Eq: Real Estate

While commercial properties values have struggled mightily this year KKR is trying to instill shareholder confidence in its $1.2 billion private real estate investment trust. KREST’s struggles are not in isolation as many REITS have faced a two-year downturn due to rising interest rates and decreased investor capital. 

 

To counteract this, KKR announced a shareholder priority plan involving the potential cancellation of up to 7.7 million KREST shares if the net asset value per share drops below $27 by June 2027. This move would increase per-share value by reducing the number of outstanding shares. Additionally, KKR affiliates will inject $50 million of new capital into KREST, demonstrating their commitment to the trust and the real estate market.

 

 KKR's strategy mirrors actions taken by Blackstone last year, aiming to protect non-KKR shareholders from short-term declines while allowing them to benefit from potential real estate recoveries.


Finsum: While commercial real estate has most likely bottomed out, its still tough to say if it will ever recover or if this is the new normal. 

In 2023, the housing market reached unprecedented heights, with median home prices soaring to an all-time high of $389,800.

While mortgage rates reached 40-year highs there was still robust demand as the microeconomics of the market continued to put upward pressure on prices. Experts predict that this trend will continue into 2024, as mortgage rates are expected to decline due to the Federal Reserve’s plan to lower benchmark interest rates.

REITs, traded on stock exchanges, allow investors to gain exposure to real estate without direct property ownership. They distribute at least 90% of taxable income to shareholders through dividends. 

While real estate investment trusts (REITs) are popular for diversifying portfolios and generating passive income, the private real estate market also offers rewarding opportunities. They can have higher IRR with more active positions but carry increased liquidity risk. 


Finsum: Investors should be extra cautious of liquidity risk in high interest rates, but the returns could certainly be worth it. 

Real estate investment trusts, known as REITs, are renowned for their attractive dividend yields, as they are legally obligated to distribute 90% of their post-tax earnings to shareholders. However, REITs are highly sensitive to various market factors such as interest rates, inflation, leverage, and regulatory changes, posing liquidity concerns for investors.

 

While dividend yield is crucial, conservative investors also consider factors like analyst ratings and liquidity when evaluating REITs. The highest-yielding REITs, according to Rick Orford, based on specific criteria, including annual dividend percentage, trading volume, number of analysts, and current analyst ratings are Vici Properties, showcasing notable revenue growth and offering a promising dividend yield of 5.71%. Starwood Property Trust, recognized as the largest commercial mortgage REIT in the US, presents a forward yield of 9.81%, notwithstanding mixed financial performance in 2023. Redwood Trust emerges as a standout contender with the highest forward yield of 11.24% and an optimistic outlook for future earnings growth, bolstered by its diversified investment portfolio.


Finsum: If interest rates have peaked REITs are poised to deliver huge returns in 2024 and 2025.

Page 1 of 28

Contact Us

Newsletter

Subscribe

Subscribe to our daily newsletter

Top
We use cookies to improve our website. By continuing to use this website, you are giving consent to cookies being used. More details…