TRADE ALERT - Core & Retirement Portfolio April 2025

Dear Landlords,

I want to extend a warm welcome to all our new members! We recommend that you start by reading our Welcome Letter by clicking here. It explains why we invest in real estate through REITs and how to get started.

As a reminder, our most recent "Portfolio Review" was shared with the members of High Yield Landlord on April 4th, 2025, and you can read it by clicking here.

You can also access our three portfolios via Google Sheets by clicking here.

New members can start researching positions marked as Strong Buy and Buy while taking into account the corresponding risk ratings.

If you have any questions or need assistance, please let us know.

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TRADE ALERT - Core & Retirement Portfolio April 2025

Transactions:

• We bought another 70 shares of Alexandria Real Estate (ARE) for our Core Portfolio.

• We also bought another 70 shares of Alexandria Real Estate (ARE) for our Retirement Portfolio.

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Alexandria Real Estate (ARE) keeps dropping with no end in sight, and it is starting to feel like the case of Simon Property Group (SPG) all over again.

As a reminder, SPG dropped from $230 all the way down to $50 in the matter of five years due to fears of retail oversupply, declining occupancy, and stagnating rents. The growth of e-commerce was seen as a secular headwind for its malls, and the pandemic, of course, didn't help its cause.

But then the market suddenly realized that it had overreacted. E-commerce wasn't going to kill malls after all, and the pandemic wouldn't last forever. The shift in narrative then caused its stock to more than triple in the following two years.

I think that Alexandria is in a very similar situation.

The life science space is oversupplied, and it is leading to high sector-level vacancy rates and declining rents.

This oversupply, coupled with the surge in interest rates of recent years, has been a perfect storm for Alexandria, and caused its share price to crash by 67% since 2022, even as it grew its cash flow by another 20% since then.

Data by YCharts

This means that its valuation is now less than 1/5 of what it was at its peak.

It is currently trading at 7x FFO, the lowest multiple I have ever seen Alexandria trade at.

The headwinds are real, and Alexandria will face some pain in the next few years. But we would argue that repricing a REIT so drastically based on temporary oversupply is a big mistake, just like it was in the case of SPG.

As we like to often remind readers, real estate should be valued based on decades of expected future cash flow, and therefore, the impact of a few years of worse results shouldn't be this significant on the valuation of a REIT.

At the current valuation, I would go so far as to say that Alexandria is likely the #1 REIT investment opportunity in today's market.

The market has priced it as if it were going to face significant long-term pain, when in reality, we expect only temporary and modest near-term pain, and very attractive long-term prospects.

As this becomes clear to the market, Alexandria could triple in value, and it would still be very reasonably priced relative to its long-term prospects.

In what follows, we will first discuss the near-term challenges, including a review of its latest results, and we will then turn to its long-term prospects.

The Near-Term Challenges