rates.

The good news is that this oil shock is expected to be temporary, even if painful.

The US Energy Information Administration forecasts the price of oil to gradually come down over the course of the year, assuming military hostilities wind down soon.

EIA Short-Term Energy Outlook

To quote the report:

We forecast the Brent crude oil price will remain above $95/b over the next two months, before falling below $80/b in the third quarter of 2026 and around $70/b by the end of the year.

As of this writing on March 31st, there have been news reports of both sides seeking to deescalate. How exactly this mini-war will end is above my paygrade, but we appear to be on an offramp.

That led to some excellent buy-the-dip opportunities among REITs and other dividend payers, many of which remain great buying opportunities.

For long-term investors comfortable with volatility, the alternative asset managers like Blackstone (BX), Brookfield Asset Management (BAM), Ares Management (ARES), and Blue Owl Capital (OWL) have been severely beaten down, offering depressed valuations amid the private credit panic.

In REITdom, there are some highly attractive buying opportunities, including among cell tower REITs, select senior housing/care REITs, and VICI Properties (VICI), which has sold off in sympathy with its tenant Caesars Entertainment (CZR).

But to tell you the truth, the investing theme I’m most excited about right now is technology.

Yes, technology.

I spent all last year in my public articles on Seeking Alpha bemoaning the market’s uncritical enthusiasm for AI. My argument was that while it is surely an amazing technology that will increase productivity over time, returns on the massive amount of AI investment being done are completely unknown, making the circular financing deals prevalent in the AI ecosystem look suspect.

This year, the pendulum has swung decisively the other way, rendering technology stocks an attractive buying opportunity (in my opinion) for long-term investors.

In what follows, allow me to lay out my broad thoughts on the economic backdrop today, followed by a glance at my top holdings and then the portfolio recycling carried out in Q1.

Three Major Economic Forces Today

While the Iran war and private credit redemptions create noise and headlines, I think there are three major economic forces having the most impact on the US economy and market fundamentals today.

1. Big Tech Capex Is The Primary Driver of Earnings Growth

Overall, US economic growth is decent but not strong. However, if you stripped out the massive level of AI infrastructure spending by Big Tech companies, US economic growth would be very weak or nonexistent.

The biggest driver of earnings growth in the stock market today is investment spending within the AI ecosystem.

The Big Beautiful Bill certainly helps by incentivizing other business investment, to be sure, but this source of growth pales in comparison to Big Tech capex.

JP Morgan

Just the five major hyperscalers have projected collective growth of about 60% in capex. Substantially all of their operating cash flow is being funneled into AI infrastructure investment this year. This capex amounts to roughly 2% of US GDP -- more than almost any other new technology investment cycle in history.

One company’s spending is another company’s income.

Hence we find that the technology and materials sectors, two of the biggest immediate beneficiaries of Big Tech capex, are projected to enjoy incredibly strong earnings growth this year.

Carson Research

Obviously, income-seeking investors will balk at the 1-2% dividend yields among dividend payers in the technology space, but I would argue that long-term investors (including dividend growth investors like me) should seriously consider some tech stocks right now.

Despite having over double the projected earnings growth as the S&P 500 (SPY) this year, the US tech sector (XLK) recently came very close to valuation parity with the SPY:

Daily Chartbook

That’s an incredible development, especially in the age of AI where developed economies around the globe become increasingly reliant on productivity growth over labor force growth.

My favorite two-pronged way to tap into this growth trend is the duo of First Trust NASDAQ Technology ETF (TDIV) and its covered call fund FT Vest Technology Target Income ETF (TDVI).

Although TDIV yields around 2% or a little less, I expect to see at least high-single-digit dividend growth from the ETF going forward.

And TDVI yields ~8%, trading capital gains for income. Its total return performance is basically equal to that of TDIV, minus its higher expense ratio of 0.75% compared to TDIV’s 0.5%.

Data by YCharts

For those, like me, who are underweight tech, these two ETFs are arguably the best option for pure-play exposure to dividend-paying tech stocks.

2. “Let Them Eat Cake” - The K-Shaped Economy

The financial media (myself included) has discussed the K-shaped economy ad nauseum over the last few years. But even if you’re tired of hearing about it, the trend is still there, and it is powerful.

The top 10% of households by income currently account for 49% of total consumer spending, while the bottom 80% have seen their share of consumption slide considerably over the last several years.

Financial Times

The top 20% of income earners account for over 60% of total consumer spending.

This is steadily reshaping the consumer economy to cater to the affluent, who are largely older people with large stock portfolios and fully paid-off personal homes.

It will also have electoral consequences. I would argue the main reason why the pendulum swung toward Republicans in 2024 was the “affordability” issue -- a codeword for negative economic sentiment and rising lifestyle envy. That issue has only gotten worse, which bodes poorly for Republicans’ electoral prospects later this year.

3. Net Immigration Has Halted

For the first time in at least 50 years, US net immigration turned negative in 2025.

In cities across the nation, net immigration absolutely collapsed, often into negative territory.

New York Times

Now, my personal view (which I believe is the majority view among Americans) is that the Biden administration was far too lax about immigration, allowing a virtually unrestricted and unfiltered flow of migrants for multiple years in a row. Too much in-migration too quickly almost always results in a political backlash.

From 2021 through 2023, well north of 10 million people migrated into the US.

Brookings Institution

This much immigration tends to make the native-born population anxious and frustrated, especially when a large portion of those migrants lack solid legal authorization.

But it is also my personal view (which, again, I believe is the majority opinion in the States) that the Trump administration has overcorrected to an extreme degree on the immigration issue. They have allowed in too few legal immigrants and been too aggressive on deportations.

This overcorrection has negative economic effects, including a dent in labor supply in many industries and a drop in aggregate consumption.

Brookings Institution

While this may seem like a small impact, it has a sizable impact when real GDP growth is already low.

If the US native-born population was still growing at a decent pace, perhaps zero net immigration wouldn’t be a problem. But unfortunately, the US has almost no growth in the native-born population either.

I think this cessation in population growth, especially among the working-age cohort, has played an outsized role in low job growth over the last year.

It is also why I am increasingly hesitant to buy residential REITs right now, despite how objectively cheap they’ve become. With little to no job growth and little to no working-age population growth, where is growth in demand for rental housing supposed to come from?

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 first quarter was a real roller coaster ride.

It started strong with REITs surging nearly 10% in value as the market became concerned about AI, and capital rotated from AI-disrupted businesses like SaaS companies towards AI-resilient businesses like REITs:

But then shortly after, the attacks on Iran began, and what was initially expected to be a short military operation turned into a broader war that’s still ongoing as I write this.

Iran retaliated by blocking the Straight of Hormuz, through which about 20% of the world’s oil shipments pass, triggering a supply shock that pushed oil prices above $100 per barrel.

The market immediately began to worry about inflation, long-term interest rates surged higher, and REITs gave up all their recent gains and then some:

I would add here that this is just the average of the REIT sector.

Many REITs, especially those with higher leverage, dropped far more than this. Some have dropped as much as 20-30% over the past month.

Vonovia (VNA), the biggest landlord in Europe, is down nearly 30%, for instance, as it has quite a bit of leverage, and the energy crisis could impact Europe even more than the rest of the world:

How did we react to this crisis?

We first assessed how much it is expected to impact inflation and concluded that the impact would likely be modest and temporary.

As we wrote in our recent market update, energy makes up only 3% of the total CPI basket, and while it will also indirectly impact other components of the basket, the biggest basket of all, which is shelter, making up 35% of total CPI, remains in a very powerful disinflationary trend today.

We concluded that $100 oil prices, if sustained, would likely add 0.5 to 1 points to the CPI rate, bringing it to about 3% by year-end.

This is not the end of the world.

Importantly, we think that this should be a transitory increase followed by an eventual return to the pre-war disinflationary trend.

That’s because:

• 1) Drilling is immensely profitable at over $100 oil and will lead to a surge in new supply.

• 2) Consumers do not immediately change their consumption behavior, but they will if energy prices remain this high, skipping a flight, for instance, due to increased cost, reducing the demand.

• 3) Finally, while it is impossible to predict how long this war will last, the Trump administration has repeatedly signaled that it wants out of it as soon as possible, possibly already over the coming weeks, and its allies have refused to get dragged into it. There is significant political and economic pressure on President Trump to calm things down with the mid-term elections coming up. Iran also has a strong economic incentive to eventually reopen the Straight of Hormuz, at least partially to “friendly nations”, as it heavily depends on oil revenue.

For these reasons, the US Energy Information Administration forecasts that the price of oil will gradually come down over the course of the year:

To quote the report:

“We forecast the Brent crude oil price will remain above $95/b over the next two months, before falling below $80/b in the third quarter of 2026 and around $70/b by the end of the year.”

But no one has a crystal ball, of course, and it could well take longer than this for energy prices to come back down.

My point is simply that this is likely to be a short-term setback, and it does not change our long-term outlook for inflation or interest rates.

We still think that other factors, primarily technological advances in AI and robotics, will ultimately have a much greater impact on inflation over time and bring interest rates back to lower levels.

Therefore, we are not changing our approach. We are simply turning this setback into an opportunity to buy the dips and bulk up our positions in anticipation of even greater gains in the future.

In the last quarter, we bought the dips in the following companies, and you can read our investment thesis by clicking the links below:

• SBA Communications

• Rexford Industrial Realty

• Shurgard

• RCI Hospitality

• International Workplace Group

• Big Yellow Group

• Innovative Industrial Properties Series A Preferred

• AH Realty Trust

• Invitation Homes

• Blue Owl Capital

• Vail Resorts

• EPR Properties Series G Preferred

Going into the second quarter, we expect to do more of the same, unless the outlook changes. Right now, the companies that are the highest on my priority list for new additions are the following:

• Invitation Homes

• Camden Property Trust

• Blue Owl Capital

• Rayonier

• Shurgard

• Vonovia

In case you missed it, we discussed many of these companies on our recent quarterly webinar. You can listen to the recording here:

Finally, I want to remind you that our book, The REIT Advantage, was recently released, and we are giving it 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 copy by clicking here.

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

==============================

2. Updates to Our Portfolio Holdings:

We have had 14 “Trade Alerts” in Q1 2026:

#1 TRADE ALERT - January 08th, 2026 (Retirement Portfolio)

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Quick Reminder:

I am excited to announce that we will be hosting our second 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 04/01/2026 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 - Core & Retirement Portfolio March 2026

The market has recently suffered a sell-off following the outbreak of war with Iran. Investors are increasingly concerned that a spike in oil prices could reignite inflation, pushing long-term interest rates higher.

This has already begun to play out.

Long-term yields have moved up, and this has had an outsized impact on companies with long-duration cash flows and or higher leverage. As a result, many REITs have pulled back sharply, with some down 20% or more over the past month or two.

But as we explain in our recent Market Update, while this is clearly a risk, we believe its long-term impact will likely be limited, and the current sell-off is creating an opportunity.

You can read why by clicking here.

In short, while oil prices have spiked, the broader inflation backdrop remains favorable. Shelter inflation, which makes up the largest component of CPI, continues to trend lower, and real-time rent data suggests further disinflation ahead. Even if oil temporarily pushes CPI higher, the impact is likely to be more modest than the market appears to expect and ultimately transitory.

Moreover, $100+ oil is unlikely to persist over the long term. Higher prices incentivize increased production, governments are already tapping strategic reserves, and elevated gasoline prices will gradually erode demand. Both the EIA and futures markets expect oil prices to decline meaningfully over the coming year.

In our view, the market is overreacting to a short-term shock, and for this reason, we are using this pullback to add slightly to the following positions:

Read more

Quick Reminder:

I am excited to announce that we will be hosting our second 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 04/01/2026 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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Updates On Our European Top Picks (Incl. Trade Alert)

Something unique about High Yield Landlord is that we do not limit our coverage to U.S. REITs, but also actively research opportunities across global markets.

Today, more than 30 countries have adopted REIT-like regimes, creating a broad and diverse opportunity set for investors:

Our International Portfolio is optional and designed for those seeking greater diversification to achieve better risk-adjusted returns.

Personally, I target allocating at least 25% of my REIT exposure to non-U.S. markets. Some members may choose to allocate more, while others may prefer to remain focused on domestic opportunities. Ultimately, it depends on individual preferences, risk tolerance, and return objectives.

The aim is to equip you with the tools and insights needed to go beyond the U.S. market, enabling you to identify and evaluate opportunities across Canada, Europe, South America, Asia, and even Africa, all from the comfort of your home.

The portfolio currently includes 18 positions, with 8 in Europe, 6 in Canada, 3 in Central and Latin America, and 1 in Africa:

Read more

Residential rental real estate has multiple forces pulling in different directions.

Unsurprisingly, it’s all about supply and demand.

There is some very, very good news for residential real estate, and that is the supply outlook.

After a record-high housing construction pipeline in the years following the COVID-19 pandemic, that pipeline is now collapsing at a rapid rate.

U.S. New Housing Units Under Construction:

As you can see from this chart above, this degree of decline in housing units under construction is typically only seen during recessions.

Multifamily (apartments) witnessed a particularly massive level of new supply over the last several years, driven by a red-hot, stimulus-fueled post-pandemic economy that saw significant interstate migration from coastal cities to Sunbelt and heartland cities. For a few years, especially 2024 and early 2025, apartment deliveries reached a 50-year high.

While this chart above is a bit dated at this point, multifamily completions are now collapsing rapidly.

The supply side of the equation is looking great. With multifamily development starts at a modest level, a slow (and progressively slowing) pace of completions over the next few years sets residential real estate up for a gradual rebound, as long as demand holds up.

As such, he biggest unknown in coming years is not the supply side. It’s the demand side.

The simple formula for robust growth in demand for rental housing looks like this:

Working-Age Population Growth + Job Growth = Household Formation = Residential Net Absorption

Unfortunately, neither the working-age population nor jobs are meaningfully growing in the US right now. And it is difficult to say when that situation will change.

The primary source of working-age population growth in the US today is net immigration.

After years of huge net immigration numbers after the pandemic, this surge reversed in 2025 and is set to keep declining in 2026.

In fact, the Census Bureau estimates that 1.5 million foreign-born immigrants departed the US in 2025.

We certainly do not want to be alarmist about this, but demographics are undeniable.

Using data from the nonpartisan Congressional Budget Office, the Left-leaning Economic Policy Institute recently estimated that the working-age population will shrink over the next five years unless net immigration returns to its historically average level.

We do not wish to make any political statement about this projection whatsoever. We merely wish to explain the economic and residential real estate impact of low levels of immigration.

At the same time, the US fertility rate dropped below the replacement rate of 2.1 births per woman in 2009 and has been falling steadily ever since.

Without positive net immigration, the US population, starting with the working-age population, would soon begin to decline as deaths outnumber births and retirements outnumber entries into the workforce.

That is a terrible demographic setup for rental housing.

Residential units need people to rent them. Specifically, they need adults with adequate income.

On the “adequate income” part of that, we also note that the US labor market has been steadily softening for years now.

While monthly numbers may swing up or down, year-over-year growth in total payrolls clearly remains in a downward trajectory.

Without growth in the population of adults with steady labor income, it is virtually impossible to see residential net absorption improve from here.

So, the supply side is pulling in a positive direction, while the demand side is generally pulling in a negative direction.

Here is a caveat to the overall dour state of the demand side: Buying a home in the US remains unaffordable for the vast majority of renters.

The home price to household income ratio is over 7x, which is higher than during the housing bubble of the mid-2000s. In fact, it is higher than anytime in modern history.

U.S. Home Price To Median Household Income Ratio:

If not for the sheer amount of wealth concentrated in the upper class, allowing affluent homebuyers to put down large down payments, almost no renters would be able to buy homes today.

As it is, there are still very few renters leaving the rental market to buy a home.

That pushes up the lease renewal rate and extends the length of time most renters remain in the rental market.

This has been the saving grace of the residential rental market over the last few years, which have seen remarkably high multifamily net absorption.

As long as total employment remains steady, this elevated level of net absorption should likewise remain in place.

As you can see, apartment completions have been historically high over the last few years, overshooting even strong net absorption, which has continued to push up the multifamily vacancy rate.

Residential completions will continue to decline over the course of this year and next year. That is certain.

But there are plenty of uncertainties that impact the demand side:

• Will mortgage rates decline enough to lure more renters out of the rental market?

• Will net immigration continue to decline, stabilize, or rebound?

• Will the labor market continue to soften, stabilize, or rebound?

Without confident answers to these questions, we cannot issue a confident outlook for residential REITs over the next year or two.

To be clear: We are confident that residential REITs will remain one of the most stable, defensive, and recession-resistant parts of the real estate sector and expect it to do well over the long run.

But we want to be honest and transparent about the forces at play in residential rental real estate today. The rebound that was widely expected to begin in 2026 has now been pushed to 2027. But even a 2027 rebound depends heavily on the state of the economy, labor market, and net immigration over the next few years.

That is why residential REITs, especially multifamily REITs, trade so cheaply today.

While apartment properties are valued at around 5% cap rates, the average multifamily REIT trades at an implied cap rate of more than 6%.

If you believe, as we do, that US job growth and net immigration will eventually rebound, this looks like a good buying opportunity for long-term investors.

Let’s now turn to the earnings updates for our residential REITs:

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When we first invested in RCI Hospitality (RICK), the thesis was fairly simple. The company owned a portfolio of highly cash-generative nightclubs and valuable real estate, yet traded at a deeply discounted valuation.

Importantly, its management also had a long track record of creating shareholder value through acquisitions.

I described it as a “REIT on steroids” because of its economics. RICK was acquiring clubs at 20–33% cash flow yields, generating massive spreads over its cost of capital. By comparison, most REITs are happy acquiring assets at 5–7% cap rates, earning far smaller spreads.

What makes this possible is a unique competitive advantage. RICK is essentially the only acquirer of scale in a highly fragmented industry, with access to public capital. At the same time, many club owners are approaching retirement, creating a steady pipeline of willing sellers. Yet, few buyers exist due to the stigma and operational complexity of these assets, which further strengthens RICK’s position.

This allows the company to deploy capital at exceptionally high returns. On top of that, most acquisitions come with significant value-add potential. RICK is often able to increase cash flow by 15–20% post-acquisition through better pricing, improved operations, and cost efficiencies from scale.

The result is a consolidation business model with exceptional economics:

This model has historically allowed the company to grow FCF per share at roughly 15% annually. Combined with multiple expansion, it generated exceptional returns for shareholders until its recent crash.

But then interest rates surged, and real estate-heavy companies fell out of favor. RICK dropped even more than the rest as its businesses also suffered from post-COVID normalization.

As a result, its stock was already cheap, and that’s when the legal indictment hit, pushing its sentiment even lower.

That legal issue is serious and should not be minimized. New York state alleged that RICK underpaid certain sales taxes tied to its voucher system at three clubs and also brought bribery-related allegations involving a state tax auditor. This was clearly bad news, and it created a lot of uncertainty around management, legal costs, the company’s filings, and even its NASDAQ compliance. As a result, the stock sold off sharply, and investors were left in the dark for months as the company delayed its 10K.

You can read our thoughts on this entire saga by clicking here.

But now we finally have much more clarity, and in my view, the latest update was very good news.

RICK has finally filed its 10K and even held a conference call to answer investor questions. RICK’s founder, Eric Langan, was also present. For months, investors had been left in the dark, and that is never good, especially when a company is dealing with serious legal issues. The delayed filing was primarily due to additional audit procedures tied to the New York state indictment, which the company itself identified as the main reason for the delay. The fact that the auditors ultimately signed off is reassuring. There was always a risk that the auditors could uncover something new and refuse to sign off, but the financial statements now received an unqualified audit opinion. Just as importantly, these filings are required to maintain the company’s NASDAQ listing, so this meaningfully reduces the risk of a delisting. Management also said that the 10Q should follow relatively soon, likely in April, which makes sense since the 10K was the main bottleneck and the quarterly filing is shorter and only reviewed rather than fully audited.

On top of that, the actual operating results were quite good.

The biggest takeaway from the call is that business continues largely as usual. The company generated another $45 million of free cash flow in fiscal 2025, including $13 million in Q4 alone. It is a good reminder that the legal case has no material impact on the actual business.

Most importantly, they are buying back shares very aggressively and reaffirming their five-year capital allocation plan. The company still targets $400 million in revenue, $75 million in free cash flow, and 7.5 million shares outstanding by fiscal 2029, with the goal of doubling free cash flow per share to about $10 relative to fiscal 2024. At the current pace of buybacks, they may get there even sooner. The share count is already down to roughly 7.7 million, about 14% lower than at September 30, 2024.

In that sense, this crisis may turn out to be a blessing in disguise. The stock is trading at an extremely depressed valuation, roughly 3.5x current free cash flow and about 2x management’s 2029 free cash flow target. That gives the company an opportunity to retire shares at an extraordinary pace with internally generated cash flow. Eric Langan made this very clear on the call. He said that as long as the stock trades below $36.50 per share, they intend to use 100% of free cash flow for buybacks rather than acquisitions.

I love that. It is exactly the right move. Why buy outside assets at higher valuations when you can buy your own business at a fraction of its intrinsic value?

This is what makes the setup so compelling.

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