REITs: Very Bond-Like | Seeking Alpha

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Most investors look at REITs for yield, as bond-like, says Alex Pettee, who discusses the nuances and axioms of investing in the public and private side of real estate investment trusts with Brad Thomas and David Auerbach (1:50). Rates up, REITs down; ignore day-to-day movements (3:30). REIT valuations, property sectors and rate sensitivities (11:30). Common vs preferred shares (14:20). Bullish housing case intact? (16:00) Hurricane effects on real estate (21:00). 3 REITs worth looking at (24:10). This was originally published as a webinar on October 10.

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Transcript

Daniel Snyder: Hey everyone. Daniel Snyder here from Seeking Alpha. We’re going to go ahead and jump into this full hour with a powerhouse panel as you see here today.

We have David, we have Alex, we have Brad Thomas, all joining us from iREIT and Hoya Capital here on Seeking Alpha. I’ll go ahead and hand it off to you, David.

David Auerbach: I’m going to tee it up where, we’ll let Alex briefly give his background. Brad could share a couple of seconds of his background. We’re going to basically start top down, work our way through, go macro to micro.

So, Alex, with that, why don’t you give the folks here a quick 30-second background? Brad, give them a 30-second background, and then, we’ll start jumping right into it.

Alex Pettee: I’ve been writing on Seeking Alpha since 2015 under Hoya Capital. We’ve been focused on REITs. So, we cover every U.S.-listed REIT. There’s about 160 equity REITs, 40 mortgage REITs.

And I think it’s always kind of helpful just to kind of start off with a kind of REIT universe, but we’ll first start with Brad.

Brad Thomas: I’ve been on Seeking Alpha since 2010. Most of you probably know my story, but I’ve been here almost 15 years. I’m at 14 going on 15 years. During that time, I’ve been fortunate to start coverage on many different REITs, many of which have become S&P 500 companies today. We’ve seen a number of M&A transactions. We’ve seen a lot of these small-caps turn into some mid-caps and some big-caps.

So, it’s been great to be on Seeking Alpha and cover the REIT sector. And, again, I’m honored to have Alex and Dave really combine with iREIT. And we’re excited about the opportunities and giving investors the best REIT research really on the planet.

AP: Most investors look to REITs for yield. I think that that’s something we’ve kind of learned over time is that most investors aren’t as interested as us in the on the ground property level trends. It’s an income vehicle and so, REITs have kind of assumed that role as a bond-like vehicle. That comes with pros and cons.

The one negative side of it is the theme of the REIT rate correlation that REITs are very bond-like. REITs are “rates up, REITs down” trend.

And so, we’ll hit on what individual REITs are more rate sensitive, more economically sensitive. We’ll look at sorting REITs by market cap tiers. There’s very wide differences in dividend yield and in balance sheets, in large-cap, mid-cap, small-cap REITs. And then, we’ll hit on some of the trends, like on the private side, how that relates to REITs on the public side.

REITs are really very interesting because it’s the only kind of dual market where there’s a public side and there’s a private side. There’s two different valuations of these assets of the REITs, of the properties held in a REIT structure and on the private side.

And so, that also creates a lot of interesting trends that drive the creation of new REITs through IPOs, through spin-offs, et cetera, or the acquisition of existing REITs.

As of month end, the average equity REIT pays a dividend yield of 3.71%. Average mortgage REIT is north of 10%. One interesting thing here is that this is, of course, the cap-weighted yield, and we’ll go through this in a little bit, but this chart here is the breakdown of yield by cap size.

And you’ll see that large-cap REITs pay that sub-4% yield, but as you go down that cap tier, mid-cap, small-cap, that you do start to see 5%, 6% yields plus.

Dave, how about, like, we’ll kind of kick it off with kind of a “rates up, REITs down” discussion.

DA: Because of that strong employment report that we had last Friday, the acceleration of more Fed rate cuts going to the back half of the year has softened somewhat, maybe 25 basis points going in the rest of the year.

I think another problem that we’re seeing here is that as of this moment right now, the 10-year treasury is at 4.065%. Rates are above 4% for the first time in August. And so, again, with people so interest rate sensitive, yield sensitive, REITs have underperformed this week since the Fed rate cut came out.

And this is my opinion. This does not represent the views of Alex or Brad. When you buy REITs, you got to use 25-, 50-year type of lenses. Ignore the day-to-day movement of what’s going on in the sector. Focus on the year-to-year big picture. And the reason being, REITs are not day-traded vehicles.

If you want to buy a day-traded vehicle, go out and buy one of the hotel REITs because it’s a one-night contract. Then if you want to step it up, then you go into apartments, which are basically six months to one year contracts.

But if you look at the relationship of typical landlord to tenant, it’s five-plus year type of relationships that are in place. So, you can’t focus on the day-to-day headlines when you’ve got to look at things in a very big picture. That’s just my take, Alex.

DS: Can I jump in real quick? Everybody is, of course, reading about the interest rate cutting cycle that we’re in now.

Do you each possibly have an idea of where we’re going? Like, how far down do they continue to cut within the end of next year? Do you follow the dot plot maybe, or how do you calculate when you’re looking forward?

AP: The rate cut expectations, of course, peaked, the Friday after the September rate cut. At that time, the market was pricing in, I believe, about over five cuts for the year. So that would imply the jumbo in September, it was implying a jumbo in November, and then one in December. That’s come back significantly.

We’ve removed, basically, a full jumbo cut from the rate cut expectations. From about 4.85, which was last week, to about four cuts implied by year-end now.

Really since the end of the great financial crisis, REITs have been extremely interest rate sensitive. So from about 2010 or 2011 through COVID, that REITs were essentially trading as bond vehicles. The closest comparison I’d say to REITs is a corporate bond, a kind of a mid-tier corporate bond.

And so that correlation broke down early pandemic, but then really since the start of the Fed’s rate hiking cycle that “rates down, REITs up” or inverse has been a very strong correlation.

A very interesting trend here is that, so REITs were the single worst-performing equity sector from the start of the Fed’s rate hiking cycle, that was March 16, 2022. We’re the worst through this July.

As soon as we got that early pivot, the REIT sector was the best-performing equity sector from July through about last week, and then REITs have since underperformed. The accumulated underperformance peaked in June of this year at 45 percentage points.

Now that’s hugely historic. REITs have historically, on a 10, 15, 20, 25-year basis, basically matched S&P on an annual basis. So to get 45 percentage points of underperformance, that’s very significant.

REITs have outperformed by about 10% to 12%, from July until late September, but now, it’s back to about a 35%, 36% cumulative underperformance gap that REITs have versus S&P since the start of the Fed rate hiking cycle.

So, I think that it’s been a very, very tough couple years for REITs, the rate headwinds have been very strong. And I think the expectation is that same negative force is now positive.

And so it’s still very much at the mercy of the Fed, of market interest rates. I think that the easier path now is lower interest rates, and so that’s huge for the REIT sector.

DS: Thank you for that, Alex. And, Brad, I would love to hear from you because, I mean, you’re the legend, you’ve graciously given us so much time over the years doing all these webinars here on Seeking Alpha.

You had your start in the commercial space, right? You know the commercial side of it. We can go into all the different industries within the sector, but when I hear about interest rates being cut, and you think about, okay, well, they can refinance, and there’s been issues in the commercial space, is there any light at the end of the tunnel for them, if unemployment reports come in okay, job numbers are okay, people continue to spend, GDP continues to grow?

What if we don’t get all these cuts that the market is anticipating?

BT: Sure. Well, again, I think it goes back to not only just REITs, but any stock that would cover a publicly-traded company is we look at the cost of capital as a really big important metric to look for.

And within the REIT sector — again, I was a private developer for 25 years. I’m actually getting back into that business now as well on the private side. And the most of the private developers can’t compete with especially a lot of these big names.

We always talk about Realty Income, which is big popular name on Seeking Alpha, ticker symbol (O), or some of these bigger companies, Mid-America Apartments, ticker (MAA), both A-rated balance sheets.

So, we look at the cost of capital and how these publicly-traded companies have much better access to debt. And I think that’s what we’re really continuing to see.

Again, I’m seeing it now 14, 15 years here on Seeking Alpha, and I think we’ll continue to see a lot of these stronger companies, these blue-chip names, continue to grow their earnings and grow their dividends.

Through all of this, through COVID, even through great recession, we saw a number of these companies that were able to continue increasing dividend. So, I think now with this current setup that I think Alex just outlined, and great job, Alex, with that, I think we’ll continue to see maybe the rate cuts have softened a bit.

But even if they continue to soften, I mean, we’re still seeing those investment spreads. Again, those are the cap rates, minus the cost of capital, those margins continuing to sustain and grow. And so, I think that’s really important.

And the great thing about REITs, and I know we’re going to get into it here in this webinar talking about some sectors that we like, some sectors we don’t like, but the great thing about REITs today, again, as I’ve been on Seeking Alpha now 15 years, is now you have a much broader way to build portfolios and manage your risk. Certain sectors are going to grow quicker than other sectors.

Cell towers, data centers, none of that existed when I was a developer. There’s no way for the individual investor to have access to a data center or cell tower or cannabis REIT or a casino. So, now, there’s so many other opportunities to diversify and really define your risk tolerance levels and build these portfolios.

And again, the game is all about cost to capital and scale. I’ve written about this time and time on Seeking Alpha, but we really like those companies that are able to continue to grow their businesses, see those small-cap companies, we’re going to touch on some of those in a minute, turn to large-cap companies.

I think the setup is really attractive right now. Obviously, sentiment, as Alex just said, the last few years have really been brutal, but, again, we’re starting to see that rally.

And I think, we’ll still continue to have REITs rally, especially, again, those companies that have those wide moat advantages.

DS: David, Alex, maybe you want to start talking us through some of these sectors that we were planning to talk about today?

AP: Some REIT property sectors and even in those property sectors, the individual REITs, there’s a very wide range of rate sensitivity, of economic sensitivity.

What the investor should expect at the property sector level, of what they’re investing in. Is this REIT extremely rate sensitive? Is this a bond-like vehicle, or is this more of an equity stock-like vehicle?

And then also to what degree that these REITs are good inflation hedges. That typically corresponds with rates, but there are some REITs that are not particularly rate sensitive, but are good hedge vehicles.

So, healthcare REITs, very rate sensitive. Storage REITs, very rate sensitive, very bond-like. Where on the other side of it, you have mall REITs, billboards, these are not rate sensitive. And so, I think that from a portfolio management standpoint, what we basically try to do is try to balance these trends, so we’re not making a direct call on interest rates that are not entirely bond-like.

That leads to an interesting discussion on REIT valuations. And so, obviously, what we’ve seen at this REIT rebound since early July, for the first time since about mid-2021, that REITs are now trading at NAV premiums. And this is important from that kind of first point that I talked about in this dual market structure, right?

There’s a private real estate industry, and there’s a public real estate industry. And a lot of the flow between new REIT creations and REITs being acquired is driven by this NAV premium. So, what NAV basically is, it’s: are the real estate assets held by these REITs more valuable in the REIT structure or less valuable in the REIT structure?

When they’re more valuable at the REIT sector level that the flow is into public REITs, that there’s new REITs being created, there’s private entities that are launching REITs. And when this is a NAV discount that the flow is out, that there’s more acquisitions, because you can basically buy the same private property in a REIT structure for cheaper than going out.

And so, yes, what we’ve seen the last couple of years is this net outflow of REITs being taken private. In 2021, there was about 215 REITs. There’s now about 195.

So one interesting factor with REITs is that the valuations play a meaningful role in how REITs actually operate, that the stock price actually matters from an operational standpoint.

And it all ties back to the cost of capital issue, and that REITs actually perform their best when capital is relatively cheaper. So when REITs are trading at discounts, you really don’t get much activity. It’s hard to grow externally.

DS: Some REITs have common versus preferred shares. So the question is, how do you approach which asset class you would kind of choose for any individual REIT?

AP: So we also track all of the REIT preferreds, 174 individual REIT preferred stocks. The average yield on these is about 7.9%, right? So there is a significant yield premium on the REIT preferreds.

BT: Not every REIT, of course, has preferreds. I’ll recommend, and I don’t know about some of those on the team, but I like to have a small percentage of those, kind of as Alex pointed out, as yield enhancers. I like around 10%, 20%, but, again, everybody has got their own risk tolerance level.

And a lot of these companies do have issued preferred, but not all, and there are some really attractive preferreds as well. So, anyway, hopefully, that answers that question.

And there’s actually a couple preferred REIT ETFs that all they do is just invest in REIT preferreds, and that may be another angle as well.

AP: Since 2019, the REIT common has outperformed the REIT preferreds. It definitely is kind of a different type of vehicle. It’s certainly much more yield focused.

Essentially, all of the REIT preferreds are cumulative, and so it’s very rare to kind of have major distribution issues. There have been a handful of cases where the preferred dividend cut as part of a acquisition, right? So, that’d be Cedar (CDR.PR.B) and the Wheeler (WHLR) situation.

But the vast majority of REIT preferreds stayed current on their distribution throughout COVID, and all except, I believe, the Wheeler and the Cedar are now current on their preferreds.

DS: So, I want to go ahead and steer the ship a little to a different industry. Brad, you mentioned cell towers and there’s industrials and data centers and all these other ones, but I think the one that always comes to the top of mind when people talk about real estate is they think about their home.

They think about the consumer. They think about how interest rates are affecting the consumer. So, in the mortgage industry, could you give us a lay of the land and maybe what you’re looking at housing when it comes to maybe even private equity companies are going in there and kind of adjusting some values and things like that, what are we seeing within mortgage, multifamily, and that sort of area?

AP: Yeah, I think that housing theme has always been kind of our major focus. I think that was kind of, like, when we started publishing here in late 2010s, housing was what we saw as the most compelling kind of macro real estate theme.

What was driving this was post great financial crisis, this essentially near shutdown of new construction. So, you saw historically low levels of new construction starting in about 2010, and that kind of built up this significant housing shortage. And I think, in 2018, 2019, that term “housing shortage” was not used often, right? It wasn’t in the daily conversation as it is now.

What we are basically forecasting is that this underbuilding was basically coming in front of this big wave, right? So, I guess, it’s Gen Z or the largest age cohort today is that 30- to 36-year-old age cohort. And so, back in 2018, 2019, we kind of saw this as being the significant catalyst, right? There were this clash of high demand and historically low supply.

And, of course, what we didn’t forecast when we’re making these calls in 2018, 2019 was how COVID would kind of accelerate these trends. And instead of playing out over 10, 15 years, it basically played out in a six month to 18 month time period where you had all this housing demand clashing with this historically low housing supply.

I think that bullish housing case is still intact. And I think that what goes on the housing side, also on the commercial side, it’s all about the supply side is really, I think, where really the area to kind of focus on, right?

The supply takes years and years to kind of build, and in many cases in some property sectors that there’s structural constraints to new supply. On the single family side, of course, there’s zoning, et cetera, that creates these barriers to new supply growth.

And so, those are, I think, if you look at the outperforming commercial sectors you’ll find that the supply theme is really the overriding trend and that the serial outperformers tend to be those not with necessarily high demand, but it’s that supply constraints.

And it’s kind of functioning in that Goldilocks zone where it’s not robust enough that the prices get bid up, that there’s a lot of new construction. But it’s the kind of sectors that are under the radar, so aren’t getting huge supply growth, but can outperform just kind of based on that — those structural trends.

DS: Brad, I wanted to see, do you have a thought about this whole mortgage and, specifically, I mean, the people out there obviously trying to still buy homes. There’s not enough, as he’s mentioned with the supply. I mean, do you see any light at the end of the tunnel here? Is that what keeps the wheel going?

BT: I think, again, there’s a couple angles here. One, and great job, again, Alex, on the mortgage REIT side, again cover residential and commercial mortgages. And the residential REIT side is certainly an interesting sector.

It’s one that – and I’ve wrote about this quite a bit. I’m not a huge fan of residential mortgage REITs. They’re a lot higher levered than equity REITs, and they’re really not suitable – for the large part, they’re not suitable for many retirees, which is a big part of our following, our base.

Not to say you shouldn’t invest in residential mortgage REITs. There’s some really interesting preferreds, which are much safer than the common of the mortgage, set aside.

Now, on the commercial side, I do like that space. I like it for a couple of reasons. One is, it gives us, as a research team, a lot more insight into commercial real estate. I have regular discussions with CEOs and family office investors about commercial real estate.

One of the CEOs that I interview frequently, in fact, maybe this week, I hope, is Brian Harris, who’s the CEO of Ladder Capital (LADR). They’re a specialty mortgage REIT. Brian’s got deep, deep, deep experience in commercial mortgage REITs, and that really has helped us and our team develop strategies around the equity side, because we like to see where is the pain and where are the opportunities, and it’s good to hear from these bankers who really know that space pretty well.

So, I like the mortgage space, but specifically, for me, I like commercial mortgage REITs.

Now, on the equity side, there’s a lot of ways to play it. As I said, we’ve got an evolution of property sectors now, not just apartments. We like apartments and, specifically, I like Sunbelt markets.

Now, that being said, we got another hurricane. My prayers go out to all of you. We just went through a major, major one here in South Carolina, still going to recover, it’s going to take weeks and months.

And there are REITs that own apartments right here in my backyard. Mid-America, for example, 10 communities in the Greenville, Spartanburg, South Carolina market. Now, those appear to be fine, as far as I can tell. We didn’t get hit terribly bad.

But the point I’m trying to make here is, multifamily, not just multifamily REITs, Daniel, but we have the manufactured housing REITs. And, again, I’m worried about some of those portfolios down in Florida.

I mean, Florida is going to get some pretty severe property damage, but there’s a sector that I really like. It’s driven obviously by the aging silver tsunami, like we like to refer to it. So, that’s another angle to play housing, affordable housing. And those are just ground leases, by the way, essentially for the large part. So, that’s one other angle.

You have skilled nursing, is another angle, and senior housing is another angle. So, there’s many ways to play kind of the housing environment. And for me, I really still like the Sunbelt multifamily in Mid-America, Camden Property Trust (CPT). I just wrote on Camden, I believe, yesterday. So, I think those are the kind of angles whether you’re going to be a renter or an owner.

The residential mortgage space, yes, there’s certainly some opportunities, but I’ll lean a little safer. And historically, those companies don’t pay out growing dividends. There is a very volatile dividend environment for the residential mortgage REITs, which is why I’ve kind of shifted from that.

And then, of course, Alex mentioned home builders. I mean, his firm has done a lot of work on the home builder space. They’ve got this ETF called (HOMZ), which invests in the broader housing sector. But these home builders, I mean, Toll Brothers (TOL), Pulte (PHM), I just wrote on those builders yesterday.

Anyway, there are a lot of ways to play it, but I think in the REIT space, again, that’s the opportunity for REITs, because you can really design or customize your portfolio based on your risk tolerance.

But I do think Alex is right, that supply is certainly what you need to watch for, and I think that’s how you’re going to make your money in the residential or the mortgage space.

DS: Thank you so much, Brad. Now, a quick question for you. I know we have three stocks that we’re going to cover here in just a second. We’ll kind of do a little bit of a rapid fire with those.

But there was a question that came through, because we’ve been talking about preferreds. You just mentioned ETFs. Somebody asked, is there an ETF that really just holds those preferred shares that comes to your mind that you really like to keep an eye on?

BT: (PFF) or (PFFA), and Alex, you and I may be thinking the same thing, but those are the two tickers I like.

AP: Yeah.

DS: All right. So, let’s go ahead and dive into these three stocks. Let’s start talking about we’ve been talking about a bunch of different industries and sectors, and these kind of go over three different industries as well, I believe. Brad, this is your article, that I kind of pulled from the iREIT and Hoya service. So, maybe you want to kick us off with the first name?

BT: Talking about small caps. So, I think there’s a great opportunity. Again, we were just talking about rate cuts and even in these small caps, I think, we’ll get more of a boost with these rate cuts.

And so, I’ll just pick the first one, Alpine Net Lease (PINE). Alpine launched by way of another REIT, called — it used to be called Consolidated-Tomoka. I can’t pronounce it. Now they call themselves CTO Realty. They’re also based down in Florida, in Orlando or Daytona Beach. They spun-off their net lease properties.

CTO spun off their net lease properties into another REIT called Alpine Net Lease, and the ticker symbol is PINE. It’s one of the smaller net lease REITs. Many of you know, I love net lease REITs, and I love net lease real estate. I used to build a lot of it.

And it’s just the most boring property sector it is. 15-year long-term leases, modest rent bumps, but it’s a very stable and predictable and reliable property sector. Alpine fits right into that box. They have these long-term net lease properties that are much smaller. Again, they’re a small cap company.

I’ve looked for the company to be acquired. I think it could be potentially a takeover target. I think there’s value. CTO owns a percentage. I can’t remember exactly, but a percentage is of Alpine. So, I think there’s certainly an opportunity for CTO. They’re externally managed as well. So, Alpine is managed by CTO.

I think there’s an opportunity for Alpine to get acquired by a company like Realty Income or maybe Agree Realty, ticker (ADC), or even a private company like Blackstone (BX).

Again, small portfolio, but I think the value there could be unlocked potentially for CTO, the external manager, because they could reinvest that capital at much higher yields than they’ve got within their Alpine portfolio. So I like that name a lot.

DA: Too small for Realty Income. They’re not going to be the buyer. My opinion.

BT: I would say, they’ve obviously, Spirit and VEREIT were two bigger acquisitions by Realty Income, and certainly that hasn’t moved the needle. I think the market has really missed the opportunities.

But, look, Realty Income is the aggregator. Since we’re on that subject, I mean, Realty Income is the aggregator of choice. They’re going to continue to grow that business model, and obviously, they’re entering Europe.

But I would say, Dave, you may be right, but I would say also never say never. I think, they’re still buying smaller portfolios, but given the composition of that Alpine portfolio, you’re probably right. It’s probably more about a private buyer for that portfolio than Agree.

I’ve talked to Joey, the CEO of Agree, quite a bit. I agree with you on that Dave as well. I think Joey probably has no interest in M&A and he hasn’t done a whole lot of M&A. But I do believe Realty Income will continue to be active.

And look, who knows? I mean, they have the ability to do a reverse merger in National Retail Properties, or (NNN) REIT. So, Realty Income has got certainly something nobody else has, which is the ability to transact these very large multibillion-dollar transactions.

DS: Yeah, it seems like they continue to get bigger and bigger every month.

DA: Hey, Daniel, before we can go ahead real quick, I have over 50 questions that we’ve gotten in this conversation today. I’ve taken every single question that’s come in the chat. I’m compiling a list for everybody that’s on this. We are going to answer every single one of these questions.

DS: I think you just earned yourself about 20 more emails right there.

All right, so this next one kind of surprised me. I never really thought about it, but the U.S. Post Office in that angle, what’s this next name, Brad?

BT: Postal Realty (PSTL). Postal is an interesting company. Again, they own one tenant in their portfolio, which is U.S. Postal Service. Look, I don’t know about you, but I think, I still go to the mailbox every day and I don’t pay as many bills through the post office, but I do believe the post office is sustainable.

I think the post office could be utilized better and we should have maybe hunting and fishing licenses at post offices and could increase their business activities. However, that’s a very stable business model, in my opinion.

I don’t think the government is going to let the post office go away anytime soon. I think it’s a bipartisan pick, by the way. And so, I like the post office. I think this is a really interesting category and Dave, there’s another one that actually ties perfectly into something Dave and I’ve been talking about another government pure play kind of government play, but postal is definitely one that we like.

The company has the ability to continue to grow their business model. Having that relationship with the U.S. Postal Service is certainly a competitive advantage. I used to own a few post offices myself, and again, they’re very reliable tenants and typically they don’t close many of these locations. So, I think that’s a great business model. Again, you’re looking at kind of a government-like entity.

So, Dave, I think you had another one. I don’t know if you want to talk about it here, just really quickly on your other government pick.

DA: Yeah, my pick that I seem to like, and I’ve mentioned it at frequent Seeking Alpha events is Easterly Government Properties. The ticker is (DEA). It is not your typical office REIT as it does focus on government agencies, the FBI, your TSA local field offices, Department of Veterans Affairs, et cetera. What’s the word I’m looking for, it has no impact on what’s going on with the election.

If you think about whoever is running, whoever is the President, they are not going to be closing FBI field offices as an example, or TSA is going away anytime soon. So, I mean, I hate to say it, but it’s just a very boring, slow and steady long-term lease type of company that’s very different than every other office REIT that’s out there.

DS: Brad, let’s go with this third one. Why don’t you walk us through it?

BT: The last one is actually, I think, turned into a fairly popular name here on Seeking Alpha, and it’s the cannabis space, and it’s not (IIPR). IIPR is Innovative Industrial Properties.

Interesting fact, that’s the only cannabis REIT listed on the New York Stock Exchange. They were able to get in before the window closed. Got that listing. But you’re not going to see, at least in the short term, any New York Stock Exchange listed cannabis REITs, in my opinion.

NewLake Capital Properties, (OTCQX:NLCP), what they’ve been able to do is go over the counter. The management is talking about other ways to list, but that’s one risk you’re going to take over the counter. Again, they’re smaller cap name. But I like the company a lot, or we like the company a lot. We’ve interviewed the management team quite a bit. They’re certainly experienced.

I got to know this company through one of the Board members. In fact, the Chairman of the Board is Gordon DuGan. Gordon was formerly the CEO of W.P. Carey (WPC), and that’s where I got to know Gordon. He’s got a lot of experience in the net lease space, being at W.P. Carey for as long as he was, and now being involved with NewLake Capital Properties.

So, that company, we believe, has got a really good business model, very low levered company, and we think a pretty sustainable dividend.

Obviously, the cannabis sector is extremely volatile and there’s still fact that there’s no federalization in the space. So, it’s all kind of state by state. We’re seeing a growing number of states still adopt cannabis legislation. Maybe South Carolina at some point will get it, which is probably one of the most conservative states we have here.

But I like NewLake Capital Properties. I think really good management team, really solid fundamentals. Again, there’s risk. It’s over the counter and it’s a cannabis play.

DS: All right, Alex, I got to ask you, if you’re backed into a corner, you got to give us one stock, which one comes to mind?

AP: Probably something in the housing space. I still like the single-family rental REITs. I think that there’s such structural undersupply there. On the multifamily side, there is more supply. Although on the multifamily side, like, the bear case for the last eight or nine years has always been oversupply, oversupply.

And I think that that goes to the point earlier in that the demand side has kind of met that supply. But I think that this Gen Y, right, that this is now in multifamily markets, but now kind of aging out of multifamily. So, I think, there’s only two REITs in this space, (INVH) and (AMH), right?

But I think that over three-, five-plus years, I think that that undersupply and this Gen Y coming through, that is a huge structural tailwind for the space.

DS: I got to say because now it’s easy to say, oh, well, somebody asked me something about REITs, just go to you guys. The CEO interviews, all the analysts on your team, I mean, the customer support and service that you guys give is far above anything else I’ve seen. So, I just want to say thank you from my side of things. It makes it really easy.

And then also, I want to mention, I’ve seen questions come in today, people asking about taxes and all sort of things. I mean, if you guys have those questions, these are the guys to ask them to. You can do that within the service here on Seeking Alpha as well. I mean, these guys offer a lot of just free information a lot of the times, too, because they’re so nice.

I can’t thank you enough all for your time and knowledge today. So go ahead and check out iREIT + Hoya Capital.

Editor’s Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.