PORTFOLIO REVIEW - February, 2025

PORTFOLIO REVIEW - February, 2025

Table of Content

1. Opening Notes

2. Notable Changes to Our Portfolio Holdings

3. Notable Changes to HYL Ratings

4. The Core Portfolio (Our Main Portfolio)

5. The Retirement Portfolio (Our Secondary Portfolio)

6. The International Portfolio (Our Optional Portfolio)

1- Opening Notes

The theme of past months has been portfolio recycling.

The recent REIT market rally has been very uneven with some REITs rising significantly while others completely missed out on the recovery:

Data by YCharts

We have taken advantage of this by selling some of our biggest winners...

• Essential Properties Realty Trust (EPRT): 69% return (partial sale)

• Simon Property Group (SPG): 169% return

• Regency Centers (REG): 122% return

• AvalonBay Communities (AVB): 43% return

• IRSA (IRS): 118% return

...to then reinvest in some recent underperformers that have recently become even cheaper:

• International Workplace Group (IWG)

• Caesars Entertainment (CZR)

• Big Yellow Group (BYG)

• BSR REIT (HOM.U:CA)

• Rexford Industrial Realty (REXR)

• Alexandria Real Estate (ARE)

• Segro PLC (SGRO)

In the process, we also set aside some cash to initiate new positions in REITs that have become attractive opportunities. The student housing REIT, Xior, is our largest new investment, and you can read our investment thesis by clicking here.

Going into February, we expect to do more of the same. We expect to sell a few positions to consolidate capital towards some of our highest-conviction opportunities.

In many cases, the market is severely mispricing certain REITs facing near-term headwinds because most investors focus only on the next year or two—if not just the next quarter.

Specifically, REITs currently affected by oversupply appear particularly undervalued, as the market tends to extrapolate recent trends far into the future. This is especially true for industrial, multifamily, life science, and self-storage REITs, which are currently experiencing stagnating or slightly declining rents.

Many of these REITs are now trading at decade-low multiples, levels that would only be justified if their long-term growth potential was permanently impaired.

But real estate markets are cyclical. Periods of oversupply are typically followed by undersupply as developers pull back on new projects after suffering losses.

This is exactly what we’re seeing today—new construction starts are down significantly. By late 2025 and into 2026, this should drive a strong acceleration in rent growth across most property sectors.

We believe this acceleration in rent growth will act as a strong catalyst for many REITs, driving significant upside. If our prediction for lower interest rates also materializes, the potential gains could be even greater.

As a result, we plan to continue capital recycling in February, strategically repositioning our portfolio to maximize returns in the recovery.

Below, we share our current watchlist for potential sales and purchases. Stay tuned for our Trade Alerts for real-time updates.

Watchlist for Potential Sale