TRADE ALERT - International Portfolio December 2024

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 December 4th, 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 - International Portfolio December 2024

The greatest gains in REIT investing come from buying shares of a company priced for likely bankruptcy, only for it to defy expectations, survive, and eventually return to a more typical valuation.

A great example of that is the case of Macerich (MAC).

The mall REIT was overleveraged heading into the pandemic and it caused its share price to crash all the way down to $5, which represented an ~80% discount to our estimate of its net asset value back then.

A few other mall REITs had already filed for bankruptcy, and the market feared that MAC would be next. In that scenario, the equity would likely be wiped out and no share price would be low enough. That is why it was priced at such a huge discount.

Data by YCharts

But while risks were high, we thought that the market had overreacted and the risk of a bankruptcy was far lower than what the market had priced in.

This pushed us to buy a lot of shares as low as $5 per share in March of 2020, allowing us to average down our cost basis to just $8 per share.

Now, four year later, we are pleased to look back and see that we were right. The company did manage to survive and it has since then improved its balance sheet and regained a more normal valuation, leading up to a quadrupling of its share price:

Data by YCharts

I am bringing this up today because I think that another REIT finds itself in a similar situation today: