TRADE ALERT - Core Portfolio August 2024 (New Investment)

Dear Landlords,

I want to extend a warm welcome to all our new members! We recommend that you start by reading our Welcome Letter by clicking here. It explains why we invest in real estate through REITs and how to get started.  

As a reminder, our most recent "Portfolio Review" was shared with the members of High Yield Landlord on August 7th, 2024, and you can read it by clicking here.

You can also access our three portfolios via Google Sheets by clicking here.

New members can start researching positions marked as Strong Buy and Buy while taking into account the corresponding risk ratings.

If you have any questions or need assistance, please let us know.

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TRADE ALERT - Core Portfolio August 2024 (New Investment)

Transaction: We bought 12,000 shares of IWG.

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Minimizing losses is just as crucial as securing wins. Although we've experienced our share of setbacks, I am glad that we resisted the temptation to invest in office REITs in recent years. Despite many advocating for them as value investments, we chose a more cautious path.

For context, I had already been running my small investment firm fully remotely for years prior to the pandemic, and hybrid/remote work settings have been very common where I come from (Finland) for a long time. 

Full remote work is certainly not for everyone and has its own set of challenges, but hybrid work is really a no-brainer in most cases as it helps to:

• Secure and retain better talent 

• Increase the productivity and happiness of your employees

• Reduces costs for both: the employer and the employee

But unfortunately for landlords, this means that tenants would need to reconfigure their office footprint, likely lease less of it, and possibly move to different buildings, leading to less demand, lower occupancy rates, dropping rents, higher leasing incentives, tenant improvements, and significantly higher capex.

All of this has come true with vacancy rates rising to the highest level ever recorded at 20%:

Moreover, things could get even worse because a lot of office buildings still have years left on their leases and as they gradually expire, many will not renew and tenants will be in a stronger position than ever to negotiate for lower rents and higher incentives. Vacancy rates are expected to rise to 24% by 2026 according to Moody's director of commercial real estate. 

This brings me to today's opportunity.