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Jonathan Litt, the founder of investment management firm Land & Buildings, has famously been negative about office real estate but may be starting to change his tune. This could be welcome news for investors following his forecasts and wondering when things might look brighter for the REIT sector.
Litt has been shorting REITs with high office space exposure for several years. In 2020, he said that what he termed an “existential hurricane” was coming to office real estate in 2020. Last year, he told CNBC the “hurricane has landed.”
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Litt recently joined CNBC’s ‘Fast Money’ to talk about the state of commercial real estate. Litt spoke briefly about the residential real estate market, noting that the Federal Reserve’s decision to lower interest rates may change what has been happening in the real estate market.
Litt remarked that homebuilders have been trading at very elevated levels. New home sales are up nearly 10% yearly, while existing home sales are down over 4% from last year. However, an uptick in existing home sales “could be a challenge for the homebuilders,” said Litt.
CNBC’s Melissa Lee asked if Litt’s attitude about homebuilders was a short in the making, but Litt refused to take the bait, saying only that he’s monitoring the situation.
It’s ‘Game On’ For Commercial Real Estate
Litt has seen a palpable shift in the commercial real estate sector. He said private and public companies are getting great financing and accelerating transaction volume. Some real estate brokers, like CBRE (NYSE:CBRE), could be big winners, benefiting from the elevated transaction rate after several years of a depressed market.
Litt also likes Equinix (NASDAQ:EQIX), one of the top data center REITs. He was recently at the Bank of America conference, where the company said that the REIT ETF had two times the demand of any other ETF in its system.
Like many others watching the market, Litt has observed that banks are slow to lend in commercial real estate and that trend is likely to continue. He noted that public companies have an advantage when raising funds.
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Is Office Coming Back? Not Quite Yet
Litt was asked about Amazon’s recent decision to end remote work. He said he’s not seeing a massive return to work yet, especially in New York, where leasing is subdued. He said that even if people are back in the office, the problem is on the financing side. “You can’t get loans, assets aren’t clearing, and there’s going to be a lot more pain in the New York market,” he added.
One of the short trades that Litt has made is Alexandria Real Estate Equities (NYSE:ARE), which has underperformed other REITs. He said the data hasn’t changed and noted that the company has had several downgrades. Benzinga data shows that there have been five analyst downgrades starting in late July after Alexandria Real Estate released its earnings. He believes the trend and the slowing demand for lab space will not reverse soon.
After his appearance on CNBC, Litt also posted on X, reiterating the message that it’s game on for REITs. While it’s clear he likes some REITs more than others, his optimism is one more positive sign for real estate.
Interest Rates Are Falling, But These Yields Aren’t Going Anywhere
Lower interest rates mean some investments won’t yield what they did in months past, but you don’t have to lose those gains. Certain private market real estate investments are giving retail investors the opportunity to capitalize on these high-yield opportunities and Benzinga has identified some of the most attractive options for you to consider.
Arrived Homes, the Jeff Bezos-backed investment platform, offers a Private Credit Fund. This fund provides access to a pool of short-term loans backed by residential real estate with a target of 7% to 9% net annual yield paid to investors monthly. The best part? Unlike other private credit funds, this one has a minimum investment of only $100.
Don’t miss out on this opportunity to take advantage of high-yield investments while rates are high. Check out Benzinga’s favorite high-yield offerings.
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This article Real Estate Activist Investor Says It’s ‘Game On’ For REITs, Which Real Estate Stocks Are On His Radar? originally appeared on Benzinga.com
