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BEST PERFORMANCE SINCE 2014 When I reflect on 2019, it’s great to see the “flight to quality” attributes of the REIT sector delivering on their promise. I’ve argued for quite some time that REITs are designed to provide investors with attractive dividend growth and above-average total return prospects. 2019 has proven to be truly terrific in this regard. A year ago, I wrote that the key will be to look for REITs that can grow their dividends in spite of economic or geopolitical shocks, and that have the scale and cost EDITOR, BRAD THOMAS of capital to sustain their growth. My 2019 forecast was one in which I targeted between IN THIS ISSUE: 9% to 10% total returns. As of December 15, REITs had delivered total returns in excess of 27%, almost tripling COMMENTARY . 1 my prediction. Many of the REITs we rated as Strong Buys last year are now Holds as a SUCCESSFUL REIT INVESTING . 4 result, and we are now in the longest economic expansion in America’s his tory. 2020 SECTOR FORECAST . 10 Demand for commercial real estate has historically been closely tied to REIT ETFS .16 macroeconomic cycles. Yet, according to Nareit, “today’s environment has no historical Q&A: HTA’S SCOTT PETERS . 21 precedent.” Calvin Schnure, Nareit’s senior vice president of research and economic DURABLE INCOME PORTFOLIO . 24 analysis, explains in the company’s 2020 economic outlook, “The U.S. economy GROWTH & INCOME PORTFOLIO . 26 followed a somewhat predictable cyclical pattern from the end of World War II until the NEW MONEY PORTFOLIO . 28 2000s. GDP and employment growth would accelerate as the economy got up to speed SMALL-CAP PORTFOLIO . 30

INDEXES . 32 after a downturn. Eventually, as the unemployment rate moved lower and lower, wage

PORTFOLIO COMPARISON . 33 growth and inflation would accelerate. In response, the Federal Reserve would raise

FREI REIT SECTORS . 34 short-term interest rates higher than long-term rates, causing the yield curve to invert;

BUY LISTS . 37 the economy would slow and usually enter a recession. After things cooled off, the Fed GLOSSARY . 38 would lower rates and the process began anew.” FREI TERMS . 40 It seems that this so-called “business cycle” was repeated every four to six years, since demand for commercial real estate was closely tied to the macroeconomic cycle.

WWW.FORBESNEWSLETTERS.COM But Schnure believes “it really is different” this time. nationwide. As such, it might surprise you that “the He adds that, “despite the unemployment rate falling to the participation rate of prime-age workers has not fully lowest in 50 years, there are few signs of inflation. There is no recovered to levels seen in the past.” historical precedent to study for clues about what might come “During past business cycles, Schnure says, labor force next. What markers can we rely on as the economy and participation “rebounded within a year or two of the end of the commercial real estate move into these uncharted waters?” recession.” However, the last three years’ elevated participation Let’s turn to NAREIT’s 2020 outlook for answers. rates are typically an “early cycle phenomenon.” As such, we could very well be at the beginning of a recovery, not the stale side. 5 THINGS TO WATCH IN 2020 1. GDP: As Schnure notes, with the exception of 2001, every 3. Homeownership: Another good point he brings up U.S. recession in the past 70 years happened when cyclical concerns home-buying trends. Americans tend to purchase gross domestic product went from being well above its long- their homes toward the beginning of economic expansion. run average to dropping below that line. Yet what we’re Either that or the middle stage. And, as current trends show, seeing today, he points out, is much more modest growth. In homeownership is definitely on the rise right now. That’s fact, cyclical GDP remains below average at this point, with one more indication that we’re not done expanding yet. companies progressing along at a too slow-but-steady pace to warrant much speculation about sharp cutbacks anytime soon. 4. Interest Rates: Considering how often this topic has made This isn’t to say there won’t be bumps in the road up the news, I’m sure you’re already an expert on the ahead, he cautions. Yet there’s also no reason to be biting subject. But on the off-chance you’ve missed every will your nails while you sit on top of your cash-filled comforter, it-won’t it vacillation by the Federal Reserve, I think it’s fretting about who’s after your money. important to include interest rates in this list. Yes, the yield curve did invert from May through October, 2. Labor Markets: I don’t think anyone needs to point out causing much speculation and panic. But then it righted itself how the past three years have been noteworthy for with no apparent harm done other than some frayed nerves on employers and employees alike. Businesses are expanding some people’s parts. Schnure points out, “It was a decline in and in need of help, leading to record levels of employment long-term rates, not a rise at the short end, that caused it.”

2| FORBES REAL ESTATE INVESTOR | JANUARY 2020 Moreover, “There are very different factors affecting today’s So far though, net operating income is keeping pace just interest rate markets than in the past.” That includes how much fine. And while cap rates are admittedly low, “so are interest the Fed and other central banks bought up back during the rates,” Schnure states. “The cap rate spread to Treasury yields, financial crisis. “These securities are still on central bank balance which measures the return above risk-free rates to real estate sheets and are holding down long-term rates, making it easier investors, remains comfortable.” In other words, according to for the yield curve to flatten and invert.” this metric, the real estate cycle we’re currently looking at still seems to be falling (or rising) in our favor for now. 5. Commercial Real Estate: Last but not least according to the Nareit If all that has you worried anyway, just on a longer-term article, is something that might seem contradictory at first. You might scale, a recent study by the Cleveland Fed found no historical remember how demand for commercial real estate was exceeding evidence that long expansions produce deep recessions. Besides, new construction there for a bit, with property prices rising at a based on the macro economic data we’ve studied, we believe the significant pace. So did rent growth as demand for that soared as well. next recession will be of the “garden style” variety. That might seem like a “mature” part of any recovery In the meantime, enjoy what we’ve got for all it’s worth. cycle . And it is. But Schnure says that’s different than a “late” Which is quite a bit. So far in 2019, REITs posted the best part. Those two labels come with very different elements. “The investment performance since 2014, based on resilient most prominent warning flag would be overbuilding,” he notes. economic fundamentals and an improved outlook for real estate. “This happens when construction gets too far ahead of REITs delivered a total return of 27.9% through the first demand growth, vacancy rates move higher, and eventually 11 months of 2019, according to the FTSE Nareit All Equity rents and property prices stop rising and even decline.” REITs Index. Nearly all property sectors delivered double- That hasn’t happened. Neither has the “second major late digit returns over that time period, led by industrial REITs cycle warning flag” he warns about, which is “speculative growth (52.4%), data centers (41.1%), timber REITs (36.9%) and of property prices.” That’s when prices outpace net operating residential REITs (35.5%). income, causing “cap rate compression” in the process. Now, onto 2020.

3| FORBES REAL ESTATE INVESTOR | JANUARY 2020 THE MOST IMPORTANT FACTOR IN SUCCESSFUL REIT INVESTING REITs have been a great sector to invest in over the decades. TEMPERAMENT: THE CORNERSTONE OF ALL GOOD In fact, adjusted for inflation, since the 1950s no single asset INCOME INVESTING class has delivered better total returns. “People behave very peculiarly in terms of their reactions Since 1972 U.S. equity REITs (the ones that own because they are human beings and they get excited when physical properties) have delivered almost 12% CAGR others get excited, they get greedy when others get greedy, (compound annual growth rate) total returns. That not only they get fearful one other get fearful... outperformed the broader S&P 500, but also the tech-heavy You will see things you won’t believe in your lifetime in Nasdaq, Dow Jones Industrial Average and the Russell 2000 the securities markets...if you can stay objective throughout (small-caps). that and detach yourself temperamentally from the crowd This is the kind of historical data that is the basis for you get very rich and you won’t have to be very bright. I long-term income-focused investors allocating 15% to mean it, I’m sure you are but it doesn’t take brains. It takes 25% of their portfolios to high-quality REITs. That’s a temperament.” – Warren Buffett good rule of thumb for building a diversified and According to Charlie Munger, Warren Buffett’s right prudently risk-managed portfolio that can deliver hand for decades, the key to his success isn’t being brilliant, generous, safe and growing income, as well as the kind of but merely making consistently “not stupid” decisions. total returns that can help you achieve your long-term If a REIT has high-quality assets and is run by financial goals. competent and trustworthy management, then merely However, there is one factor that determines whether or knowing when to buy it at a reasonable or attractive price, not you personally will enjoy the strong returns REITs have and holding for the long term, is all that you need to do to historically provided. achieve great returns.

INVESTMENT PERFORMANCE

Source: NAREIT

4| FORBES REAL ESTATE INVESTOR | JANUARY 2020 So let’s take a look at some examples of Buffett’s “things you market, including with average rolling returns that were won’t believe in your lifetime in the securities markets.” The superior in every time frame. first example is Super SWAN dividend king Federal Realty At the end of 1999 value stocks in general, including Trust (FRT). REITs like FRT had been left for dead by growth-manic From 1988 to 2005 this legendary REIT underperformed investors. “Value is dead, long live growth!” was the battle cry the tech-obsessed S&P 500. In fact, from 1988 to the end of at the time. Federal Realty was trading at just 7.9 times funds 1999, the tech bubble peak, Federal Realty lost to the S&P from operations and a yield of 9.5%. 500 6.7% CAGR to 19.0% CAGR. But notice that over the That is a classic example of Buffett’s “the market will always past 31 years (1988-2019), FRT outperformed the broader surprise you” because such valuations made no fundamentals sense.

FEDERAL REALTY TOTAL RETURNS SINCE 1988

Source: Portfolio Visualizer. Portfolio 1 is Federal Realty.

5| FORBES REAL ESTATE INVESTOR | JANUARY 2020 According to Buffett, “You’re right because your facts are measured from fair value to the bubble high of mid-2016. right, and your reasoning is right—that’s the only thing that From the 2009 lows to 2016 bubble peak (when it was makes your right. And if your facts and reasoning are right, 35% overvalued) SPG delivered 33% CAGR total returns you don’t have to worry about anybody else.” or 729% total returns. That’s more than double the Well, here’s what investors who understood the fundamen - broader market’s return. tal facts about FRT have enjoyed since the tech bubble ended. Since then the so-called “retail apocalypse” has caused SPG FRT has almost tripled the broader market and with to fall into a bear market, with the price down 33% despite FFO 58% less long-term volatility to boot. This illustrates that per share and dividends rising 18% and 29%, respectively. REIT investors who were 100% focused on fundamentals Simon has gone from being a wonderful company at a dan - and valuation (the facts and reasoning Buffett is talking gerous price to a wonderful company at a wonderful price. Yet about) rather than past performance, were vindicated. many REIT investors might not want to touch it, due to the Did it take a genius to know that Federal Realty was media’s obsession with store closures. Since 2017, 21,000 stores likely to make a great investment at a 9.5% yield and 7.9 have closed in the U.S., including about 12,500 projected by times FFO? Absolutely not. It merely took someone with the Coresite in 2019. That’s a record number of store closures. right temperament, a long-term focus and who wasn’t What you normally don’t hear, however, is that about obsessed with “pretty charts.” 18,500 stores are set to open in 2019, meaning there is no From 2009 to 2016 Simon Property Group (SPG) was a retail apocalypse just normal creative destruction in which Wall Street darling, posting 20.5% CAGR total returns, failing retailers are replaced by thriving ones.

FRT TOTAL RETURNS SINCE 2000

Source: Portfolio Visualizer. Portfolio 1 is Federal Realty.

6| FORBES REAL ESTATE INVESTOR | JANUARY 2020 Sources: F.A.S.T Graphs, FactSet Research

Source: Kimco investor presentation

7| FORBES REAL ESTATE INVESTOR | JANUARY 2020

Sources: F.A.S.T Graphs, FactSet Research

SPG TOTAL RETURNS SINCE 1994

Source: Portfolio Visualizer. Portfolio 1 is Simon Property Group

8| FORBES REAL ESTATE INVESTOR | JANUARY 2020 Simon’s 207 global properties see three billion global Temperament is the visitors each year and generate more than $60 billion in retail sales. The self-funding REIT has $7 billion in low-cost most crucial of all liquidity available and $1.5 billion in retained cash flow. Its total redevelopment backlog is $7 billion in size, and because in the words it plans to spend about $1.2 billion per year on improving its of Thomas Phelps Class A properties. The organic growth potential alone, factoring in its historical 7% to 8% cash yield on “fortunes are made investments and about 2% same-store net operating income growth is 4.3% to 4.7% CAGR. by buying right Buybacks can boost that to 5% to 6%, and strategic and holding on” M&A can possibly get it back to historical 7% growth rates or even more.

SIMON PROPERTY GROUP GROWTH PROFILE FactSet long-term growth consensus: 4.3% CAGR ● Reuters’ 5-year CAGR growth consensus: 8.6% CAGR REIT investors need three things to succeed over time: ● (likely includes M&A) Knowing which quality REITs are worth owning ● YCharts long-term growth consensus: 4.2% CAGR Knowing reasonable-to-attractive valuations at which to ● ● Long-term historical growth: 7.3% CAGR over the last 20 years buy them ● Realistic long-term growth range: 3% to 7% The proper temperament to ride out periods of extremely ● ● Historical fair value (for use in total return modeling): 15 long and often irrational market sentiment ● to 18 times FFO Temperament is the most crucial of all because in the In fact, Reuters’ expects almost 9% long-term growth words of Thomas Phelps “fortunes are made by buying right from Simon though I personally consider 7% the upper end and holding on.” of a realistic growth range for this Super SWAN REIT. There is no way of knowing how long a quality REIT My base case for SPG, given its world-class will remain undervalued. But if you understand the basics of management’s growth plans and track record on execution, good income investing, and have a proper sense of market is 5% long-term growth and a return to the lower end of its history, then you can avoid getting suckered into dangerous fair value 15 times FFO. bubbles and profit from periods of irrational market That’s still good enough to generate almost 14% CAGR pessimism. Simon Property Group in mid-2016 was a very total returns that could nearly double your investment over foolish investment, but today, at the best valuation in a the next five years. decade? It’s a very “not stupid” one that is likely to make It’s also what the REIT has delivered since its 1994 IPO, all high-yield income investors very happy for the next five or while income investors enjoyed 60% less volatility over time. more years. Bottom Line: Proper temperament is the most important factor in long-term REIT investing success -This article was written by Adam Galas.

9| FORBES REAL ESTATE INVESTOR | JANUARY 2020 2020 REIT FORECAST Going into 2020, uncertainty abounds. And it’s important 2020 REIT PROPERTY SECTOR FORECAST for investors to pay close attention to the economic Here’s a sector outlook for 2020, along with our favorite landscape, which will be greatly influenced by the outcome REITs in each category. of the upcoming presidential election. As referenced in the previous article, it remains to be INDUSTRIAL: One of the four major commercial property seen whether the Fed will deliver additional rate cuts to sectors, these REITs comprise roughly 10% of the sustain the longest economic expansion on record. We all broad-based real estate ETFs Real Estate Select Sector know that rate increases can be like kryptonite for REITs but SPDR Fund (XLRE) and Vanguard Real Estate Index also like candy canes when rates decrease. Fund (VNQ). As in previous years, we’ve always relied on fundamental Riding the e-commerce wave, industrial REIT analysis to make our REIT predictions. And while we performance has been relentless over the past half-decade as recognize that 2020 will present added challenges, we retailers and logistics providers invest heavily in supply remain steadfast in our navigational goals given the chain densification and physical distribution networks in an consistent predictability that REIT earnings generate. ongoing “need for speed” arms race. For the third quarter, REIT funds from operations We expect that industrial fundamentals will remain (FFO) were $15.8 billion. Through all three completed strong in 2020, especially relative to other REIT sectors. quarters of 2019, FFO came in at $48.2 billion. There were also Valuation is elevated relative to historical standards but is widespread increases in earnings across the REIT sector. reasonable given the sector’s current fundamental Two-thirds reported higher FFO in the third quarter backdrop. The industrial REITs trade at 25x 2020 FFO than a year ago—the highest proportion since the fourth versus an average 20x for the overall REIT group. We’re quarter of 2016. Dividends paid by equity REITs totaled compelled to maintain a tac tical stock selection strategy of $12.2 billion, and dividends paid by mortgage REITs waiting on a pullback. (mREITs) totaled $2.1 billion. Overall, that $14.3 billion was Our top picks in the sector are Plymouth Realty 1.3% higher than in the third quarter of 2018. (PLYM) and Monmouth Realty (MNR). Last year, STAG In addition, acquisition activity picked up in 2019, Industrial (STAG) was our top industrial pick and has reflecting improved cost of capital and optimism about returned 27.4% year-to-dat e (Current rating: Buy future real estate returns. REITs are likely to continue Watch.) Plymouth trades at 9.5x P/FFO, with a dividend accessing the equity markets to increase their holdings of yield of 8.2%. Monmouth trades at 16.9x, with a income-producing properties in 2020. Rising net dividend yield of 4.6%. acquisitions should boost FFO growth over the coming Finally, while Iron Mountain (IRM) isn’t considered quarters and years as well, reflecting growing confidence by industrial , it does compare more favorably to the sector. REIT management and investors in the industry’s prospects. We maintain a Strong Buy on this “hybrid” storage REIT, REIT balance sheets are also well-positioned to support recommending it based on its durable growth history future operations. REITs have lowered their leverage by and potential. raising significant amounts of equity capital to finance their property portfolios. Industrial O verweight The aggregate debt/Ebitda (earnings before interest, P/ FFO 21.72x taxes, depreciation and amortization) ratio across all equity 5-Year P /FFO 18.74x Dividend Y ield 4% REITs was 5.7x in 2019. Compare that to 7x-8x in 2007- Payout R ao 66.3% 2008. That’s a positive change, to say the least. 2020 F orecasted F FO Growth 5.3% Lower leverage can help in any type of environment. It 2020 P icks provides dry powder for future acquisitions when market Plymouth I ndustrial R EIT ( PLYM) Buy conditions remain positive. It also offers a cushion in higher Mo nmouth R eal E state I nvestment ( MN R) Buy Iron Mo untain ( IRM) Strong B uy interest rate or rocky economic environments.

10 | FORBES REAL ESTATE INVESTOR | JANUARY 2020 DATA CENTER: As part of the broader communications being. We also have a Spec Buy rating on Landmark category, we maintain an overweight rating on data centers, Infrastructure Partners (LMRK), which we’ve also which are home of the “cloud,” the physical epicenter of the included in our infrastructure segment, since it invests in internet. Data center REITs own roughly 30% of cell towers, outdoor signs and smart poles. investment-grade data center facilities in the U.S. and command roughly a fifth of data center capacity globally. Cell T ower Overweight Consolidation remains a continuing theme in this P/ FFO 22.13x sector, as operators attempt to fend off mounting 5-Year P /FFO 20.52x Dividend Y ield 3% competitive pressures from their ever-more powerful Payout R ao 62.2% tenants. Size and scale have proven to be advantages in the 2020 F orecasted F FO G rowth 8.5% data center space, and these REITs have used acquisitions 2020 P icks as a means to stay in front of competitive threats from Crown C astle ( CCI) Buy ( Watch) hyperscale providers. Landmark I nfrastructure ( LMR K) Spec B uy Given the recent pullback in pricing, we have moved Digital Realty (DLR) and CyrusOne (CONE) back to Buy TRIPLE NET: We will continue to be overweight in the triple status. We consider both REITs to be consolidators with net lease sector this year. Net lease REITs comprise roughly above-average long-term growth potential. 8%-10% of broad-based REIT ETFs VNQ and iShares U.S. Real Estate ETF (IYR). We believe that the total return Data C enter Overweight potential of the sector is higher when the sector trades with P/ FFO 19.94x elevated equity valuations, as these REITs are able to grow 5-Year P /FFO 19.19x adjusted funds from operations (AFFO) and dividends via Dividend Y ield 3% accretive external acquisitions. Payout R ao 64.6% 2020 F orecasted F FO Growth 5.4% This sector is recognized by its strong fundamentals: 2020 P icks occupancy of 98%-99%, favorable leasing volume and Digital R ealty ( DLR) Buy consistent dividend growth. We forecast modest same-store CyrusOne ( CONE) Buy net operating income growth of 1%-2%, driven by annual lease escalators and biases toward acquiring properties with CELL TOWER: The cell tower REITs are included within the long-term leases of at least 10-15 years. Most net lease infrastructure category, where we maintain an overweight REITs have well-funded dividends that could support better concentration. Although shares in both American Tower (AMT) valuations compared to many other sectors. and Crown Castle International (CCI) have become pricey, we We continue to recommend Realty Income (O), Store believe there is room for continued multiple expansions in 2020. Capital (STOR) and W.P. Carey (WPC), but now is not the Cell tower REITs own roughly 50%-80% of the time to buy shares. We are also happy to see Essential 100,000-150,000 investment-grade macro cell towers in the Properties (EPRT) return over 100% in 2019 after we set it as United States. They primarily own macro communication a Strong Buy. (It is now rated as a HOLD due to its runup.) towers, which host cellular network broadcast equipment from AT&T, Verizon, T-Mobile and Sprint. But Crown Triple N et Overweight Castle and Uniti Group (UNIT) also have significant P/ FFO 17.27x investments in fiber and small-cell networks. 5-Year P /FFO 15.30x Cell tower REITs have been among the best-performing Dividend Y ield 5.26% Payout R ao 84.0% sectors over the past four years, powered by the network 2020 F orecasted F FO Growth 4.7% densification required by later-stages of 4G LTE and the 2020 P icks early stages of the 5G rollout. Realty I ncome ( O) Hold Our top pick here is Crown Castle. But based on Store C apital ( STOR) Hold valuation (P/AFFO is 22.3x), we are waiting on better W.P. C arey ( WPC) Hold Essenal P roperes R ealty ( EPRT) Hold pricing and have it on our Buy watchlist for the time

11 | FORBES REAL ESTATE INVESTOR | JANUARY 2020 SHOPPING CENTERS: Shopping center operators in Charlotte Russe and Charming Charlie, just to name a urban markets provide a bright spot in this segment of the few. Looking at 2020, the mall space is still in trouble— REIT market. Target has had an incredible year, for one. much more than grocery-anchored shopping centers. Walmart is doing great, especially in groceries. Meanwhile, As such, store closures and additional retail discount chains like T.J. Maxx, Ross Stores and Five Below bankruptcies are inevitable. The best operators will be seem to have no problem growing sales. These are the retail - the ones that have enough capital to weather the storm, ers you want to be working with. demand from other businesses to re-tenant quickly, To be sure, there are some traditional tenants like Bed and the know-how to stay ahead of some of this mess Bath & Beyond and Barnes & Noble that remain on certain before it hits them. watchlists. But, on the whole, there’s much less risk here We see heavy headwinds hanging over the department than with certain malls. Some might argue that online store sector in 2020. Sears is still operating, albeit under a grocery services will put more grocery stores on the new owner, and will have about 180 stores still open for chopping block. However, we see that penetration staying business (including those under the Kmart banner) once its low compared with total grocery sales. Besides, the latest round of already-announced store closures are businesses in question still need real estate to keep their completed. Ninety-six locations were scheduled to shut food and fulfill orders from. down after the holiday season. J.C. Penney, meanwhile, still Shopping center lease terms typically average 10-15 has more than 850 stores, which we think is far too many. years at signing and have CPI-based or fixed contractual And Macy’s has said it is evaluating what to do with its real rent bumps along with additional “percentage rent” based estate at lower-tier malls—something it plans to address in on sales. Unlike the mall sector, where private market sales early this year as well. are few-and-far-between, the transaction market is Meanwhile, among the specialty retailers, Victoria’s significantly more active with shopping center REITs, Secret continues to struggle to stay relevant as its sales which have seen transaction volumes that are eight times remain sluggish. Gap is also having a hard time growing higher than mall REITs over the last 12 months. sales. Ascena Retail—which owns Justice, Lane Bryant and Our favorites are Kimco Realty (KIM), Brixmor Catherines—remains on many analysts’ so-called (BRX), Federal Realty (FRT), Urstadt Biddle (UBA), Retail bankruptcy watch lists. And then there’s Forever 21. It says Opportunity Investment (ROIC), Regency Centers (REG) it still plans to keep a lot of its real estate in the U.S., but it’s and Weingarten Realty (WRI). also actively seeking rent concessions from its landlords. We anticipate that most retailers will be in a powerful position Shopping C enters Neutral to renegotiate rents and lease terms as they come due, P/ FFO 14.46 considering everything. 5-Year P /FFO 15.49 Our 2020 mall REIT list is therefore down to only two Dividend Y ield 5.25% picks at this point: Simon Property Group (SPG) and Payout R ao 76.3% 2020 F orecasted F FO Growth 2.3% Tanger Factory Outlet Centers (SKT). We expect dividend 2020 P icks cuts this year for Washington Prime Group (WPG) and Kimco R ealty ( KIM) Buy possibly Macerich (MAC). Brixmor ( BRX) Buy Federal R ealty ( FRT) Buy Urstadt B iddle ( UBA) Buy Malls U nderweight Reta il O pportunity (ROIC) Buy P/ FFO 7.53x Regency C enters ( REG) Buy 5-Year P /FFO 12.25x Weingarten R ealty ( WRI) BuyDividend Y ield 11.77% Payout R ao 71.3% 2020 F orecasted F FO Growth 1.8% 2020 P icks MALLS: We don’t expect the retail upheaval to slow down Simon P roperty G roup ( SPG) Strong B uy anytime soon. 2019 is looking to be a record year for retail Tanger F actory O utlook C enters ( SKT) Strong B uy store closures, with bankruptcies from Forever 21, Fred’s,

12 | FORBES REAL ESTATE INVESTOR | JANUARY 2020 RESIDENTIAL/APARTMENTS: These REITs comprise Viewed as a defensive, countercyclical sector, manufactured roughly 15% of IYR and VNQ. The $3-$5 trillion U.S. housing has historically been among the most yield-sensitive multifamily apartment market is highly fragmented, how - REIT sectors despite its recent track record of stellar growth. ever, with REITs owning roughly 500,000 of the estimated Building new manufactured housing communities in moder - 25 million units available. That’s roughly 2% of the existing ately high-value areas is notoriously difficult, a function of local rental apartment stock. politics and restrictive zoning regulations. Apartment REITs appear fairly valued across the three We favor Equity Lifestyle Properties (ELS) and Sun metrics we track. The sector trades at a slight free cash flow Communities (SUI), but shares are too expensive to purchase premium (AFFO, funds available for distribution, cash today. We have a Hold on UMH Properties (UMH) due to con - available for distribution) to the REIT average. And after cerns over management’s decision to invest in high-risk REITs. accounting for medium-term growth rates, apartment REITs trade roughly in line with the REIT average on the Manufactured H ousing Overweight free cash flow/growth metric, which is similar to a PEG P/ FFO 30.16x (price/earnings-to-growth) ratio. Apartment REITs now 5-Year P /FFO 21.30x trade at a modest 5%-10% NAV premium, which should Dividend Y ield 2.75% Payout R ao 78.9% help to fuel external growth this year following several 2020 F orecasted F FO Growth 13.2% years of challenging conditions. 2020 P icks Our favorites in the sector include AvalonBay (AVB), Equity L ifestyle P roperes ( ELS) Hold Essex Property (ESS) and Mid-America Apartment Communities (MAA), although we recommend waiting on SINGLE-FAMILY RENTALS: Single-family rental REITs a pullback to purchase new shares. comprise roughly 2%-3% of VNQ and Schwab U.S. REIT ETF (SCHH). Housing is the single-largest annual expenditure Apartments N eutral category for the average American, taking up roughly 33% of P/ FFO 13.24x 5-Year P /FFO 18.25x their budgets according to the Bureau of Labor Statistics. Dividend Y ield 3.91% The roughly $5 trillion U.S. single-family rental (SFR) Payout R ao 34.1% market is highly fragmented, with REITs owning roughly 2020 F orecasted F FO Growth 7.9% 150,000 of the estimated 15 million units across the U.S. 2020 P icks That’s roughly 1% of the existing SFR stock. AvalonBay ( AVB) Hold Essex P roperty ( ESS) Hold The two major SFR REITs are among the only institutional Mi d-America A partment C ommunies ( MA A) Hold operators that hold portfolios that combine both scale and diversification. A highly fragmented market, the average SFR owner manages just one to two properties. Relative to MANUFACTURED HOUSING: These REITs comprise apartment markets, this fragmentation makes it more difficult roughly 2% of the broad-based REIT Indexes VNQ and to acquire a substantial number of units to achieve scale. IYR. This is one of the few sectors that doesn’t rely as heavily on Out of the two available options, we prefer Invitation Homes external growth to drive results. Instead, occupancy and rental (INVH) to American Homes 4 Rent (AMH). Invitation has a rate gains under relatively high operating margins can drive West Coast concentration where home affordability remains low, free cash flow and ultimately FFO-per-share growth. and job growth should allow it to continue to push rents. Often misunderstood by investors, manufactured homes are generally not “mobile.” Roughly 80% of these Single F amily R entals Neutral units remain where they were initially installed. In addition P/ FFO 23.0x to traditional manufactured housing communities, these 5-Year P /FFO 21.0x REITs also manage resort-style RV parks, which account Dividend Y ield 2.50% Payout R ao 25.0% for roughly 25% of their portfolios. The past half-decade 2020 F orecasted F FO Growth 8.0% has seen substantial growth in RV sales, which has 2020 P icks provided an added tailwind for these REITs. Invitaon H omes ( INVH) Hold

13 | FORBES REAL ESTATE INVESTOR | JANUARY 2020 SELF-STORAGE: Roughly one in ten U.S. households rent a properties, which tend to be more sensitive to underlying self-storage unit, and annual industry revenue totals nearly industry fundamentals. $50 billion. There are roughly 50,000 self-storage facilities We consider Healthcare Trust of America (HTA), throughout the U.S. And proximity to one’s home (generally Physicians Realty (DOC), Medical Properties Trust three to five miles) is cited as the most important feature. (MPW), LTC Properties (LTC) and Ventas (VTR) to be in Seventy percent of customers are residential, with the other the most defensive positions going into 2020. 30% split between businesses, students and the military. Pressured by rising expense line items, the previously Healthcare N eutral high-flying self-storage sector has seen a steep drop-off in P/ FFO 16.35x same-store NOI growth since peaking in early 2016 at above 5-Year P /FFO 14.41x 10%. Supply growth, meanwhile, appears to have peaked in Dividend Y ield 5.49% 2018 at more than 4% of existing inventory, but deliveries Payout R ao 81.8% are expected to remain elevated through 2020. 2020 F orecasted F FO Growth 5.7% Maintaining caution in this area, we are underweight. 2020 P icks Healthcare Trust o f A merica ( HTA) Buy The only REIT we recommend today is Public Storage Physicians R ealty ( DOC) Buy (PSA). However, we do have a Spec Buy on Global Self Me dical P roperes ( MP W) Hold Storage (SELF), a nanocap pick. LTC P roperes ( LTC) Buy Ventas ( VTR) Buy

Self-Storage U nderweight OFFICES: Considered one of the four major real estate P/ FFO 18.63x 5-Year P /FFO 20.33x sectors, office REITs comprise roughly 10%-15% of VNQ Dividend Y ield 3.89% and IYR. They tend to hold assets in the higher tiers of the Payout R ao 75.8% quality spectrum relative to the national average, with nearly 2020 F orecasted F FO Growth 7.6% a quarter of all Class-A central business district (CBD) office 2020 P icks buildings in the United States. As a whole, office REITs tend Public S torage ( PSA) Buy to be concentrated in coastal “gateway” markets, where post- Global S elf S torage ( SELF) Strong S pec B uy recession job growth has been strongest and supply growth has also been most prevalent. HEALTHCARE: These REITs comprise roughly 15% of VNQ Given the high degree of fixed costs incurred in and IYR. A unique feature of healthcare REITs is the critical managing an office property—whether fully occupied or importance and reliance on third-party operators, many of mostly vacant—operating leverage is quite high. Thus, small which have struggled to remain profitable in recent years changes in occupancy and market fundamentals can have amid rising costs and lower reimbursement rates. significant positive or negative impacts on performance. Healthcare REITs have historically leased properties to Leases for high-quality office space tend to be relatively long tenants under long-term, triple-net lease structures, though term at five to ten years for suburban assets and 10-20 for these REITs have taken on increasingly more operating CBD assets. responsibilities over the past decade following the REIT Job growth in the office-using sectors is the key driver Investment Diversification and Empowerment Act here but gains in space efficiency per worker have been the (RIDEA), which allowed REITs to participate in property- most significant headwind over the last three decades. Since level economics. the 1990s, the amount of square footage per worker has been There are five subsectors within the healthcare REIT cut in half, a function of improvements in communications category: senior housing, skilled nursing, hospital, medical technology, changes in work culture, and more efficient office and research/lab, and each has its distinct risk/return floor layouts. characteristics. Incidentally, senior housing can be further Our top picks for 2020 include Easterly Government split into two categories based on lease structure: triple-net Properties (DEA), which is a Hold today based on leased properties and senior housing operating (SHOP) valuation, S.L. Green Realty (SLG) and City Office (CIO).

14 | FORBES REAL ESTATE INVESTOR | JANUARY 2020 Office N eutral Infrastructure N eutral P/ FFO 14.20x P/ FFO 15.04x 5-Year P /FFO 14.62x 5-Year P /FFO 14.71x Dividend Y ield 4.24% Dividend Y ield 5.37% Payout R ao 56.0% Payout R ao 66.4% 2020 F orecasted F FO Growth 1.9% 2020 F orecasted F FO Growth 7.6% 2020 P icks 2020 P icks Easterly G overnment P roperes ( DEA) Hold Hannon A rmstrong S ustainable I nfra (HASI) Hold S.L. G reen R ealty ( SLG) Buy CorEnergy ( CORR) Hold City O ffice ( CIO) Buy

PRISONS: While controversial, some investors still have LODGING: We are maintaining an underweight allocation interest in this specialty property sector. So, while we do to lodging REITs in 2020 due to a deceleration in corporate research the fundamentals of the two prison REITs, it’s up to profits and increasing margin pressure as a result of higher you to decide if this is an area you are comfortable investing wages. (Keep in mind: Labor comprises roughly 50% of the in. On a broader level, investing in prisons can be lucrative. expense base of a hotel). Politics have made this sector more volatile, admittedly. And In this cycle, we think lodging REITs will not be able to while we consider the tailwinds beneficial (inmate deliver top-line revenue per available room (RevPar) growth population is growing at a 5% annual rate, with state prison given the deceleration in transient travel, especially with the occupancy at 96%), investors should recognize the corporate chains. There will likely be merger and acquisition speculative attributes related to reduced banking/analyst (M&A) activity in 2020 in this sector, with Apple exposure and sensationalized media headlines. We prefer Hospitality (APLE) appearing to be well-positioned to CoreCivic (CXW) over GeoGroup (GEO) due to its low acquire or merge with a similar REIT. We also like Park payout ratio, better credit rating, and reduced exposure to Hotels & Resorts (PK), a best-in-class REIT that should see the federal Bureau of Prisons (BOP). significant scale advantage as a result of its recent merger with Chesapeake. Prisons N eutral P/ FFO 6.40x Lodging U nderweight 5-Year P /FFO 10.92x P/ FFO 9.16x Dividend Y ield 12.24% 5-Year P /FFO 10.08x Payout R ao 78.7% Dividend Y ield 6.42% 2020 F orecasted F FO Growth 4.1% Payout R ao 58.4% 2020 P icks 2020 F orecasted F FO Growth 0.0% CoreCivic (CXW) Strong S pec B uy 2020 P icks Apple H ospitality ( APLE) Buy Park H otels & R esorts ( PK) Strong B uy GAMING: According to Fitch Ratings, “U.S. states with more mature gaming industries offer operators insulation and, in some instances, regulatory tailwind. Mature gaming states INFRASTRUCTURE: This year, we expect this growing tend to be geographically adjoined to other states that also energy-fueled sector to see its valuation gap tighten. We’re have developed gaming industries. Where they do not, they especially bullish on energy REITs such as CorEnergy adjoin states with legislatures that tend to be socially Infrastructure (CORR) and Hannon Armstrong conservative such as Texas and Kentucky, which have repeat - Sustainable Infrastructure Capital (HASI). Cell towers are edly rejected proposals to legalize gaming.” also considered infrastructure assets, but we broke them out Gaming REITs are essentially net lease REITs and separately (as previously seen). include VICI Properties (VICI), Gaming and Leisure Properties (GLPI) and MGM Growth Properties (MGP). We are maintaining our Buy recommendation on VICI.

15 | FORBES REAL ESTATE INVESTOR | JANUARY 2020 Ga ming Overweight Timber / Farming Neutral P/ FFO 14.39x P/ FFO 51.34x 5-Year P /FFO 11.48x 5-Year P /FFO 16.40x Dividend Y ield 5.94% Dividend Y ield 3.85% Payout R ao 82.3% Payout R ao 103.1% 2020 F orecasted F FO Growth 4.1% 2020 F orecasted F FO Growth 7.8% 2020 P icks 2020 P icks Vici G aming ( VICI) BuyGladstone L and ( LAND) Buy CatchMa rk T imber ( CTT) Buy

TIMBER AND FARMING: These specialty sectors are less we like CatchMark Timber (CTT) and within farming, we mature than the other categories. However, within timber, like Gladstone Land (LAND).

BANNER YEAR FOR REAL ESTATE ETFS While the real estate sector has taken its foot off the gas More than $5 billion poured into the 11 core U.S. real estate pedal a bit over the last few months, 2019 will likely still go ETFs in 2019. That’s the best year for inflows since 2016 and down as a banner year for the U.S. real estate sector as the definitely better than 2018’s $2.6 billion in outflows. “goldilocks” economic conditions of low interest rates and We track more than 70 real estate ETFs across eight steady, domestic-led economic growth have been an ideal categories, but the majority of sector’s assets reside in 11 backdrop for commercial and residential real estate equities. “core” REIT ETFs. The Vanguard Real Estate ETF (VNQ)

US R eal E state ETF Fund Flows 10 ,00 0.00 Fund F lows i nto C ore U S R EIT Funds ( $B o f USD) 8, 000 .00 7, 505. 33 7, 741. 78 6, 000 .00

5, 356 4, 000 .00

2, 000 .00 1, 901 .61 296. 63 0. 00 20 14 20 15 20 16 20 17 20 18 20 19

(2 ,643) -2 ,000.00

-4 ,000.00

16 | FORBES REAL ESTATE INVESTOR | JANUARY 2020 was the winner in 2019 with more than $2 billion in inflows. the major REIT sectors, there are some notable differences It was foll owed by the relatively new J .P. Morgan that explain the variance in performance within the group. BetaBuilder MSCI U.S. REIT ETF (BBRE), which saw an Most significantly, those that exclude certain non-core impressive $1 billion in inflows, presumably from existing sectors, like cell towers, underperformed. J.P. Morgan Asset Management clients that were reallocated to the in-house fund from other RATIONALE FOR REAL ESTATE ETFS exchange-traded or mutual funds. The only core U.S. Real estate exchange-traded funds are an excellent option REIT ETF that experienced outflows was the SPDR Dow for investors seeking low-cost, liquid and diversified Jones REIT ETF (RWR). exposure to real estate, particularly if they have limited time Most ETFs set record highs earlier in 2019, though they to dedicate to active research. ETFs can complement have given back a chunk of those gains since peaking in and “anchor” an actively managed strategy of picking October. Performance ranged from 18% to 25%, which was individual REITs, providing a base level of diversification in well above their trailing five-year average of 7.3% per year. what’s commonly known as a core-satellite portfolio While these funds offer similar diversified exposure across management approach.

CORE U .S. R EIT E TF F UND F LOWS

Ticker ETF Total A ssets ( $) 2019 2018 2017 2016 2015 2014 VN Q Vanguard R eal E state I ndex F und 35.8 b illion 2,054 (3,388) 1,971 4,290 n 4,784 SC HH Schwab U S R EIT E TF 5.8 b illion 686 754 1,134 868 662 439 IYR iShares U .S. R eal E state E TF 4.5 b illion 311 (153) (484) (154) (1,509) 1,455 XL RE Real E state S elect S ector S PDR F und 3.7 b illion 600 317 (108) 2,606 2 RW R SPDR D ow J ones R EIT E TF 2.5 b illion (365) (53) (514) 53 148 344 IC F iShares C ohen & S teers R EIT E TF 2.3 b illion 80 (967) (481) (144) 139 344 US RT iShares C ore U .S. REIT E TF 1.7 b illion 605 609 270 (7) (5) (8) BBR E JPMorgan BetaBuilders M SCI U S R EIT 1.2 b illion 1,035 69 ------FR EL Fidelity MSCI R eal E state I ndex E TF 982.4 m illion 278 202 199 194 27 -- FR I First T rust S &P R EIT I ndex Fund 193.7 m illion 61 (31) (77) 7 (113) 149 EW RE Invesco S &P 5 00 E qual W eight R eal E state 35.2 m illion 11 (2) (8) 29 0 -- Core U S R EIT E TF T otal 58.8 b illion 5,356 (2,643) 1,902 7,742 (648) 7,505 Source: i REIT, H oya C apital R eal E state, E TFdb, E TF.com

CORE U .S. R EIT E TFS P ERFO RMA NCE

TickerETF Div. Y ield YTD 1 W eek 4 W eek 1-year 3-year 5-year Holdings Top 1 0% VN Q Vanguard R eal E state I ndex F und 3. 4% 24. 2% -2. 7% -2. 5% 15. 9% 7.7% 7. 7% 182 36% FR EL Fidelity MSCI R eal E state I ndex E TF 3. 3% 24. 0% -2. 7% -2. 4% 16. 0% 9.8% -- 175 36% XL RE Real E state S elect S ector S PDR F und 3. 0% 23. 7% -2. 4% -2. 5% 15. 9% 11. 3% -- 33 58% IYR iShares U .S. R eal E state E TF 2. 6% 23. 6% -2. 6% -2. 3% 15. 7% 9.9% 8. 5% 115 36% BBR E JPMorgan BetaBuilders M SCI U S R EIT ETF 2. 2% 22. 0% -3. 5% -3. 3% 13. 3% -- -- 151 35% US RT iShares C ore U .S. REIT E TF 2. 9% 21. 9% -3. 5% -3. 3% 13. 5% 7.5% 7. 8% 155 35% IC F iShares C ohen & S teers R EIT E TF 2. 4% 21. 3% -2. 8% -2. 9% 13. 8% 8.3% 7. 8% 31 59% EW RE Invesco S &P 5 00 E qual W eight R eal E state 2. 4% 21. 1% -2. 7% -2. 8% 12. 5% 8.3% -- 33 33% SC HH Schwab U S R EIT E TF 2. 9% 19. 3% -3. 4% -3. 4% 11. 4% 6.4% 6. 7% 95 44% RW R SPDR D ow J ones R EIT E TF 3. 3% 19. 2% -3. 5% -3. 4% 11. 3% 6.2% 6. 5% 95 44% FR I First T rust S &P R EIT I ndex Fund 2. 7% 18. 9% -4. 2% -4. 1% 10. 9% 6.3% 6. 4% 154 35% Core U S R EIT E TF A verage 2. 8% 21. 7% -3.1% -3. 0% 13. 7% 8.2% 7. 3% 111 41% Source: i REIT, H oya C apital R eal E state, E TFdb, E TF.com

17 | FORBES REAL ESTATE INVESTOR | JANUARY 2020 Inefficiencies certainly do exist in the real estate sector, however. So it would be ill-advised to go all-in on any single fund and thus forgo any opportunity for outperformance. According to research compiled by Hoya Capital Real Estate, certain factors have seen persistent outperformance in the REIT sector over the past five- and ten-year periods. REITs with higher quality properties (low cap rates) and lower leverage profiles (low debt levels) have outperformed while REITs in the highest quadrant of dividend yields have woefully underperformed. Below, we note the vast differences in growth and dividend yield among each of the 16 sectors. In December, we saw a prime example of this theme in action with the implosion of low-quality, highly-levered

REIT S ector I ndex Growth Ra te REIT S ector I ndex Average Y ield

Data C enter 23.0% Mall 6.8% Cell T ower 10.6% Hotel 5.5% Manufactured Ho me 8.9% Healthcare 4.7% Homebuilders 7.8% Net L ease 4.7% Industrial 7. 1% Shopping Center 4.6% Single Fa mily R ental 5.7% Timber 4.3% Timber 4.8% Student Ho using 4.1% Sto rage 4.8% Stora ge 3.9% Apa rtment 4.6% Office 3.1% Student Ho using 3.1% Apartment 2.9% Shopping C enter 3.0% Industrial 2.6% Net L ease 2.9% Data C enter 2.6% Healthcare 0.8% Manufactured Ho me 2.3% Office 0.7% Cell T ower 2.1% Hotel 0.1% Single Fa mily R ental 1.6% Mall 0. 0% Homebuilders 0.7% Average R EIT 4.7% Average R EIT 3.6% Source: Ho ya Ca pital

REIT ET F P ERFO RMANCE - AL L CA TEGORIES

Ticker ETF YTD Div. Y ield Holdings % In Top 10 INDS Pacer Be nchmark Industrial Re al Es tate 39.7% 1.8% 17 75% SRVR Pacer Be nchmark Da ta & I nfra Re al Es tate 34.4% 1.7% 19 77% CHIR Global X MS CI Ch ina Re al Es tate 27.1% 1.4% 47 64% PPTY PPTY - U. S. Di versified Re al Es tate 26.1% 2.9% 116 29% VNQ Vanguard Re al Estate I ndex F und 24.2% 3.4% 182 36% FREL Fidelity MSCI Re al Es tate I ndex 24.0% 3.3% 33 59% PSR Invesco A cve U. S. Real Es tate 24.0% 2.5% 81 38% Source: i REIT, Ho ya C apital Re al Es tate, ET Fdb, ET F.com

18 | FORBES REAL ESTATE INVESTOR | JANUARY 2020 mall REIT CBL & Associates (CBL), which was a favorite assets over the last 12 months led by BBRE and SRVR. This among some yield-chasers. The data suggests that this is a highlights investor demand for differentiated exposure losing strategy in the REIT sector. Instead, focus on long- within the real estate sector. In fact, among all domestic and term dividend growth and total return. Broad-based funds international REIT ETFs, INDS, SRVR and PPTY were three like the core ETFs discussed earlier, of course, are generally of the four top-performing real estate ETFs for 2019. indiscriminate regarding quality—which again reinforces The innovation continued in 2019 with the launch of the need for some minimum degree of active management NetLease Corporate Real Estate ETF (NETL) in April and the layered on top of an otherwise passive strategy. Hoya Capital Housing ETF (HOMZ) in March, both of which have significantly outperformed the core U.S. REIT ETFs noted INNOVATION IN THE REAL ESTATE ETF LANDSCAPE previously since their respective launches. Virtus Real Asset Thankfully, the real estate segment has seen significant Income Fund (VRAI) launched in February and includes a innovation in the ETF lineup over the last several years, with 30%-40% weighting toward REITs. five launches in 2018 and two more in 2019. This has NetLease Corporate is the only REIT ETF focused on enabled investors to more actively customize their portfolios the triple-net lease property sector. Under that structure, toward their more specific needs, objectives and existing tenants p ay all expenses related to property management: exposures, and to help avoid some of the persistently property taxes, insurance and maintenance. Like a ground underperforming factors without needing to employ a full- lease, triple-nets result in long-term, high-margin, on active strategy. relatively predictable income streams. Naturally, with In 2018 the Pacer Benchmark SCTR series of funds these more bond-like lease characteristics comes a higher launched, which includes the Data & Infrastructure Real level of sensitivity to movements in interest rates. NETL Estate ETF (SRVR), the Industrial Real Estate ETF (INDS) includes 23 holdings under a modified cap-weighted and the Retail Real Estate ETF (RTL). The J.P. Morgan system. Its top holdings include Store Capital (STOR), BetaBuilder MSCI U.S. REIT ETF and the U.S. Diversified Realty Income (O), National Retail (NNN), Vereit (VER) Real Estate ETF (PPTY) from Vident Financial were also and W.P. Carey (WPC). formed in 2018. All have performed well from a total return Hoya Capital Housing (by iREIT partner Hoya Capital) perspective and also accumulated an impressive haul of is a diversified fund that straddles the line between a real

NETLEASE CO RPORATE RE AL ES TATE ET F (N ET L) H OLDINGS

Co mpany Primary In dustry Weight Company Primary In dustry Weight

Store Ca pital Retail 8.4% Agree Re alty Retail 3.9% Realty In come Retail 8.2% VICI P roperes Gaming 3.8% Naonal Re tail Retail 7.9% Gaming an d Le isure P rop Gam ing 3.7% Vereit Retail 7.9% EPR P roperes Retail 3.6% W.P. Ca rey Diversified 7.4% Innovave In dustrial Industrial 3.1% Essenal P roperes Retail 4.5% Gladstone Co mmercial Diversified 2.7% Spirit Re alty. Retail 4.3% MGM Growth Gaming 2.5% STAG In dustrial Industrial 4.2% Safehold Diversified 2.5% Lexington Re alty Industrial 4.2% One Li berty Diversified 1.9% Global N et Le ase Retail 4.2% Four Co rners Retail 1.7% Gey Re alty Retail 4.1% Monmouth Industrial 1.4% Industrial Lo giscs Industrial 3.9% Cash Co mponent -- 0.1 % Source: ET F.com. Da ta As o f 1 2/1/2019.

19 | FORBES REAL ESTATE INVESTOR | JANUARY 2020 Source: HOMZ Investment Case

REIT ET F P ERFO RMANCE - H IGH Y IELD

Ticker ETF YTD Div. Y ield Holdings % In To p 10 VRAI Virtus Re al A sset I ncome ET F -- 5.6% 88 13.45% ROOF IQ US Re al Es tate S mall Ca p ET F 20.0% 6.1% 76 27% SRET Global X S uperDividend RE IT ET F 19.7% 7.9% 31 37% MORT VanEck V ectors Mo rtgage REIT I ncome 18.5% 6.6% 26 64% KBWY Invesco K BW P remium Yi eld Eq uity RE IT 18.5% 6.3% 30 48% REM iShares Mo rtgage Re al Es tate ET F 18.5% 8.4% 37 72% Source: i REIT, Ho ya C apital Re al Es tate, ET Fdb, ET F.com

estate and homebuilder ETF. With 100 company holdings, Similar to HOMZ, Virtus Real Asset Income is anchored it’s designed to be a one-stop-shop for residential real estate by traditional REIT exposure. Yet it also includes holdings in exposure and is built for investors seeking long-term growth other non-REIT sectors. We slot VRAI into the “high-yield” and capital appreciation, a fairly unique objective in the real estate ETF category alongside favorites like the Global X generally yield-oriented real estate investment sector. SuperDividend REIT ETF (SRET) and Invesco KBW HOMZ invests in companies expected to capture growth Premium Yield Equity REIT ETF (KBWY). Keep in mind to in new home construction, the realization of the achieve higher yields, high-yield ETFs typically assemble a deferred maintenance on existing homes and upward collection of misfits, outcasts, small-caps and recent under - pressure on rents. achievers. Analyzing exactly how and where each of these

20 | FORBES REAL ESTATE INVESTOR | JANUARY 2020 ETFs derives the extra yield is critical information for sectors where there are vast differences in quality and investors who seek to understand how each of these ETFs investment characteristics of the underlying companies. fits into a broader asset portfolio. When everything is tallied up 2019 will likely end up being Bottom Line: The ETF real estate sector has seen significant a banner year for the real estate ETF segment. We think this innovation over the last two years. Long-since dominated by much-needed evolution is just beginning. giants like Vanguard and Blackrock, it’s beginning to be disrupted by new entrants with innovative indexes that cater more precisely to specific investors’ needs and objectives. Disclosure: Hoya Capital Real Estate, which advises HOMZ, is The one-size-fits-all approach of the broad-based a contributor to iREIT on Alpha. market-cap weighted indexes doesn’t make sense in these

HTA’S SCOTT PETERS Since its listing on the New York Stock Exchange in 2012, in the country, but also the shares in Healthcare Trust of America (HTA) have returned only company with an an average of 9.4% annually. We’ve been covering this int egrated operating platform healthcare REIT since that time, watching as its assets have focused only on medical office. grown from zero (as a non-traded REIT in 2007) to more This positioning enables us to than $6 billion. not only source great We recently upgraded HTA from a HOLD to a BUY. investment opportunities but One reason we are bullish on the REIT is because of its operate them effectively for our management team, led by CEO, Scott Peters. investors and tenants alike. Recently I caught up with Peters to discuss HTA’s This is critical in a competitive business model and to gain insight into the durable revenue sector like medical office. drivers behind the MOB (medical office building) segment. Thomas: How competitive is the acquisition market? Where Brad Thomas: At a high level, what’s the status of the MOB market? are you seeing cap rates? Scott Peters: During the last 15 years, the medical office Peters: The market for medical office continues to be sector has become a significant asset class for investors. It is competitive, especially for larger portfolios. In these one of the few real estate sectors that has produced steady, situations, we see cap rates in the high 4 to low 5 range, defensive growth and returns for investors in most market which is consistent with where they have been for the last environments. two to three years. With the backdrop of an aging population and growing However, most medical office investments are less than demand for healthcare services, it has great fundamentals $50 million in size. These single asset deals are too small that should continue its growth for the foreseeable future. As for many investors, but great for someone like HTA that you would expect, investors have taken note and are starting is a targeted buyer. These acquisitions provide higher to put more money into the space. yields for investors and our year-to-date acquisitions The good news for us is that HTA has spent the last 13 have averaged in the 5.5% to 6.0% range, which is quite years becoming not only the largest owner of medical office accretive for us.

21 | FORBES REAL ESTATE INVESTOR | JANUARY 2020 Thomas: What markets is HTA focused on today? 3% for almost ten years. That strength and recognition from Peters: HTA is really unique in the healthcare sector, in that the fixed-income community allows us to make our we are only focused on growing in 15-20 key markets. We investments accretive for shareholders. target markets with higher rates of population and income growth, like Boston, Dallas, Raleigh and Denver, which Thomas: How are leasing and retention fundamentals? should allow for high levels of occupancy and rent growth. Peters: Leasing trends in medical office have been We also look to gain key economies of scale, which consistently strong. We continue to have tenant retention enables us to leverage our operating platform to provide around 80% and re-leasing spreads of more than 2% upon better service and returns. We are reaching this goal, with renewal. This has led us to generate same property cash net nine markets at 1 million or more square feet, and 15 with operating income growth of almost 3% since we became more than 500,000 square feet. This scale and opportunity publicly traded in 2012. Most importantly, we have driven sets HTA apart in the space. this same property growth to the bottom line.

Thomas: How is the company positioned for growth in Thomas: How does internalized leasing provide HTA with a terms of the balance sheet? competitive advantage? Peters: HTA has one of the strongest balance sheets in the Peters: Our integrated operating platform is really critical to sector. We are investment grade rated, with more than $1 our success. Healthcare continues to be a very local business billion in available liquidity that we can put to work to grow where relationships with providers makes a critical the company on a conservative and accretive basis. We difference. Having a local operating team backed by the demonstrated this strength earlier this year by issuing $900 strength of a national platform allows us delivery best in million in senior bonds at interest rates of approximately class service and performance.

Source: FAST Graphs

22 | FORBES REAL ESTATE INVESTOR | JANUARY 2020 Thomas: Can you tell us about your development pipeline? Thomas: Finally, what’s your dividend policy and do you Peters: We recently added development capabilities to our expect to see continued growth? platform. We see this as an extension of our service capabilities Peters: We believe in a strong, well-covered dividend that for our health system relationships. The good and bad news is grows on an annual basis. We currently yield more than 4% that there isn’t a lot of development in the sector. This is great on a yield basis and have grown it annually over the last four as an existing owner and helps us maintain very steady leasing years. I would expect this trend to continue as we grow our performance. However, we are now starting to win our fair earnings through a combination of same store growth and share of development opportunities, including two in 2019 accretive investments. with total investment of more than $90 million. These are over 75% preleased and will be great additions to our portfolio. We Thomas: Thank you. expect to do between $100 - $200 million per annum.

Forbes Real Estate Investor is published monthly by NOTE: Forbes Real Estate Investor is intended to Forbes Media LLC, 499 Washington Blvd., Jersey City, NJ 07310 provide information to interested parties. As we have no knowledge of individual circumstances, goals and/or portfolio concentration or diversification, Editor: Brad Thomas Contributor : Michael Terry readers are expected to complete their own due diligence before purchasing any stocks mentioned or Junior Research Analyst: Noah Blacker recommended. It does not guarantee that securities mentioned in this newsletter will produce profits or Forbes Media LLC that they will equal past performance. Although all Vice President/Editor, Newsletters: Matthew Schifrin content is derived from data believed to be reliable, accuracy cannot be guaranteed. Brad Thomas and Editorial Director: Tina Russo members of the staff of Forbes Real Estate Investor Designer: Gail Stoicheff may hold positions in some or all of the stocks listed. Digital Marketing Director: Cristina Baluyut Digital Marketing Associate: Diane Schmid

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23 | FORBES REAL ESTATE INVESTOR | JANUARY 2020 DURABLE INCOME PORTFOLIO Core REIT portfolio formed six years ago. It is our largest and most diversified portfolio.

SECTOR ALLOCATION

FUNDAMENTALS Dividend Yield: 5.1% Current Portfolio Value: $712,214 Year-To-Date Return: 18.9% SWAN/SALSA: 57%/43% Avg. R.I.N.O. Rating: 3.5

During the last 30 days the best performers include Stocks sold in December: Hannon Armstrong Park Hotels & Resorts (+14%), Jernigan Capital Infrastructure, Taubman Centers, City Office and QTS (+11%) and CoreCivic (+ 10%). Year-to-date, the Realty. More capital was added to Public Storage portfolio has returned 18.9% and since inception in ($3,000), W.P. Carey ($2,500) and Extra Space August 2013 it has an annualized average return Storage ($1,500). of 17.0%.

24 | FORBES REAL ESTATE INVESTOR | JANUARY 2020 CURRENT HOLDINGS RECENT TRADES

SW AN / R. I.N. O. YT D Di v. Ho lding RE IT Ticker SAL SA Ra ting B | H | S Re turn Yi eld % Va lue Ti cker B|S Date Value Commercial M ortgage REITs CO NE Buy 12/2/2019 $2,097.07 Blackstone M ortg age Trust BXMT SALSA - BUY ( WATCH) 23. 5% 6. 7% 2. 4% $4, 10 6 DLR Buy 12/ 2/ 20 19 $2, 097. 07 TPG R E F inance T rust TRTX SALSA - BUY 20. 4% 8. 4% 1.3 %$2,2 15 QT SSell12/2/2019($4,194.14) Jernigan C apita l JCAPSALSA-HOL D 6. 0% 7. 0% 0.8 %$1,4 47 HA SI Sell 12/20/2019 ($4,784.75) KKR R eal Esta te Fi nance KREFSALSA-BUY14. 3% 8. 4% 0.6 %$1,0 72 CIO Sell 12/20/2019 ($1,282.87) Ladder C apita l LADRSALSA-BUY23. 8% 7. 7% 3. 4% $5, 773 TC OSell12/20/2019($1,476.05) Healt h C are REITs EX R Bu y12/20/2019$1,500.00 Physicians R ealty T rust DOC SAL SA 3.8 BU Y 23. 2% 4. 9% 3. 8% $6, 551 PSA Bu y12/20/2019$3,000.00 Health care T rust o f A merica HTA SWAN 4.0 BUY 22. 4% 4. 2% 3.7 %$6,2 87 WP CBuy12/20/2019$2,500.00 Medical P roperti es T rust MPW SALSA 3.6 HOL D 31. 8% 5.0% 2. 8% $4, 885 Ventas V TR SWAN 4.2 BUY 0. 1% 5. 6% 4. 1% $7, 143 LTC P roperti es, LTC SWAN 3.9 BUY 11. 7% 5.1% 1.7 %$2,9 44 Om ega H ealth care In vesto rs OH I SALSA 3.8 BUY ( WATCH) 26. 0% 6. 4% 2. 1% $3 ,58 4 Net Le ase REITs W. P . C arey WPCSW AN 4.0 BU Y 23. 7% 5. 3% 4. 4% $7 ,53 6 Sto re C apital STOR SWAN 4.2 HOL D 34. 7% 3. 6% 4. 0% $6, 820 Realty In come OSWAN4.4HOL D 18 .8% 3.8% 5. 6% $9, 564 Pris on R EIT s CoreCivic C XW SALSA 3.2 STRON G S PEC B UY 2. 6% 9. 8% 1. 1% $ 1, 829 Lo dg ing R EIT s Park H ote ls & R esorts PK SALSA 3.5 STRON G B UY 4. 5% 7. 4% 4. 3% $7 ,32 8 Data C enter R EIT s Cy rusOne CONE SW AN 3.9 BU Y 24. 2% 3. 0% 6. 8% $1 1, 768 Digita l R ealty T rust DLR SW AN 4.4 BU Y 15 .8% 3.6% 6.2% $10 ,707 Ot he r P rope rty S ector R EIT s Ir on M ounta in IR MSALSA3.3STRON G BUY 6. 1% 7. 5% 3. 7% $6, 434 Of fic e R EIT s Bosto n P roperties, BXP SWAN 3.6 BUY ( WATCH) 23. 2% 2. 8% 1. 1% $1 ,969 Mall R EIT s Brookfield P roperty P artn ers BPY SALSA 3.4 STRON G B UY 22. 7% 7. 2% 2. 7% $4, 581 Simon Property G roup SPG SWAN 4.3 STRONG B UY -9 .0% 5.7% 2. 8% $4, 739 Tanger Fa cto ry Ou tl et C ente rs SKT SWAN 3.9 STRONG B UY -2 0.8% 9.7% 2.0% $3,528 Sho pp ing C ent er R EIT s Kimco R ealty KIM SWAN 3.7 BUY 5. 5% 3. 4% $5, 783 Retail O pportunity Investments ROIC SWAN 3.7 BUY 14 .2% 4.6% 1. 4% $2,442 Federal R ealty Investment FRT SWAN 4.6 BUY 10 .8% 3.2% 3. 9% $6, 71 2 Brixmor P roperty Gr oup BRX SAL SA 3.5 BU Y 56. 1% 5. 2% 1. 4% $2, 329 Indus trial R EITs STAG I ndustrial STAG SWAN e BUY ( WATCH) 31 .1% 4. 6% 4. 7% $8, 059 Monmouth R eal Estate MNR SALSA 3.3 BUY 23. 7% 4. 7% 1. 8% $3,12 7 Self S torage R EIT s Extr a S pace S to rage EXRSAL SA 3.1 HOLD 18 .3% 3.4% 2.2% $3,713 Public S torage PSA SWAN 3.5 BUY 7. 5% 3. 8% 1. 7% $3,000 Cell T ower REITs Crown C astle International CCI SW AN 3.9 HOLD 33. 3% 3. 3% 3. 8% $6 ,48 3 Campus H ous ing REITs American C ampus Communities ACC SWAN 3.6 BUY ( WATCH) 16 .0% 4.1% 2.2% $3,830 Gaming R EIT s VIC I P roperti es VIC I SAL SA 3.5 BU Y 38. 6% 4. 7% 2. 3% $3 ,92 3

25 | FORBES REAL ESTATE INVESTOR | JANUARY 2020 GROWTH & INCOME PORTFOLIO Core strategy is to generate returns driven by a higher growth profile.

SECTOR ALLOCATION

FUNDAMENTALS Dividend Yield: 5.6% Current Portfolio Value: $121,258 Year-To-Date Return: 23.8% SWAN/SALSA: 43%/57% Avg. R.I.N.O. Rating: 3.3

Since inception in January 2016 the portfolio has an the best performers were Park Hotels & Resorts annualized average return of 20.7% vs. 8.7% for the (+14.4%), CoreCivic (+10.2%) and Ladder Capital Vanguard Real Estate ETF (VNQ). Year-to-date the (+5.9%). portfolio has returned 23.8%. During the last 30 days

26 | FORBES REAL ESTATE INVESTOR | JANUARY 2020 CURRENT HOLDINGS RECENT TRADES

SWA N/ R.I.N .O . YTD Div . Hol di ng RE IT Ticker SA LSA Ra ting B | H | S Re turn Yi eld % Va lue Ticker B|S Date Value Healt h C are REITs BR MK Bu y12/20/2019$2,000.00 Physicians R ealty T rust DOC SALSA 3.8 BUY 23. 2% 4. 9% 2. 9% $3 ,49 4 DL RBuy12/20/2019$4,000.00 Medical P roperti es T rust MPW SALSA 3.6 HOL D 31 .8% 5. 0% 1. 6% $1,953 VTR Buy 12/20/2019 $2,000.00 Ventas V TR SWAN 4.2 BUY 0.1 %5.6 % 7. 4% $9, 01 4 BPY Bu y12/20/2019$2,000.00 LTC P roperti es LTC SWAN 3.9 BUY 11. 7% 5.1% 1. 9% $2,299 TCO Sell 12/20/2019 ($2,755.18) Omega H ealthcare Investors OH I SALSA 3.8 BUY ( WATCH) 26. 0% 6. 4% 2. 2% $2, 723 SRC Sell 12/20/2019 ($3,978.01) Commercial M ortgage REITs CO NE Buy 12/2/2019 $2,548.87 Arbor Realty T rust ABRSALSA-BUY ( WATCH) 57. 3% 7. 9% 2. 4% $2 ,96 3 QT SSell12/2/2019($2,548.87) Blackstone M ortg age Trust BXMT SALSA - BUY ( WATCH) 23. 5% 6. 7% 2. 1% $2, 545 Ladder C apital LA DR SAL SA - BU Y 23. 8% 7. 7% 4. 9% $6 ,00 1 Broadmark R ealty Capital BRMK SAL SA - BU Y 23. 6% 1. 6% $2, 000 Net Le ase R EIT s W.P . C arey WPCSWAN4.0 BUY 23. 7% 5. 3% 2. 1% $2, 494 Sto re C apital STOR SWAN 4.2 HOL D 34. 7% 3. 6% 2. 6% $3, 095 Realty In come OSWAN4.4 HOL D 18 .8% 3.8% 3.3% $4,020 Data C ent er REITs CyrusOne C ONE SWAN 3.9 BUY 24. 2% 3. 0% 5. 8% $6, 994 Digita l R ealty T rust DLR SWAN 4.4 BUY 15 .8% 3.6% 3. 3% $4 ,00 0 Gaming R EIT s VIC I P roperti es VIC ISALSA3.5 BUY 38. 6% 4. 7% 2. 6% $3, 111 Of fic e R EIT s City Of fice R EIT CIO SALSA 2.7 BUY 35. 8% 7. 3% 2. 1% $2, 539 Easte rly Go vernment Properti es DEASALSA3.4 HOL D 55. 3% 4. 5% 1. 8% $2 ,21 7 Mall R EIT s Brookfield P roperty P artn ers BPY SALSA 3.4 STRONG B UY 22. 7% 7. 2% 4. 0% $4, 863 Simon P roperty Gr oup SPG SWAN 4.3 STRONG B UY -9 .0% 5.7% 3. 8% $4 ,64 8 Tanger Fa cto ry Ou tl et C ente rs SKT SWAN 3.9 STRONG B UY -2 0.8% 9.7% 3.6% $4,348 Indus trial R EITs STAG I ndustrial STAG SWAN 3.4 BUY ( WATCH) 31 .1% 4. 6% 4. 9% $5, 88 5 Monmouth R eal Estate MNR SALSA 3.3 BUY 23. 7% 4. 7% 3. 1% $3, 800 Plymouth In dustrial R EIT PLYM SALSA 3.3 BUY 56. 5% 8. 1% 2. 1% $2, 554 Cell T ower REIT Crown C astle International CCI SALSA 3.9 BUY ( WATCH) 33. 3% 3. 3% 3. 0% $3 ,61 5 Apa rtment R EIT Avalonbay C ommunities AVB SW AN 3.9 HOLD 22. 0% 2. 9% 2. 5% $3, 085 Campus H ous ing REIT American C ampus Communities ACC SWAN 3.6 BUY ( WATCH) 16 .0% 4.1% 1. 9% $2,361 Lo dg ing R EIT s Ryman H ospita lity P roperti es RHPSAL SA 3.1 BU Y 34. 6% 4. 1% 0. 9% $1 ,06 8 Park H ote ls & R esorts PKSALSA3.5 STRONG B UY 4. 5% 7. 4% 4. 6% $5, 58 1 Apple H ospitality REIT APLE SALSA 2.9 BUY 21 .0% 7. 5% 1. 6% $1, 961 Sho pp ing C ent er R EIT s Brixmor P roperty Gr oup BRX SAL SA 3.5 BU Y 56. 1% 5. 2% 1. 9% $2, 329 Weingarten R ealty In vesto rs WRI SALSA 3.7 BUY 32. 3% 5. 2% 3. 6% $4, 402 Ot he r P rope rty S ector R EIT Ir on M ounta in IR M SALSA 3.3 STRON G B UY 6. 1% 7. 5% 4. 6% $5, 569 Pris on R EIT CoreCivic C XW SAL SA 3.2 STRON G S PEC B UY 2. 6% 9. 8% 3. 1% $3, 726

27 | FORBES REAL ESTATE INVESTOR | JANUARY 2020 NEW MONEY PORTFOLIO Higher risk hedge fund strategy. Invests primarily in Strong Buys, with target returns of 25% annually.

SECTOR ALLOCATION

FUNDAMENTALS Dividend Yield: 6.4% Current Portfolio Value: $101,640 Year-To-Date Return: 28.2% SWAN/SALSA: 26/74% Avg. R.I.N.O. Rating: 3.2

Since inception in February 2018 the portfolio has an 30 days the top performers were Ryman Hospitality average annualized return of 29.2% vs. 16.6% for (+22.6%), Park Hotel & Resorts (+14.4%) and GEO Vanguard Real Estate ETF (VNQ). Year-to-date it has Group (+12.8%). returned 28.2% vs. 25.2% for VNQ. During the last

28 | FORBES REAL ESTATE INVESTOR | JANUARY 2020 CURRENT HOLDINGS RECENT TRADES

SW AN/ R. I.N. O. YT D Di v. Ho lding RE IT Ticker SA LSA Ra ting B | H | S Re turn Yi eld % Va lue Ticker B|S Date Va lue Commercial M ortgage REITs BR MK Bu y12/20/2019$2,500.00 Broadmark R ealty Capital BRMK SALSA - BUY 23. 6% 7. 9% $8, 01 0 VT R Bu y12/20/2019$2,500.00 Pris on R EIT s BPY Bu y12/20/2019$2,500.00 CoreCivic C XW SAL SA 3.2 STRON G S PEC B UY 2. 6% 9. 8% 10. 2% $1 0, 387 WR ISell12/20/2019($2,200.92) Ge o Gr oup GE O SALSA 3.0 SPEC BUY -8 .8% 11.8% 5. 6% $5, 64 3 SR C Se ll 12/20/2019 ($2,733.24) Lo dg ing R EIT s Park H ote ls & R esorts PKSALSA3.5STRON G B UY 4. 5% 7. 4% 9. 7% $9, 86 7 Ryman H ospita lity P roperti es RHPSAL SA 3.1 BU Y 34. 6% 4. 1% 0. 0% $0 CorePoint L odging CPLGSALSA2.6STRON G S PEC B UY -9 .6% 7.6% 1.2% $1,229 Data C enter R EIT s QTS R ealty Trust QTS SALSA 3.3 BUY ( WATCH) 43. 5% 3. 4% 5. 9% $5, 978 Ot he r P rope rty S ector R EIT s Ir on M ounta in IR M SALSA 3.3 STRON G B UY 6. 1% 7. 5% 6. 4% $6 ,551 Uniti G roup UNITSALSA 2.3 SPEC B UY -4 6.2% 6.8% 4.7% $4,799 Sho pp ing C ent er R EIT s Retail O pportunity Investments ROIC SW AN 3.7 BU Y 14 .2% 4.6% 3.2% $3,219 Healt h C are REITs Physicians R ealty T rust DOC SALSA 3.8 BUY 23. 2% 4. 9% 4. 8% $4, 87 0 Healthcare T rust of A merica HTASW AN 4.0 BU Y 22. 4% 4. 2% 3. 4% $3, 471 Ventas V TR SW AN 4.2 BU Y 0. 1% 5. 6% 7. 3% $7 ,380 LTC P roperti es LTC SWAN 3.9 BUY 11. 7% 5.1% 1. 2% $1, 19 8 Mall R EIT s Taubman C enters TCO SWAN 3.9 HOLD -2 8.5% 8.9% 1. 7% $1, 702 Simon P roperty Gr oup SPG SWAN 4.3 STRON G B UY -9 .0% 5.7% 4.4% $4,488 Tanger Fa cto ry Ou tl et C ente rs SKT SWAN 3.9 STRON G B UY -2 0.8% 9.7% 4. 5% $4, 54 5 Brookfield P roperty P artn ers BPYSALSA3.4STRON G B UY 22. 7% 7. 2% 6. 7% $6, 80 7 Gaming R EIT s VIC I P roperti es VIC ISALSA3.5BUY 38. 6% 4. 7% 4. 5% $4, 62 2 Indus trial R EITs Monmouth Real E sta te I nvestm ent MNR SALSA 3.3 BUY 23. 6% 4. 7% 3. 8% $3, 84 7 Plymouth In dustrial R EIT PLYMSAL SA 3.3 BU Y 56. 5% 8. 1% 2. 1% $2, 119 No n-RE ITs Marcus M CS - - - -1 4.6% 1.8% 0. 9% $90 8

29 | FORBES REAL ESTATE INVESTOR | JANUARY 2020 SMALL-CAP PORTFOLIO Less diversified portfolio. More risk due to its concentration and volatility often associated with small-caps.

SECTOR ALLOCATION

FUNDAMENTALS Dividend Yield: 4.3% Current Portfolio Value: $85,997 Year-To-Date Return: 31.3% SWAN/SALSA: 14%/86% Avg. R.I.N.O. Rating: 2.4

Since inception in January 2016 the portfolio has an The best performers in the last 30 days were Ladder annualized average annual of 37.2% vs. 8.7% for the Capital (+5.9%), Gladstone Land (+5.3%) and WPT Vanguard Real Estate ETF (VNQ). This year it has Industrial (+2.6%). We did not buy or sell any portfolio returned 31.3% compared with 25.2% for the VNQ. stocks in December.

30 | FORBES REAL ESTATE INVESTOR | JANUARY 2020 CURRENT HOLDINGS RECENT TRADES

SW AN/ R. I.N. O. YT D Di v. Ho lding RE IT Ticker SA LSA Ra ting B | H | S Re turn Yi eld % Valu eTic ker B|S Date Value Commercial M ortgage REITs NO NE Arbor R ealty Trust ABR SALSA - BUY ( WATCH) 57. 3% 7. 9% 4. 9% $4, 241 Ladder C apita l C orp LADR SALSA - BUY 23. 8% 7. 7% 3. 2% $2 ,75 9 Trinity M erger C orp TMCXSAL SA - BU Y 1. 3% $1, 16 0 Ot he r P rope rty S ector R EIT s Armada H offler Properti es AHHSALSA3.0 83 HOL D 37. 6% 4. 5% 3. 4% $2 ,88 4 Saf ehold S AFE SALSA 3.335 HOLD 110 .9% 1. 6% 2. 7% $2, 351 Uniti G roup UNITSALSA 2.291 SPEC B UY -4 6.2% 6.8% 1.9% $1,596 T im be r R EIT s Catc hMark T imber Trust CTT SALSA 3 BUY 71 .3% 4. 7% 5. 5% $4 ,76 2 Lo dg ing R EIT s Ryman H ospita lity P roperti es RHP SALSA 3.1 26 BUY 34. 6% 4. 1% 11. 4% $9,816 CorePoint L odging CPLGSALSA2.6 43 STRON G S PEC B UY -9 .6% 7.6% 3. 2% $2 ,73 4 Of fic e R EIT s Easte rly Go vernment Properti es DEA SALSA 3.3 94 HOL D 55. 3% 4. 5% 3. 9% $3 ,38 5 Indus trial R EITs STAG I ndustrial STAGSWAN 3.3 75 BUY ( WATCH) 31 .1% 4. 6% 2. 4% $2, 10 1 WPT I ndustr ial R eal Esta te WPTIF SALSA 3 BUY 18 .0% 6. 0% $5, 147 Plymouth In dustrial R EIT PLYM SAL SA 3.326 BU Y 56. 5% 8. 1% 4. 9% $4, 21 6 Sho pp ing C ent er R EIT s Ursta dt B iddle P roperti es UBA SWAN 3.7 69 BUY 31 .1% 4. 5% 6. 9% $5, 908 Fa rmla nd R EIT s Gladstone L and LANDSAL SA 3 BU Y 15 .7% 4.2% 7.3% $6,299 Farmland P artn ers FPISALSA2.6 2 SPEC BUY 47. 8% 3. 1% 3. 1% $2, 645 Data C enter R EIT s Qts R ealty T rust QT SSALSA3.3 35 BUY ( WATCH) 43. 5% 3. 4% 2. 1% $ 1, 782 Mall R EIT s Tanger Fa cto ry Ou tl et C ente rs SKT SWAN 3.8 73 STRONG B UY -2 0.8% 9.7% 4.4% $3,763 Pris on R EIT s Co reCivic CX W SALSA 3.16 STRONG S PEC BUY 2. 6% 9. 8% 4. 8% $4, 161 No n-RE ITs ETF S eries S oluti ons Trust - H oya C apita l H ousing ETF HOM Z- - - - - 2.9 %$2,508 Cash A ccount s Cash ( Dry-Powder) ------13.7% $11,7 79

31 | FORBES REAL ESTATE INVESTOR | JANUARY 2020 INDEXES

RE IT Ticker Sector Market C ap ( m) P/F FO Div. Y ield YTD R eturn R.I .N .O . Rating B | H | S American T ower AMT In fr astructure $99,2 84 27.57 1.7% 39.6% 3.95 HOLD

S Digital R ealty T rust DLRData S ector $24,83817.5 73.7 %13.3%4.4 1BUY O OS D DO D Ventas VTR Health C are $21,10414.6 15.7 %-1.0 %4.2 2BUY A AD A SA S S S Realty In come O Triple N et $23,58022.0 13.8 %18.3%4.4 1HOLD Simon P roperty Group SPG Mall $44,603 11.9 85.8 %-9.6 %4.3 2STRONG B UY AV ERAG E: $42,682 4.1% 12.1% 4.26

RE IT Sector Market C ap ( m) P/F FO Div. Y ield YTD R eturn R.I .N .O . Rating B | H | S W.P . C arey WPC Triple N et $13,41717.5 95.3 %23.3%4.0 0HOLD

O Store C apital STOR Triple N et $8,69919.4 03.6 %35.1%4.2 2HOLD NO N AN A A Agree R ealty ADC Triple N et $2,90822.5 43.3 %19.9%3.6 9HOLD W WA W W S S SW S Realty In come O Triple N et $23,58022.0 13.8 %18.3%4.4 1HOLD National R etail P roperties NNN Triple N et $8,96318.8 73.9 %11.2%4.1 1HOLD AV ERAG E: $11 ,514 4. 0% 21. 5% 4. 08

RE IT Sector Market C ap ( m) P/E Div. Y ield YTD R eturn R.I .N .O . Rating B | H | S Starwood P roperty STWD Mortgage REITs $7,0 45 13.40 7.7% 34.1 %- HOLD

T Apollo C ommercial Real E state ARI Mortgage R EIT s $2,86710.2 99.9 %20.2%- SELL S ST

A AS Blackstone M ortgage BXMT Mortgage REITs $5,0 63 14.04 6.7% 23.5 %- BUY L LA B BL TPG R E F inance Trust TRTX Mortgage REITs $1,5 28 11.83 8.4% 19.8 %- BUY Ladder C apital LADR Mortgage R EIT s $2,11610.9 07.7 %23.3%- BUY AV ERAG E: $3, 724 8. 1% 24. 2%

RE IT Sector Market C ap ( m) P/F FO Div. Y ield YTD R eturn R.I .N .O . Rating B | H | S

D STAG I ndustrial STAG Industrial $4,1 48 16.94 4.7% 29.1 %3.38BUY ( WATCH) ND N E E EN D D DE Realty In come O Net L ease $23,580 22.0 13.8 %18.3%4.4 1HOLD I ID I I V VI V V I I IV I LTC P roperties LTC Health C are $1,770 14.7 05.2 %10.8%3.8 7HOLD D D D DI D

D

Y Y Y Y Y Y Y Gladstone L and LAND Farmland $266 24.31 4.1% 16.6 % 2.80 SPEC BUY L L L L L L LY L H H H H H H H HL EPR P roperties EPR Net L ease $5,508 12.7 46.5 %14.5%2.9 7HOLD T T T T T T T TH N N N N N N N NT Chatham L odging CLDTLodging$85710.097.2%10.9 %2.99HOLD O O O O O O O ON M M M M M M M M MO Apple H ospitality APLE Lodging $3,6 06 9.77 7.5% 20.5 %2.92BUY AV ERAG E: $2,401 6.1% 14.7% 3.11

We use Sharesight to calculate percentage returns using a dollar-weighted return methodology, which measures investment performance taking account of the size and timing of cash flows. Sharesight annualizes returns weighting the length of time that each capital input has been invested for, by the amount of capital invested to determine the average years invested for each dollar of capital.

32 | FORBES REAL ESTATE INVESTOR | JANUARY 2020 PORTFOLIO COMPARISON Here’s a look at how the portfolios stack up.

YTD Dividend Current Avg. R.I.N.O. Percent Performance Yield Porolio Value Rang SWAN/SALSA

Durable Income 19% 5.1% $712,214 3.500 57%/43%

Growth & Income 24% 5.6% $121,257.98 3.300 43%/57%

New Money 28% 6.4% $101,639.93 3.200 26%/74%

Small-Cap 31% 4.3% $85,997.04 2.400 14%/86%

PORTFOLIO RETURNS

------Returns Since Incepon ------Total Return --- Annualized Total Return VNQ Annualized Alpha 30-Day 2019 YTD

Durable Income 17.0% 9.0% 8.0% Durable Income -1.4% 18.9%

Growth & Income 20.7% 8.7% 12.0% Growth & Income -1.4% 23.8%

New Money 29.2% 16.6% 12.6% New Money 2.5% 28.2%

Small-Cap 37.2% 8.7% 28.5% Small-Cap 2.0% 31.3%

VNQ -2.2% 25.2%

Data as of December 19, 2019

33 | FORBES REAL ESTATE INVESTOR | JANUARY 2020 Forbes Real Estate Investor REIT Sectors

------Share P rice------Ratings------F undamenta ls------P erfo rmance------E arnings------Cur rent SWA N| R.I .N .O. Mar ke t FFO Na me Ticker 19-De c-19 V alue Va riance SA LSA Ra ting B| H| S Ca p Yi eld P/ FFO Pa yout 1- Month YTD 1- Year

Healthcare [ 17] Alexandria R eal Esta te ARE $159.8 2$115.0039.0 %SWAN4.4 HOL D$18,4 03 2.5% 22.9 x57%-0.1 %41.5%40.1% Community H ealthcare CHCT$44.19$41.506.5%SALSA3.6HOLD$8923.7 %26.6x99%-4.7%59.8 %58.3 % CareTrust R EIT CTRE $20.8 0$20.0 04.0 %SALSA3.7 HOLD $1,9 78 4.3 %15.2 x66%3.0 %15.9 %11.8% Physicians R ealty DOC $18.7 3$20.0 0-6.4 %SALSA3.8 BUY $3,5 28 4.9% 18.7 x92%0.6 %23.2%20.4% Global M edical REIT GM RE $13.22 $11.00 20.2% SALSA 3.1 BUY $567 6.1 %17.5x106%-1.1%57.4 %67.0 % Healthcare R ealty T rust HR $32.8 9$34.0 0-3.3 %SALSA3.5 HOL D$4,3 99 3.7% 20.8 x76%0.9 %20.1%14.7% Healthcare T rust of A merica HTA $29.9 8$28.5 05.2 %SWAN4.0 BUY $6,2 11 4.2% 18.3 x76%0.3 %22.4%19.2% LTC P roperti es LTC $44.5 3$48.0 0-7.2 %SWAN3.9 BUY $1,7 70 5.1% 14.8 x75%-4.8 %11.7%6.9% Medical P roperti es T rust MPW $20.3 4$18.0 013.0 %SALSA3.6 HOL D$10,5 25 5.0% 15.4 x77%0.5 %33.5%30.0% Nati onal H ealth care I nvestors NHI $80.1 6$72.0 011.3 %SALSA3.6 HOL D$3,5 24 5.2% 14.6 x76%-0.4 %10.4%7.0% Om ega H ealth care In vesto rs OHI $41.3 6$39.0 06.1 %SALSA3.8 BUY ( WATCH) $9,0 37 6.4% 13.6 x87%-0.6 %26.0%24.4% Healthpeak PEAK $32.8 9$34.0 0-3.3 %SALSA3.6 BUY ( WATCH) $16,7 72 4.5% 18.7 x84%-6.3 %23.2%19.6% Sabra H ealth C are R EIT SBRA $21.2 7$22.0 0-3.3 %SALSA3.3 HOL D$4,3 04 8.5% 11.4 x96%-3.3 %40.7%32.2% Senior H ousing Properti es SNH$7.68$8.50-9.6%SALSA2.8SELL$1,82610.9%5.9x64%2.5%-29.0 %-31.7% New S enior In vestm ent Gr oup SNR $7.7 9$7.0 011.3 %SALSA2.3 SELL $646 6.7% 13.6 x92%0.0 %105.5%92.4% Ve ntas VTR $56.62 $60.00 -5.6% SW AN 4.2 BU Y$21,1045.6%14.8x83%-3.2%0.1%-2.7% We lltower WELL $79.05 $75.00 5.4% SWA N4.1HOLD$32,0754.4%19.0x84%-6.8%18.9%16.0% AV ERAG E4.9%$8,0925. 4% 16. 6x 82% -1. 4% 28. 3% 25. 0%

Lodging [ 14] Apple H ospitality APLE $16.11 $20.00 -19.5% SALSA 2.9 BUY $3,606 7.5 %9.8x73%1.4%21.0 %23.5 % Braemar H otels & Resorts BHR $9.1 0$10.7 5-15.3 %SALSA3.0 HOL D$2997.0%6.5 x46%-5.4 %7.8 %7.5% Chatham L odging CLDT $18.42 $24.00 -23.3% SALSA 3.0 BUY (WATCH) $857 7.2 %10.1x73%3.8%11.1 %12.1 % CorePoint L odging CPLG $10.5 0$15.0 0-30.0 %SALSA2.6 STRON G S PEC B UY $602 7.6% 7.2 x55%6.4 %-9.6 %-6.2 % Host H ote ls & R esorts HST $18.6 4$20.2 2-7.8 %SALSA2.7 BUY $13,3 68 4.5% 10.6 x48%10.6 %15.6%18.4% Hersha H ospita lity HT $14.5 5$22.0 0-33.9 %SALSA2.8 BUY $562 7.7 %7.4x57%3.9 %-11.2 %-7.0 % Summit H ote l P roperti es IN N$12.1 5$14.0 0-13.2 %SALSA3.0 BUY $1,2 78 5.9% 9.7 x57%3.1 %32.8%31.3% Pebblebrook H ote lPEB$27.3 8$35.0 0-21.8 %SALSA3.4 BUY $3,5 77 5.6% 10.6 x58%8.7 %0.6 %-1.0 % Park H ote ls & R esorts PK $25.8 5$34.0 0-24.0 %SALSA3.5 STRON G B UY $6,1 88 7.4% 9.0 x66%15.9 %4.5 %5.6% Ryman H ospita lity P roperti es RHP $86.8 8$83.0 04.7 %SALSA3.1 BUY $4,7 30 4.1% 12.7 x52%-1.4 %34.6%37.1% RLJ L odging RLJ $18.0 4$21.0 0-14.1 %SALSA3.0 HOL D$3,0 76 7.3% 9.0 x65%9.9 %16.4%13.5% Sunstone H otel Investors SHO $14.32 $14.00 2.3% SALSA 2.8 HOLD $3,220 4.6 %13.0x58%4.0%11.3 %13.9 % Soth erly H otels SOHO $6.5 4$7.5 0-12.8 %SALSA2.5 HOL D$93-5.7 x- 0.1 %25.7%19.5% Xenia Hote ls & R esorts XHR $21.8 4$22.7 5-4.0 %SALSA3.0 BUY $2,4 60 5.0% 10.1 x51%4.0 %31.9%32.4% AV ERAG E-15.2%$3,1376. 3% 9. 4x 58% 4.6% 13. 7% 14. 0%

Net L ease [13] Agree R ealty ADC $68.5 7$57.0 020.3 %SALSA3.7 HOL D$2,9 08 3.3% 22.3 x74%-8.1 %19.9%22.4% American F inance Trust AFIN $13.35 $10.00 33.5% SALSA 2.4 STRONG S ELL $1,425 8.2 %13.5x111%-9.4%10.0 %5.4 % EPR P roperti es EPR $70.2 0$65.0 08.0 %SALSA3.0 HOL D$5,5 08 6.4% 12.9 x83%-4.8 %15.8%9.6% Essenti al Properti es R ealty T rust EPRT $24.6 1$20.0 023.1 %SALSA3.5 HOL D$1,9 94 3.6% 21.0 x75%-6.2 %83.5%92.0% Four C orners Property T rust FCPT $27.4 3$25.0 09.7 %SALSA3.5 HOL D$1,8 77 4.3% 19.2 x82%-2.2 %9.1 %7.2% Global N et L ease GN L$20.36$18.0013.1%SALSA2.5STRONG S ELL $1,821 10.5% 10.8x 113% 2.9% 26.7 %23.4 % Getty R ealty GTY $32.91 $29.00 13.5% SALSA 3.1 HOLD $1,356 4.3 %18.8x80%-1.3%15.6 %13.1 % Nati onal R eta il P roperties NNN $52.2 2$50.0 04.4 %SWAN4.1 HOL D$8,9 63 3.9% 19.0 x74%-8.1 %11.8%10.8% Realty In come O $72.3 5$65.0 011.3 %SWAN4.4 HOL D$23,5 80 3.8% 22.1 x83%-7.0 %18.8%17.1% Spirit R ealty Capita lSRC$48.7 2$50.0 0-2.6 %SALSA3.0 HOL D$4,8 59 5.1% 14.6 x75%-5.3 %44.4%44.5% Sto re C apital STOR $37.0 5$30.0 023.5 %SWAN4.2 HOL D$8,6 99 3.6% 19.4 x70%-8.4 %34.7%31.1% Ve reit VER $9.21 $9.50 -3.1% SAL SA 2.9 HOLD $9,833 6.1% 13.4x 81% -5.7% 34.8% 33.1% W.P . C arey WPC $77.8 8$76.0 02.5 %SWAN4.0 BUY $13,4 17 5.3% 17.7 x92%-9.6 %23.7%20.7% AV ERAG E12.1%$6,6345. 3% 17. 3x 84% -5. 6% 26. 8% 25. 4%

Of fice [ 14] Brandywine R ealty T rust BDN $15.4 5$13.0 018.8 %SALSA3.0 HOL D$2,7 22 4.9% 10.9 x54%1.6 %26.5%27.6% Bosto n P roperties BXP $135.6 9$130.00 4.4 %SWAN3.6 BUY ( WATCH) $20,9 81 2.8% 19.4 x55%-1.7 %23.2%21.6% City Off ice R EIT CIO $12.9 0$14.0 0-7.9 %SALSA2.7 BUY $615 7.3% 11.0 x79%-3.7 %36.0%28.5% Cousins P roperti es CUZ $40.3 3$30.0 034.4 %SALSA2.6 HOL D$5,9 19 2.9% 15.7 x45%-0.5 %31.7%29.1% Columbia P roperty T rust CXP $20.4 9$22.0 0-6.9 %SALSA3.1 HOL D$2,3 95 3.9% 13.7 x54%1.9 %10.0%15.3% Easte rly Go vernment Properti es DEA $23.1 8$20.5 013.1 %SALSA3.4 HOL D$1,7 19 4.5% 19.4 x87%0.9 %55.7%50.9% Empire S ta te R ealty Trust ESRT $13.8 7$15.0 0-7.5 %SALSA3.1 HOL D$2,5 10 3.1% 16.2 x50%0.3 %-0.5 %-2.1 % Highwoods P roperties HIW $47.3 3$44.0 07.6 %SALSA3.3 HOL D$4,9 10 4.0% 14.3 x57%-0.6 %27.6%25.3% Kilroy R ealty KRC $82.4 9$75.0 010.0 %SALSA2.8 HOL D$8,7 45 2.3% 21.5 x49%-0.1 %33.7%35.2% Corporate O ffi ce P roperti es OF C$28.8 2$29.0 0-0.6 %SALSA3.3 HOL D$3,2 30 3.8% 14.2 x54%-0.2 %41.1%39.6% Off ice P roperti es In come T rust OPI $31.7 4$20.0 058.7 %SALSA2.7 STRON G SELL $1,5 30 6.9% 5.3 x37%-2.0 %24.4%26.4% Piedmont O ffice Realty T rust PDM $21.86 $17.00 28.6% SALSA 3.0 HOLD $2,750 3.9 %12.3x48%1.6%33.6 %32.5 % SL Gr een R ealty SLG $90.5 3$95.0 0-4.7 %SALSA3.2 BUY $7,2 52 3.8% 13.0 x49%8.5 %18.0%16.7% Vornado R ealty VNO $67.2 7$75.0 0-10.3 %SALSA2.8 HOL D$12,8 39 4.4% 15.7 x66%5.2 %12.9%10.4% AV ERAG E9.8%$5,5804. 2% 14. 5x 56% 0.8% 26. 7% 25. 5%

Shopping C enters [ 13] Acadia R ealty AKR $26.06 $29.00 -10.1% SALSA 3.3 HOLD $2,266 4.4 %18.4x80%-4.4%13.0 %10.2 % Brixmor P roperty Gr oup BRX $21.5 0$22.0 0-2.3 %SALSA3.5 BUY $6,4 04 5.2% 11.2 x59%-2.1 %56.1%55.6% Federal R ealty Investment FRT $127.87 $134.0 0-4.6%SWAN4.6BUY$9,6573.2 %20.1x65%-2.4%10.8 %8.7 % Kimco R ealty KIM $20.5 4$22.0 0-6.6 %SWAN3.7 BUY $8,6 73 5.5% 14.1 x77%-4.2 %46.6%48.4% Kite R ealty Gr oup KRG $18.6 3$21.0 0-11.3 %SALSA3.2 BUY $1,5 65 6.8% 11.4 x77%-3.3 %46.0%43.2% Regency C ente rs REG $62.5 4$67.0 0-6.7 %SWAN3.9 BUY $10,4 79 3.7% 16.2 x61%-2.9 %10.5%12.7% Retail O pportunity Investments ROIC $17.33 $20.00 -13.4% SWAN 3.7 BUY $2,010 4.6 %15.6x71%-3.2%14.2 %12.3 % RPT R ealty RPT $14.5 0$15.0 0-3.3 %SALSA3.2 BUY $1,1 58 6.1% 13.4 x81%2.3 %29.8%27.9% Retail V alue RVI $37.67 $32.00 17.7% SALSA 2.9 HOLD $718 - 8.7x - 6.4% 55.7 %48.2 % Ursta dt B iddle P roperti es UBA $23.9 1$25.0 0-4.4 %SWAN3.8 BUY $904 4.5% 17.2 x-1.5 %31.1%27.2% Urban E dge Properties UE $19.03 $22.00 -13.5% SALSA 3.1 BUY $2,307 4.7 %16.3x76%-6.9%20.0 %17.1 % Weingarten R ealty In vesto rs WRI $31.0 6$32.0 0-2.9 %SALSA3.7 BUY $3,9 97 5.2% 14.8 x83%0.4 %32.3%31.7% White sto ne R EIT WSR $13.4 2$11.0 022.0 %SALSA2.5 STRON G SELL $545 8.5% 12.5 x106%-2.8 %18.7%17.9% AV ERAG E-3.0%$3,8995. 2% 14. 6x 76% -1. 9% 29. 6% 27. 8%

u CONTINUED ON NEXT PAGE

34 | FORBES REAL ESTATE INVESTOR | JANUARY 2020 ------Share P rice------Ratings------F undamenta ls------P erfo rmance------E arnings------Cu rrent SW AN| R. I.N. O. Ma rket FFO Na me Ticker 19-De c-19 V alue Va riance SA LSA Ra ting B| H| S Ca p Yi eld P/ FFO Pa yout 1- Month YTD 1- Year Industrial [ 14] Americold R ealty T rust COL D$34.0 7$27.0 026.2 %SALSA3.1 HOL D$6,5 33 2.4% 27.2 x63%-9.7 %35.8%33.4% Duke R ealty DRE $34.2 8$28.0 022.4 %SALSA3.6 HOLD $12,3 62 2.6 %23.8 x61%-2.6 %36.1 %31.3% EastGr oup P roperties EGP $131.7 5$100.0031.8 %SALSA3.3 HOL D$5,0 60 2.2% 26.6 x59%-1.6 %46.3%42.4% First I ndustr ial R ealty Trust FR $40.9 3$32.0 027.9 %SALSA2.9 HOL D$5,1 96 2.3% 23.6 x53%-3.5 %44.5%41.8% In dustr ial Logisti cs P roperti es T rust IL PT $21.15 $19.0 011.3%SALSA2.8 HOL D$1,3 79 6.2 %12.0x75%-1.2 %14.6 %18.6 % Liberty P roperty Trust LPT $59.1 5$41.0 044.3 %SALSA2.8 HOL D$9,3 32 2.8% 23.3 x64%-4.1 %44.8%42.8% Lexingto n R ealty LXP $10.6 0$10.0 06.0 %SALSA2.8 HOL D$2,6 27 3.9% 13.5 x52%-3.3 %33.3%37.1% Monmouth R eal Estate MNR $14.60 $15.00 -2.7% SALSA 3.3 BUY $1,416 4.7 %16.1x78%-1.8%23.6 %18.7 % Pr ologis PLD $87.31 $65.00 34.3% SAL SA 3.7 HOLD $55,158 2.4% 26.4x 64% -4.1% 52.7% 48.5% Plymouth In dustrial PLYM $18.5 4$19.0 0-2.4 %SALSA3.3 BUY $249 8.1% 9.4 x76%-0.6 %56.5%71.4% PS B usiness P arks PSB $163.5 7$140.0016.8 %SWAN3.8 HOL D$6,4 51 2.6% 23.9 x63%-6.8 %28.1%25.3% STAG I ndustrial STAG $31.20 $29.00 7.6% SWAN 3.4 BUY (WATCH) $4,148 4.6 %17.2x79%0.8%31.1 %32.1 % Terreno R ealty TRNO $52.8 3$35.0 050.9 %SALSA3.7 HOL D$3,5 40 2.0% 37.6 x74%-7.2 %52.6%47.9% WPT I ndustr ial WPTIF $14.0 0$16.0 0-12.5 %SALSA3.0 BUY $898 - - - 1.0 %18.0%16.2% AVER AGE 18.7% $8,168 3. 6% 21. 6x 66% -3. 2% 37. 0% 36. 2%

Commercial M ortgage [13] ( Using EPS) Arbor R ealty Trust ABR $14.5 4$13.7 55.7 %SALSA- BUY ( WATCH) $1,5 95 7.9% 11.2 7x 89% -4.0 %57.3%59.0% Ares C ommercial R eal E sta te ACRE $16.0 5$14.0 014.6 %SALSA- HOL D$4638.2%11.5 5x 95% 3.2 %31.4%34.0% Apollo C ommercial Real E sta te F inanceAR I$18.67$16.5013.2% SAL SA - SEL L$2,8679.9%10.33x102%3.7%20.6%22.3% Broadmark R ealty BRMK $12.35 $12.00 2.9% SALSA - BUY $1,737 - - - 13.2% 23.6 %24.4 % Blackstone M ortg age BXMT $37.70 $34.00 10.9% SALSA - BUY (WATCH) $5,063 6.6 %14.18x93%4.4%24.7 %27.1 % Colony Credit R eal E sta te CLNC $13.9 0$15.0 0-7.3 %SALSA- SELL$1,7 87 12.5% 12.9 9x 163% 7.3 %-2.5 %-5.1 % Gr anite P oint M ortg age T rust GPMT $18.5 2$17.7 54.3 %SALSA- HOL D$1,0 16 9.0% 12.7 2x 113% 2.6 %9.8 %11.8% Hannon A rmstr ong S usta inable In f HA SI $32.14 $25.25 27.3% SALSA - HO LD $2,087 4.2% 23.29x 97% 10.4% 75.0% 66.8% Jernigan C apita lJCAP$19.9 6$20.0 0-0.2 %SALSA- HOL D$4447.0%17.2 8x 121% 12.7 %6.0 %4.5 % KKR R eal Esta te F inance T rust KREF $20.6 7$19.2 57.4 %SALSA- BUY$1,1 88 8.3% 12.3 8x 104% 3.9 %15.1%18.7% Ladder C apita lLADR$17.6 8$17.5 01.0 %SALSA- BUY$2,1 17 7.7% 10.9 5x 84% 5.5 %23.9%26.0% Starwood P roperty STWD $24.99 $23.00 8.7% SALSA - HOLD $7,045 7.7 %13.48x104%2.9%34.9 %36.3 % TPG R E F inance Trust TRTX $20.61 $19.25 7.1% SALSA - BUY $1,528 8.4 %11.89x99%2.6%20.4 %22.7 % AVER AGE 7.4% $2,226 8. 1% 13. 5x 105% 5.3% 26. 2% 26. 8%

Apartment [ 10] Prefe rred A partment Communiti es APT S$13.36$14.50-7.9% SAL SA 2.9 SEL L$6127.9%9.4x74%0.1%2.0%1.1% AvalonBay C ommuniti es AVB $207.7 4$175.0018.7 %SWAN3.9 HOL D$29,0 13 2.9% 22.6 x66%-4.0 %22.0%18.7% Bluerock R esidential BRG $11.60 $10.00 16.0% SALSA 2.5 SELL $261 5.6 %- - -1.4%34.3 %26.5 % Camden P roperty T rust CPT $105.4 2$90.0 017.1 %SALSA3.4 HOL D$10,2 08 3.0% 21.0 x64%-5.7 %23.4%20.8% Equity R esidenti al EQR $80.3 6$70.0 014.8 %SWAN3.3 HOL D$29,8 42 2.8% 23.1 x65%-7.3 %24.4%21.5% Essex P roperty T rust ESS $298.6 8$245.0021.9 %SWAN4.2 HOL D$19,7 37 2.6% 22.4 x58%-6.3 %24.2%20.2% In vesto rs R ealty T rust IRET $73.6 2$64.0 015.0 %SALSA3.0 HOL D$8563.8%16.5 x76%-1.4 %55.1%56.6% In dependence R ealty Trust IR T$13.9 2$9.0 054.7 %SALSA2.5 SELL $1,2 65 5.2% 18.6 x96%-5.6 %58.5%54.2% Mid-America A partm ent C ommunity MA A$129.32$116.0011.5%SALSA3.2 HOLD$14,7513.0%19.9x59% -5 .9% 39.8% 37.5% NexPoint R esidential NXRT $43.67 $35.00 24.8% SALSA 2.5 HOLD $1,083 2.6 %24.0x61%-8.2%28.1 %32.3 % AV ERAG E18.7%$10,7633. 9% 19. 7x 69% -4. 6% 31. 2% 28. 9%

Malls [ 9] Brookfield P roperty P artners L . BPY $18.46 $21.0 0-12.1%SALSA3.4 STRON G B UY $8,1 43 7.2 %13.4x96%-1.8 %22.7 %29.8 % CBL & A ssociate s P roperti es CBL $1.0 7$2.0 0-46.5 %SALSA2.1 STRON G SELL $186 11.2 %0.8 x9%-18.9 %-41.6%-40.1% Macerich MAC $27.27 $60.00 -54.6% SALSA 3.9 STRONG S ELL $3,855 11.0% 7.7x 84% 3.2% -31.3 %-28.9% Pennsylvania R EIT PEI $5.4 3$12.0 0-54.8 %SALSA2.9 SELL $421 15.5 %4.7 x73%-0.4 %5.3 %7.9% Tanger F actory Ou tlet Centers SKT $14.8 2$25.0 0-40.7 %SWAN3.9 STRON G B UY $1,3 77 9.7% 6.6 x64%-4.3 %-20.8%-21.8 % Simon Property G roup SPG $145.3 5$180.00-19.3 %SWAN4.3 STRON G B UY $44,6 03 5.7% 12.1 x69%-1.9 %-9.0 %-9.1 % Taubman C enters TCO $30.46 $60.00 -49.2% SWAN 4.2 HOLD $1,865 8.9 %8.3x73%-5.4%-28.5 %-28.3% Un ibail-Rodamco-Westfield UR W:NA $139.75 $150.00 -6.8% SALSA 4.0 BUY $19,337 7.7% 11.5x 89% -1.3% 11.4% 9.7% Washington P rime Gr oup WPG $3.6 6$7.0 0-47.7 %SALSA2.8 STRON G SELL $683 27.3 %3.4 x85%-6.7 %-4.3 %-2.9 % AV ERAG E-36.8%$8,94111. 6% 7.6x 71% -4. 2% -1 0.7% -9 .3%

Ot her P roperty S ector [ 8] American A ssets Trust AAT $44.89 $37.00 21.3% SALSA 3.0 HOLD $2,691 2.7 %20.2x53%-3.4%14.5 %14.0 % Armada H offl er Properti es AHH $18.6 2$16.2 514.6 %SALSA3.1 HOL D$1,0 22 4.5% 16.0 x72%4.7 %37.6%34.5% Alexander & B aldwin ALEX $20.8 5$20.0 04.3 %SALSA3.2 HOL D$1,5 07 3.3% 41% -6.0 %16.9%20.8% CorEnergy I nfrastructure COR R$43.7 4$40.0 09.4 %SALSA2.9 HOL D$5926.9%11.4 x78%-1.0 %42.2%34.4% Iron M ountain IRM $31.9 1$40.0 0-20.2 %SALSA3.3 STRON G B UY $9,1 62 7.5% 14.0 x105%-4.5 %6.1 %6.0 % Landmark I nfrastructure Partn ers LMRK $17.2 0$16.0 07.5 %SALSA2.8 SPEC B UY $436 8.6% 12.3 6x 113% 14.3 %63.2%48.1% Sa fehold SAF E$39.00$32.0021.9% SAL SA 3.3 HOLD $1,863 1.6% 26.7x 41% 7.3% 110.9% 108.4% Uniti Gr oup UNIT $8.2 5$12.0 0-31.3 %SALSA2.3 SPEC B UY $1,5 95 6.8% 4.0 x27%33.8 %-46.2%-44.8 % AV ERAG E3.4%$2,3595. 2% 15. 0x 66% 5.6% 30. 6% 27. 7%

Self S torage [ 6] Cu beSmart CU BE $31.30 $30.00 4.3% SALSA 2.8 HOLD $6,058 4.1% 18.6x 77% -0.5% 12.3% 9.4% Extr a S pace S to rage EXR $103.8 5$100.00 3.8 %SALSA3.1 HOL D$13,4 50 3.4% 21.4 x73%-2.1 %18.7%15.4% Life S to rage (Sovran S elf S torage) LS I $1 06. 73 $95. 00 12 .3% SALS A 3. 0HOLD $4, 98 0 3. 8% 19 .0x 71 %-3. 5% 19. 5% 15. 4% Nati onal S to rage A ffi liate sNSA$32.5 8$30.0 08.6 %SALSA2.9 HOL D$1,9 33 3.9% 21.3 x82%-0.2 %28.3%25.0% Public S torage PSA $210.12 $230.0 0-8.6%SWAN3.5BUY$36,7043.8 %19.5x75%-0.6%7.5%7.2 % Gl obal S elf S torage SELF $4.2 7$4.8 0-11.0 %SALSA2.8 STRON G S PEC B UY $33 - 14.7 x- 2.2 %15.8%16.1% AV ERAG E1.6%$10,5263. 8% 19. 1x 76% -0. 8% 17. 0% 14. 8%

Data C enters [ 5] Cy rusOne CO NE $64.66 $67.00 -3.5% SWAN 3.9 BUY $7,320 3.0% 18.1x 54% 0.4% 25.2% 21.7% CoreSite R ealty COR $113.62 $100.0 013.6%SALSA3.4HOLD$5,5984.2 %22.3x93%-0.6%34.4 %36.4 % Digital R ealty T rust DLR $119.0 0$122.00-2.5 %SWAN4.4 BUY $24,8 38 3.6% 18.0 x65%-1.0 %15.8%16.3% Eq uinix EQ IX $575.92 $450.00 28.0% SAL SA 4.1 HOLD $48,849 1.7% 25.4x 43% 1.3% 66.6% 64.0% QTS R ealty QTS $52.69 $50.00 5.4% SALSA 3.3 BUY (WATCH) $3,068 3.3 %20.0x67%2.7%47.6 %48.3 % AV ERAG E8.2%$17,9353. 2% 20. 8x 64% 0.6% 37. 9% 37. 3%

Timber [ 4] ( Using EPS) Catc hMark T imber CTT $11.5 3$12.0 0-3.9 %SALSA3.0 BUY $565 4.7% - - -0.9 %71.3%64.6% Po tlatch PCH $43.79 $34.00 28.8% SAL SA 3.0 HOLD $2,944 3.7% 57.62x 211% 0.8% 44.3% 49.8% Ra yonie rRYN$32.26$26.0024.1%SALSA3.0HOLD$4,1773.3%75.02x252%5.6%20.8%20.7% Weyerhaeuser C o. WY $30.0 1$23.0 030.5 %SALSA3.1 HOL D$22,3 62 4.5% 72.8 4x 330% 2.9 %44.7%42.3% AV ERAG E19.9%$7,5124. 0% 68. 5x 264% 2.1% 45. 3% 44. 4%

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35 | FORBES REAL ESTATE INVESTOR | JANUARY 2020 ------Share P rice------Ratings------F undamenta ls------P erfo rmance------E arnings------Cu rrent SW AN| R. I.N. O. Ma rket FFO Na me Ticker 19-De c-19 V alue Va riance SA LSA Ra ting B| H| S Ca p Yi eld P/ FFO Pa yout 1- Month YTD 1- Year Manufactured H ousing [ 3] Equity L ife sty le Properti es ELS $68.6 5$60.0 014.4 %SALSA3.7 HOL D$12,5 00 1.8% 32.7 x58%-3.5 %43.5%41.7% Sun C ommuniti es SUI $148.2 1$125.0018.6 %SALSA3.6 HOL D$13,7 36 2.0% 30.3 x61%-8.9 %48.3%47.7% UMH P roperties UMH $15.7 8$14.0 012.7 %SALSA2.6 SELL $645 4.6% 25.6 x117%6.1 %40.7%39.8% AV ERAG E15.2%$8,9602. 8% 29. 5x 79% -2. 1% 44. 1% 43. 1%

Gaming [ 3] Ga ming a nd L eisure P roperti es GLPI $38.1 1$35.0 08.9 %SALSA2.9 HOL D$9,1 95 6.4% 13.1 x83%2.4 %42.2%38.7% MGM G rowth P roperti es MGP $30.0 1$28.0 07.2 %SALSA3.1 HOL D$8,7 86 6.1% 13.5 x80%-1.4 %21.8%21.1% VICI P roperties VICI $22.5 1$23.0 0-2.1 %SALSA3.5 BUY $11,6 73 4.6% 18.3 x84%2.5 %40.2%40.1% AV ERAG E4.6%$9,8845. 7% 15. 0x 82% 1.2% 34. 7% 33. 3%

Single F amily R entals [ 3] American Homes 4 R ent AMH $25.6 4$20.0 028.2 %SALSA3.1 HOL D$7,7 10 0.8% 23.1 x18%-3.4 %30.0%29.9% In vita ti on H omes INVH $29.2 3$23.5 024.4 %SALSA3.1 HOL D$15,7 36 1.8% 23.2 x41%-2.8 %48.5%46.2% Front Y ard R esidenti al RESI $12.3 3$11.2 59.6 %SALSA2.7 SELL $664 4.9% 60.7 x296%16.9 %47.2%40.0% AV ERAG E26.3%$8,0372. 5% 35. 7x 118% 3.6% 41. 9% 38. 7%

Prisons [ 2] CoreCivic CXW $17.0 8$21.0 0-18.7 %SALSA3.2 STRON G S PEC B UY $2,0 34 9.8% 6.8 x67%11.6 %2.6 %-2.5 % The GE O Gr oup GEO $16.2 3$20.0 0-18.9 %SALSA3.0 SPEC B UY $1,9 68 11.8 %7.6 x90%13.3 %-8.8 %-12.8 % AV ERAG E-18.8%$2,0017. 2x 79% 12. 5% -3 .1% -7 .7%

Farmland [ 2] Farmland P artners FPI $6.5 6$10.0 0-34.4 %SALSA2.6 SPEC B UY $197 3.1% 84.1 x190%3.3 %47.8%40.1% Gladstone L and LAND $12.71 $13.00 -2.2% SALSA 3.0 BUY $266 4.2 %24.1x101%5.1%15.7 %9.0 % AV ERAG E-18.3%$2323. 6% 54. 1x 146% 4.2% 31. 7% 24. 6%

Cell T owers [ 2] American T ower AMT $224.20 $195.0 015.0%SWAN3.9HOLD$99,2841.7 %28.4x48%2.9%43.6 %41.4 % Crown Castl e In te rnati onal CCI $139.9 2$116.0020.6 %SALSA3.9 BUY ( WATCH) $58,1 74 3.3% 23.5 x77%3.1 %33.3%31.7% AV ERAG E17.8%$78,7292. 5% 25. 9x 62% 3.0% 38. 5% 36. 5%

Billboards [ 2] Lamar A dvertising LAMR $88.0 4$65.0 035.4 %SALSA2.9 HOL D$8,8 42 4.4% 15.2 x66%7.3 %33.4%37.7% Ou tfr ont M edia OU T$26.1 8$25.0 04.7 %SALSA3.0 BUY ( WATCH) $3,7 57 5.5% 11.2 x62%7.0 %53.0%54.5% AV ERAG E20.1%$6,3005. 0% 13. 2x 64% 7.2% 43. 2% 46. 1%

Campus H ousing [1] American Campus C ommuniti es ACC $46.0 8$45.0 02.4 %SWAN3.6 BUY ( WATCH) $6,3 32 4.1% 19.0 x77%-1.9 %15.9%13.3% AV ERAG E2.4%$6,3324. 1% 19. 0x 77% -1. 9% 15. 9% 13. 3%

36 | FORBES REAL ESTATE INVESTOR | JANUARY 2020 STRONG BUY LIST

Name Ticker Current P rice Current V alue Variance SWAN|SALSA Brookfi eld P roperty P artn ers BPY$18.4 6$21.0 0-12.1%SALSA Ir on M ounta in IR M$31.9 1$40.0 0-20.2%SALSA Park H ote ls & R esorts PK $25.8 5$34.0 0-24.0%SALSA Simon P roperty Gr oup SPG $145.3 5$180.0 0-19.3%SWAN Tanger F acto ry Ou tl et C ente rs SKT $14.8 2$25.0 0-40.7%SWAN

STRONG SPECULATIVE/BUY WATCH LIST

Name Ticker Current P rice Current V alue Variance SWAN|SALSA B|H|S American Campus C omm ACC $46.08 $45.00 2.4 %SWANBUY ( WATCH) Arbor R ealty Trust ABR $14.54 $13.75 5.7 %SALSABUY ( WATCH) Blackstone M ortg age BXMT $37.7 0$34.0 0 10.9% SALSA BUY (WATCH) Bosto n P roperties BXP $135.69 $130.0 04.4 %SWANBUY ( WATCH) Chatham L odging CLDT $18.4 2$24.0 0 -23.3% SALSA BUY (WATCH) CoreCivic CXW $17.08 $21.00 -18.7 %SALSASTRON G S PEC B UY CorePoint L odging CPLG $10.50 $15.00 -30.0 %SALSASTRON G S PEC B UY Crown Castl e In te rnati onal CCI $139.92 $116.0 020.6 %SALSABUY ( WATCH) Farmland P artn ers FPI $6.56 $10.0 0 -34.4% SALSA SPEC BUY Global S elf S torage SELF $4.27 $4.80 -11.0% SALSA STRONG SPEC BUY Healthpeak PEAK $32.89 $34.00 -3.3 %SALSABUY ( WATCH) Landmark I nfrastructure LMRK$17.20$16.007.5 %SALSASPEC B UY Om ega H ealth care In vesto rs OH I$41.36$39.006.1 %SALSABUY ( WATCH) Ou tfr ont M edia OU T$26.18$25.004.7 %SALSABUY ( WATCH) QTS R ealty QTS $52.6 9$50.0 0 5.4% SALSA BUY (WATCH) STAG I ndustrial STAG $31.2 0$29.0 0 7.6% SWAN BUY (WATCH) The GE O Gr oup GE O$16.23$20.00-18.9 %SALSASPEC B UY Uniti Gr oup UNIT $8.2 5$12.00-31.3 %SALSASPEC B UY

BUY LIST

Name Ticker Current P rice Current Value Variance SWAN|SALSA Apple H ospitality APLE $16.11 $20.0 0-19.5 %SALSA Brixmor P roperty Gr oup BRX $21.5 0$22.00-2.3 %SALSA Broadmark R ealty BRMK $12.35 $12.0 02.9%SALSA Catc hMark T imber CTT $11.5 3$12.00-3.9 %SALSA City Off ice R EIT CIO $12.9 0$14.00-7.9 %SALSA Cy rusOne CO NE $64.66 $67.00 -3.5% SWAN Digital R ealty T rust DLR $119.0 0$122.0 0-2.5 %SWAN Federal R ealty Investment FRT $127.87 $134.00 -4.6% SWAN Gladstone L and LAND $12.71 $13.0 0-2.2%SALSA Global M edical REIT GMRE $13.22 $11.0 020.2 %SALSA Healthcare T rust of A merica HTA $29.9 8$28.505.2 %SWAN Hersha H ospitality HT $14.55 $22.0 0-33.9 %SALSA Host H ote ls & R esorts HST $18.6 4$20.22-7.8 %SALSA Kimco R ealty KIM $20.5 4$22.00-6.6 %SWAN

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37 | FORBES REAL ESTATE INVESTOR | JANUARY 2020 Kite R ealty Gr oup KRG $18.6 3$21.00-11.3%SALSA KKR R eal Esta te F inance T rust KREF $20.6 7$19.257.4 %SALSA Ladder C apita lLADR$17.6 8$17.501.0 %SALSA LTC P roperti es LTC $44.5 3$48.00-7.2 %SWAN Monmouth R eal Estate MNR $14.60 $15.0 0-2.7%SALSA Pebblebrook H ote lPEB$27.3 8$35.00-21.8%SALSA Physicians R ealty DOC $18.7 3$20.00-6.4 %SALSA Plymouth In dustrial PLYM $18.5 4$19.00-2.4 %SALSA Public S torage PSA $210.12 $230.00 -8.6% SWAN Regency C ente rs REG $62.5 4$67.00-6.7 %SWAN Retail O pportunity Investments ROIC $17.33 $20.0 0-13.4 %SWAN RPT R ealty RPT $14.5 0$15.00-3.3 %SALSA Ryman H ospita lity P roperti es RHP $86.8 8$83.004.7 %SALSA SL Gr een R ealty SLG $90.5 3$95.00-4.7 %SALSA Summit H ote l P roperti es IN N$12.1 5$14.00-13.2%SALSA TPG R E F inance Trust TRTX $20.61 $19.2 57.1%SALSA Un ibail-Rodamco-Westfield UR W:NA $139.75 $150.00 -6.8% SALSA Urban E dge Properties UE $19.03 $22.0 0-13.5 %SALSA Ursta dt B iddle P roperti es UBA $23.9 1$25.00-4.4 %SWAN Ve ntas VT R$56.62$60.00-5.6% SW AN VIC I P roperti es VIC I$22.5 1$23.00-2.1 %SALSA W.P . C arey WPC $77.8 8$76.002.5 %SWAN Weingarten R ealty In vesto rs WRI $31.0 6$32.00-2.9 %SALSA WPT I ndustr ial WPTIF $14.0 0$16.00-12.5%SALSA Xenia Hote ls & R esorts XHR $21.8 4$22.75-4.0 %SALSA

REIT GLOSSARY 1031 Exchange or Like-Kind Exchange: The tax-deferred units); (2) “straight-lined” rents included in revenue; and (3) FAS exchange of real property for another of similar characteristics 141 adjustment. Development-related expenditures are excluded under U.S. Internal Revenue Code Section 1031. To qualify, the from this analysis because they are not considered a recurring seller has (1) 45 days from the sale of the relinquished property expense. The AFFO calculation may also be called cash to formally identify replacement properties that must be similar available for distribution (CAD), or funds available for in nature to the property that was sold and (2) 180 days from the distribution (FAD). The intent is to produce a cash-based sale of the relinquished property to complete the purchase and measure of recurring earnings after debt services and regular exchange. The property seller cannot exchange real property for capital reserves. It is a financial measure of the REIT’s ability common shares or operating partnership units (OP units) in a to cover the dividend. REIT, because the assets are not of like kind. Building Classifications: Building classifications usually Adjusted Funds From Operations (AFFO): A measure of a real refer to Class A, B, and C properties and locations. estate company’s cash flow generated by operations; it is Classifications are subjective. Class A buildings generally considered a closer measure of economic profitability than funds feature superior construction and finish and are well from operations (FFO). AFFO is calculated by subtracting from located. These buildings typically command the highest FFO both (1) normalized recurring expenditures that are rental rates in their submarket. The lower classes of capitalized by the REIT and then amortized, but which are buildings are progressively less desirable due to age, necessary to maintain a REIT’s properties and its revenue stream location or construction. Rents decline as the class of the (i.e., leasing commissions and tenant improvement allowances in property declines. A property can be described as a Class commercial properties or new paint and carpeting in apartment A building in a Class B location or vice versa.

38 | FORBES REAL ESTATE INVESTOR | JANUARY 2020 Cross Collateralized: A term used when the collateral for NAREIT (National Association of Real Estate Investment one mortgage is also used as collateral for another loan. For Trusts): The primary trade organization of the REIT industry. example, Property A is pledged as collateral for a mortgage Typically pronounced “nay-reet.” on Property B and vice versa; the properties are cross collaterals and for the two mortgage loans, and the loans are Net Operating Income (NOI): One of the primary income considered cross collateralized. metrics in the commercial real estate and REIT industry. NOI is calculated by subtracting operating expenses (for example, Eminent Domain: The power of the government to acquire property tax, property insurance, maintenance expenditures, private property forpublic use under certain circumstances, and utilities) from property-derived gross income (typically rent in return for just compensation. and tenant reimbursements of expenses). NOI does not include depreciation, income tax, or financing expenses. Funds From Operations (FFO): The most commonly accepted and reported measure of REIT operating performance. The Non-Recourse Debt: A debt obligation under which the lender’s NAREIT white paper is considered the recognized standard for claim against the debtor is limited to the value of the property calculating FFO. A simple example is as follows: GAAP net on which his claim is secured. There is no personal liability of income + GAAP real estate depreciation and amortization- the borrower and the loan bars the lender from seeking a gains on real estate (in GAAP net income) + losses on real estate deficiency judgement against the borrower. (in GAAP net income) +/- adjustments for non-controlling partnerships + impairments = funds from operations. Procurement Costs: The expenditure incurred to obtain a tenant, not including concessions. Typical procurement costs Lease Buyout: Either (1) a lump sum payment, usually equal to include marketing expenses, lease commissions, tenant some percentage of the present value of the rental payments improvements, moving allowances and the cost of satisfying remaining for the balanceof the lease, made to a landlord by a remaining lease obligations at the property the tenant is vacating. tenant in exchange releasing the tenant from future obligations under the lease, or (2) a lump sum payment, usually equal to Triple Net Lease: The term “triple net” is drawn from a lease some percentage of the present value of the difference between being (1) net of operating expenses, (2) net of insurance market and contractual rent, made by the landlord to the premiums and (3) net of property taxes. This arrangement is tenant in exchange for the termination of a lease and the commonplace in industrial and retail assets. Leases can be recapture of the leased space. double net (tenant pays operating expense and insurance) or single net (operating expense only), but these are rare. General Partnership: A partnership in which each partner has unlimited liability with respect to partnership debts and also has Source: Wells Fargo Research influence over the business operation

39 | FORBES REAL ESTATE INVESTOR | JANUARY 2020 FORBES REAL ESTATE INVESTOR TERMS

Some of you have asked me about various terms used through - prospective company’s market price must be at least 5% or out the newsletter so I’ve included a summary of definitions that below our Fair Value Price (also our Target Price) to be I hope you find helpful. considered a BUY. In other words, while we may like a SWAN stands for “sleep well at night” and that is our way of company’s fundamentals and prospects for profitability, we will describing a blue chip investment. In order for a company to be not issue a BUY rating unless it is at least within our price target. labeled a SWAN it must meet certain tests of quality such as SELL recommendations: As you know, we do not have many dividend safety, conservative debt metrics, diversification and other SELL ratings but if we do include a SELL it means that either the attributes in which we measure the durability of the dividend. company is grossly overpriced or that the fundamentals are SALSA stands for “safe and lasting seeking alpha” and this is poor, or a combination of both. our way of describing a REIT that is not a SWAN. We generally TRIM recommendations: We recently added TRIM to our list do not include a REIT in the REIT Lab if it is not safe. For as a result of the fact that many higher quality REITs have example, we once included UDF and Wheeler Real Estate become somewhat pricey. We did not want to use the SELL term Investment in the REIT Lab but we decided to discontinue as we thought it would spark a complete liquidation of the coverage after these companies failed to deliver sound results. security in question. BUY recommendations: As you will see in our REIT Lab, we HOLD recommendations: Using process of elimination, if the decided to modify our recommendations such that a prospective REIT is not a BUY, SELL or TRIM, it is a HOLD.

Disclosure: I am long these 72 REITs: ACC, APLE, AVB, BHR, BPY, BRG, BRX, BXMT, CCI, CIO, CLDT, CONE, CORR, CTRE, CUBE, CXP, DEA, DLR, DOC, EPR, EQIX, ESS, EXR, FRT, GDS, GEO, GMRE, GPT, HASI, HT, HTA, INN, IRET, IRM, JCAP, KIM, KREF, KRG, LADR, LAND, LMRK, LTC, MPW, NNN, NXRT, O, OFC, OHI, OUT, PEB, PEI, PK, PSB, PTTTS, QTS, RHP, RLJ, ROIC, SBRA, SKT, SPG, STAG, STOR, TCO, TRTX, UBA, UNIT, VER, VICI, VNQ, VTR, WPC.

40 | FORBES REAL ESTATE INVESTOR | NOVEMBER 2020