TRADE ALERT - Core Portfolio May 2026 (New Investment)
Dear Landlords,
I want to extend a warm welcome to all our new members!
As a reminder, our most recent “Portfolio Review“ was shared with the members of High Yield Landlord on April 2nd, 2026. You can read it by clicking here.
You can also access our three portfolios on Google Sheets:
New members can start researching positions marked as Strong Buy and Buy while considering the corresponding risk ratings.
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TRADE ALERT - Core Portfolio May 2026 (New Investment)
Today, we are selling Centerspace (CSR) for a quick near-10% gain since our purchase just about a month ago.
The original plan was not to sell this early. We bought Centerspace because we thought that the risk-to-reward was very compelling, especially given the high odds of a near-term buyout.
But something important has changed, and this has forced us to reevaluate our thesis.
At the same time, another more compelling opportunity has emerged. Since our cash is currently limited, we need to sell a holding to unlock capital, and Centerspace is now the most logical source of funds.
What Changed?
Our thesis for Centerspace focused heavily on its high likelihood of getting bought out in the near term.
The REIT is undergoing a strategic review, and until recently, it was the biggest position of Land & Buildings, an activist REIT investment firm that was pressuring the company to pursue a sale to unlock value.
Centerspace first confirmed this strategic review on November 11, 2025, noting that its board had initiated the review earlier in the fall. The review was broad and included a potential sale, merger, other business combination, or simply continuing to execute on its standalone strategy.
This sounded promising.
However, we just learned that Land & Buildings exited its entire position in the last quarter.
That is a big change. Land & Buildings is a specialist REIT activist investor. If they thought that a buyout was still likely, I doubt that they would have sold their entire position, especially since they continue to hold other residential REIT investments.
To me, this clearly suggests that they now believe that a deal is unlikely to occur. They are giving up on it.
That does not mean that a transaction is impossible, but it materially reduces the odds, in my opinion.
The Strategic Review Is Taking Longer Than Expected
The lack of progress is also concerning. Centerspace did not provide any meaningful update on the strategic review in the first quarter. That matters because if a sales process had strong buyer interest and a clear path forward, I do not think that it would typically drag on this long without any real progress being communicated.
To be clear, strategic reviews can take time. But the longer this goes without an update, the more likely it becomes that the company simply continues to operate independently or pursues smaller asset sales instead of a full company sale.
I also noticed a small but important detail in its newest investor presentation. Centerspace now says that it trades at only a 10% discount to consensus NAV.
We think that the actual discount is closer to 25%, because consensus NAV estimates often suffer from anchoring bias. Sell-side analysts tend to anchor their NAV estimates to the current share price, especially for smaller REITs with limited coverage.
But the fact that Centerspace itself highlights only a 10% discount to consensus NAV is telling. It makes the case for a buyout appear far less obvious. If management and the board believe that the discount is only 10%, they may not see much benefit in selling the entire company, especially if buyers are not willing to pay a meaningful premium.
Asset Sales Now Seem More Likely Than A Full Buyout
My updated base case is that Centerspace will likely sell a few assets, use part of the proceeds to buy back shares, and use the rest to pay down debt.
That would still be positive.
But it is not the same upside catalyst as a full company sale at a large premium to the current share price.
As a reminder, Centerspace is still quite leveraged, with debt to EBITDA of roughly 7.3x. That high leverage was acceptable to us when we thought that a buyout was likely, but it is less attractive if the company simply remains independent.
The risk-to-reward has therefore worsened. At the same time, the share price has surged nearly 10% since we bought it less than a month ago.
Following this recent outperformance, Centerspace is no longer trading at a material discount to higher-quality peers, despite having a lot more leverage.
Why Not Hold For More Upside?
Centerspace is not a bad REIT.
It owns apartments in generally resilient Midwest and Mountain West markets. Its assets should benefit over time from the same long-term housing shortage that supports the broader residential REIT sector.
But today, I think we can do better.
For higher leveraged residential exposure, I would rather own BSR REIT (HOM.U:CA). It has exposure to markets with better long-term growth prospects, trades at a lower valuation, and its management has already proven its willingness to sell major assets to aggressively buy back stock.
For safer residential exposure, I would rather own Camden (CPT) or UDR (UDR). They own better assets on average, have lower leverage, and trade at fairly similar valuations.
Centerspace was attractive primarily as a potential buyout play. I now think that this outcome is a lot less likely. Therefore, we are happy to sell at a profit and reallocate the capital into a more compelling opportunity.
That opportunity is:
