Listen here or on the go via Apple Podcasts and Spotify

Hoya Capital's David Auerbach talks REITs, interest rates, and spiking volatility (0:30) M&A activity - more small/midcap in play (4:35) Retail one of the more positive sectors (9:25) Strawberry Fields and healthcare (14:30) HOMZ, RIET ETFs (16:40) A manufactured housing play (23:15) Recorded June 10, 2026

Transcript

Rena Sherbill: David Auerbach, always great to have you on Investing Experts. Welcome back to the show.

David Auerbach: Great to see you, Rena. It's been way too long, it seems.

Rena Sherbill: It has been way too long and it's always great to talk real estate with you. I think now is as good a time as any to get into it.

For a refresher, you run Hoya Capital on Seeking Alpha and outside of Seeking Alpha. Talk to us about how you're thinking about and looking at the real estate picture these days. We have threats and talks of hikes when it comes to interest rates.

How would you encourage and how are you thinking about the REIT and real estate space right now?

David Auerbach: What's funny is really not much has changed since we last spoke. We're in an elevated interest rate environment. We're in an elevated tenure treasury environment. We're dealing with market volatility.

Last time I believe it was tariffs. This time we have oil in the Middle East conflict. There's always big macro headlines that are overhanging the REIT sector. But at the company level, fundamentals continue to remain fairly solid.

Dividends continue to rise across the board. M&A activity continues to grow.

So we think that regardless of what's going on in the macro environment, the real estate investment trust sector is still a great place to park cash and earn dividend income by frankly living our daily lives.

Quick example, you and I are using a data center to facilitate this conversation as well as to watch it at the end of it on the back side of things. You and I didn't think about where interest rates were at, what's going on overseas, what Kevin Warsh is going to do next week at his first Fed meeting as the chairperson.

We hit the record button and we're doing our jobs. So, I feel like at the end of the day, the goal really is to look at the fundamentals of the various companies and realize that by and large, companies are standing on solid footing as we speak.

Rena Sherbill: Let me ask you before we get into some of those fundamentals and themes and what have you, would you say that the narrative around or the correlation between interest rates and REITs has changed as time has gone on and as narratives have evolved?

David Auerbach: So we did a little bit of work on this ahead of time because we were thinking about this.

We took a look at the correlation of (VNQ), that's Vanguard's REIT ETF, comparing it to the 10-year treasury.

And if you look back from 23 to 25, it was pretty close in a one-to-one correlation. Rates still matter, but it doesn't seem to have matter as much versus prior years. And so a lot has changed.

That with many of these REITs trading in perpetual discounts to net asset value, you're seeing management teams get very creative and trying to find ways to unlock value regardless of this higher for longer or call it high for long environment that we continue to operate in.

At the end of the day, though, if you look at year-to-day performance, the REITs are up around 12%. The S&P (SP500) is up about eight percent.

But the REITs are still underperforming the S&P by about sixty six percentage points since mid twenty two. So we still have a long way to go.

One of two things has to happen, frankly, REITs have to rally, S&P (SPY) has to sell off, or some combination of both.

Rena Sherbill: What is your sense in terms of REITs rallying?

David Auerbach: It's interesting that you asked that question because look at today's performance as a perfect example. The broader markets are down a percent or more, give or take, and yet the REITs are outperforming today.

So this is one of those stories that it seems like REITs are holding up pretty well on a volatile tape. We've seen headlines that VIX, the volatility index, is spiking.

Talking heads are focusing more on the big stories like the SpaceX (SPCX) IPO or Anthropic (ANTHRO) or OpenAI (OPENAI) or some these other things. And so, in any other given environment, I think the REITs would be getting a lot more attention because we've seen a couple of different REIT IPOs come down the pipe recently. We've seen a couple of big mergers announced. And like I said, it's on these management teams to try to find ways to close that gap to their discounts to NAV.

Rena Sherbill: What would you say, or what have been some of the M&A movements that have excited you or that you feel like investors should note at the very least?

David Auerbach: From a very, very high-level perspective, it seems like, and again, I want to be careful as I say this, but I get the impression that most, if not all, small and mid-cap REITs are in play in some form or fashion.

Most of the M&A transactions that we've seen recently have occurred between the mid-cap REITs and the small cap REITs.

The most unique example though was announced a couple of weeks ago where two large cap REITs, Avalon Bay (AVB) and Equity Res (EQR), two of the largest apartment REIT landlords in the country, announced a merger.

Now I think that's potentially a one-off. I don't think we're going to be seeing some of these mega REITs continuing down this merger path. But we have, like I said, seen a lot of these mid-cap names in play. And so it wouldn't surprise me if we see more private players taking public REITs out.

I feel like the public to public M&A picture is going to be more fragmented than potentially the private capital sitting on the sidelines. Because again, I can go out as a private guy, acquire a publicly traded REIT with an established platform at a discount, frankly, let's say 75, 60 cents on the dollar, something like that, and have exposure to properties coast to coast. And so I feel like there's a lot of hungry money sitting on the sidelines.

Rena Sherbill: You mentioned that we're both utilizing companies and features that have to do with REITs, but we're not thinking about interest rates and how that affects them.

What would you say to the themes that we can't escape but be affected by? Like how is that affecting the REIT and real estate space in terms of the economy, in terms of inflation playing out? How have you seen that affect things lately?

David Auerbach: It seems like, copy, paste, repeat. REITs are interest rate sensitive. Interest rates are up, therefore REITs are under pressure. And I always like to try to right that misconception because again, it's business as usual.

Lending windows are right wide open for REITs. They're able to raise bukus amount of capital at the lending window. With REIT performance ticking up here in the past week or so we've seen REITs kind of trickling back into starting to do forward equity offerings.

I feel like a lot of these management teams and companies really just kind of put on the blinders and just focus on the operations. The headlines are always going to be out there. It's how the companies respond to those headlines. And and I just want to remind any viewer or listener, with the exception of a hotel REIT that is a one-night contract, which I guess you would call the most risky contract that's out there.

An apartment rate typically is a one-year lease. Offices are five to seven, same with shopping centers. And you can go all the way up to a ground lease, which is a 99-year lease term.

So as a result, I feel like the REITs are kind of insulated from the day-to-day headlines when these long-term leases are locked in place with set rent bump escalators.

And obviously, we had the CPI report that came out. And I think, again, today's performance is a perfect example of that. Market is down on a hot inflation report, and yet the REIT sector is trading higher mostly.

So again, I feel like it's on the company, its management team. Last week was the big real estate conference in New York, the big Nareit conference at the same Hilton where you guys hosted your event a couple of years ago, and we had our first conversation.

And the reason why I mentioned this is I was having dinner with one of my former colleagues one night and he actually presented, I hadn't thought about this. So Rena, I'm gonna give you a test here real quick. You ready? What's the number one rule of real estate?

Rena Sherbill: Well, somebody once told me location, location, location, but then last week somebody told me management, management, management.

David Auerbach: Well, you kind of ruined my surprise there, because you are correct. The number one rule of real estate is location, location, location. The number one rule of REITs is location, location, management.

So at the end of the day, at least when it comes to the REIT industry, you've got to look towards management and see how they're kind of guiding that ship through the open waters. and there's great management teams that are have long-term track records that are out there.

With deep benches, as I like to say, where that person that gets promoted into the C-suite has already been at that company for five, 10, 20 years. So they know how that company operates. They've been through different cycles.

As I like to say, these management teams know when to go on offense, know when to go on defense, know when to turn left, when to turn right. And they're not gonna let a simple headline come out from CNBC that dictates their future path.

Rena Sherbill: What about like trends, like let's say have you seen reflections in the retail space of budget retailers doing better or high-end retailers staying status quo? Have you seen anything like that, which, I totally understand and agree with and hear your point about the day-to-day headlines not affecting things and in general, we are too swayed by them, 100% agree.

But then there are also themes that are changing our behavior as consumers. Have you seen A, that be reflected in the REIT space and in the real estate space? And B, what companies would you highlight? Or the converse of that, who do you think has done a poor job at reacting if you've seen anything like that?

David Auerbach: Retail is one of the more positive sectors. At the first of all, the Nareit conference, the tone was upbeat more so than in recent years, because by and large, fundamentals are stronger than what the public markets are valuing them at currently.

Retail is that perfect example because the sector is benefiting, frankly, from a lack of new supply. So with healthy tenant demand, this lack of new supply, strong leasing spreads, Tanger's (SKT) been reporting double digit leasing spreads recently. They're able to push rents.

Retail is still a place that's out there. Remember, retail is a wide swath. You got the discount dollar stores all the way to the luxury goods providers and everything. And a guy like Tanger, which runs exponential outlet malls, whatever you want to call it, is kind of focused on all of those different tenant makeups that make up their portfolio.

So they are still seeing strong healthy demand. If you look at a lot of these sectors that are out there, office is seeing a positive momentum. They're seeing more leases. There's signs of, in your neck of the woods of AI firms leasing space at office because they're anticipating this growth curve that's up ahead.

Residential continues to improve. The residential, meaning apartments and single family rentals, hotels reported positive quarters, and industrial, it seemed like across the board a lot of these companies were very positive. Now, on the flip side, I wouldn't say anybody is doing it poorly.

We like to say that of the 20 different subsectors that are out there that make up the REIT industry, each of these subsectors is in a different stage of the real estate cycle. And I've used the analogy before with you, the REIT industry is like your graduating class in high school. You have the top 10%, the valedictorian, the salutatorian, the REITs in the S&P 500. You've got the bottom 10%, the bullies, the troublemakers, the REITs that cut their dividend, or the REITs that are overlevered.

It's that middle part of the curve that you're gonna see that performance. And it's frankly those students or companies that go under the radar that are really drawing all the attention, but don't get the news coverage that they deserve.

As an example, storage, like self-storage properties or even cold storage had been under pressure over the past, call it year, but even they are starting to see signs that their fundamentals are starting to improve.

So by and large, fundamentals are pretty solid, and let's say they're healthier than the current market sentiment is suggesting. And should rates come down, which obviously we know that they're probably not going to, this is a sector that could be poised for a setup to see a lot more consolidation and potential further growth.

Rena Sherbill: Speaking of headlines and REITs that are affected accordingly, there's news out of the cannabis sector in terms of rescheduling. Trulieve, (TRLV) one of the major companies, just uplisted.

Anything to say about (IIPR), NewLake Capital (NLCP), or any of the cannabis REITs in general?

David Auerbach: I can tell you that the management teams are sitting here going like this. Come on, baby. Come on, let's go. I think once that domino falls, it lifts up the vice angle and unable to invest mantra with that sector.

When the banking laws are relaxed after this rescheduling occurs, and again, we could be talking still multiple months down the road. I think the key then is exchange and platform availability.

IIPR is a very unique beast in itself on how they were able to list versus a NewLake or some of these other players that are out there.

And I think it's this visibility angle that a lot of these cannabis players are looking for because frankly, a lot of advisors still can't touch the sector because it's not available to trade on a lot of different platforms.

But right now, in speaking with some of these players, all I can tell you is that they're waiting for Washington to tip it over and they're ready to hit the ground running once that happens.

Rena Sherbill: Last time you were on, you were talking about Strawberry Fields REIT (STRW), which is in the healthcare space. And you were talking about one of the things that you liked about it was its dividend.

Anything to say about Strawberry Fields? Anything to say about the healthcare space?

David Auerbach: Well, a lot's changed since we last spoke about Strawberry Fields and that portfolio continues to get bigger and the dividend has gone up. So that worked out well.

Speaking of healthcare, we have seen two, one very big and one big IPO that occurred in the healthcare space in the past quarter. Janus Living (JAN), which was spun off from Health Peak. And then National Healthcare Properties (NHP), which was a private to public conversion.

So we are seeing a lot of renewed interest in the space. Look, the sector has been very strong over the past year or two. Again, lack of new supply, the number of consumers or tenants growing into these properties as baby boomers retire, Gen X on the horizon, et cetera. This is a sector that has done very well.

Now, in the past couple of weeks, it's been a little bit weak, but this is a sector that again is dominated by a Ventas (VTR), a Welltower (WELL), and then there's kind of everybody else that's out there.

And again, going back to that mid-cap example where you're talking about the beginning, it's all these other companies that are really kind of moving that needle because again, when you're as big as a Welltower is it takes a lot to move that needle and grow versus you know a care trust and (LTC), some of these other players, where if they go out and acquire a portfolio, you can actually track meaningful earnings growth from it.

But again, thinking about long-term investors that play in the REIT industry, senior housing and healthcare is a great place to be, frankly, because again, you're thinking about that tenant 10, 25, 50 years from now that's going to be living in those properties.

And it's a sector that's again ripe for development and evolution.

Rena Sherbill: What would you say in terms of updating listeners about your two ETFs that you run at Hoya Capital, (HOMZ) and (RIET)?

David Auerbach: Thanks for asking. HOMZ, frankly, nothing has changed since our last conversation when it comes to homes, in that home affordability is out the window, mortgage rates remain highly elevated, the average consumer can't buy a house, and therefore it's the residential REITs, the single family rental players, all the other companies that make up the industry that benefit from this.

This is again, a sector that you have to take with a long-term vision. And hopefully, as the housing market continues to perk back up from this multi-year slumber, homes might be a great way to play it. J

ust because, again, we feel it's truly the most all-encompassing way to cover the housing industry through the home builders, through the residential REITs, through the suppliers, the home goods and furnishings, such as Home Depot (HD) and Lowe's (LOW).

And all the service providers, the mortgage brokers, and everything that make up the industry. RIET, completely different focus. Again, this is looking at the income side of things. RIET recently passed $100 million of AUM. So we're growing there. Volume seems to be ticking up. Our dividend remains very steady. I think we're yielding around 10.5%, 11% approximately annualized that we pay a dividend on a monthly basis.

Again, the story there is to figure out which of these REITs, frankly, pay the highest dividends that are have low leverage. It's a very unique ETF in that it combines both common and REIT preferred stocks. We do skew it towards small and mid-cap REITs, as mentioned. We've got exposure to some mortgage REITs.

But our goal there is to try to capture as much income as we possibly can. And again, we've seen that kind of play out because of some of the REITs that have gone through this M&A process, as I mentioned. But if you look at Hoya, we publish some great research, again, a little biased, but, with some of the research we put out, we have a dividend tracker. And if you look at all the REITs that have raised their dividends versus just one or two that have cut their dividends, the goal is to see that dividend increase table continue to grow throughout the year. And it seems like we're going down that path.

Rena Sherbill: Anything else that you would share with our audience about what you took away from the conference last week in New York? Anything that surprised you or anything that you were felt validated by? Anything else to share there?

David Auerbach: It's interesting you ask that because we just came out of earnings season in late, call it mid to late May. And you want the companies to refer to as we just reported a couple of weeks ago, here's where we're at this quarter. That they're basically telling you again, it's business as usual.

Some of these companies actually had let's call it better May months than were anticipated, kind of setting up the stage, hopefully, for a good second quarter earnings season.

I feel like with this interest rate pall that's cast over the market that a lot of these companies are talking about, yeah, but our fundamentals are solid. Our FFO is growing. Our NOI, our profits are growing. So again, I feel like you have to kind of look through the noise to understand what's going on at the company level.

But again, also noting that as I like to say, I have no control over my ETF stock price. The REIT management teams have no control over their company share prices. All they can do is figure out ways, frankly, to boost that that discount and net asset value.

So what does that mean? Asset sales, joint ventures, stock buybacks, simplifying the story, being select on M&A. There's a lot of different tools that these companies can use at their disposal to try to create value. And again, at Hoya, we've done a very good job of covering all of the various M&A activity that's occurring in the space.

It's every single day there's a great story that's out there that 99.99% of the time is not being covered by any of the media folks, but we are covering it because our job is to highlight all of the good, the bad, the ugly that makes up this space and realize, how do I capture dividend income off of this story?

So an example, Vornado (VNO) announced two big leases at Penn2, which is in Penn Station, their office development that's out there. And Penn2 is now 90% leased.

So thinking about it from a dividend income perspective, we have a 10-year lease locked in with two different players. Here's what the rent bump means. Here's how that's going to translate to income in my shareholder's pocket at the end of the day.

Number two, another thing that a lot of these management companies are trying to focus on is what's the cost of borrow? I'm investment grade rated by S&P. I know that I can go out and get five-year paper at X, 10-year paper at Y. They know to the day of what the borrow rate is.

And I feel like a lot of these management teams are, again, trying to go on offense with their messaging saying, look, if you're concerned about REITs being interest rate sensitive, that's great. Guess what? We don't have any debt coming due until 2029 or 2030. We're good.

So let all this volatility happen out there because we're already locked in for the next few years.

Remember, with publicly traded REITs, one thing that you get compared to a lot of other sectors that are out there is what I call transparency. Earnings press releases, earnings conference calls, earnings supplements. They publish basically every single lease, all the lease expirations, all of this stuff.

But on the other side of that coin is how approachable REIT investor relations teams are. So again, anybody listening to this, watching this, reading this, can pull up their favorite REIT, look through the earnings supplement, walk away with a question, email the investor relations person at the company. And sometimes you might even hear from the top brass themselves answering that question. The companies want to answer investor questions.

They are very shareholder friendly to try to satisfy all of those investor inquiries because again, we're in an industry that's frankly dominated by news that's dropping by the second or a tweet on some social media platform. And these REITs are operating again with much, much different lenses than what some of these other call it, talking heads, are focusing on.

Rena Sherbill: And what else would you say about the housing market? What else would you share with investors when it comes to the housing market these days?

David Auerbach: I think one of our top ideas that we like is that a manufactured housing play. The ticker is (UMH). Manufactured housing in 2026 is different than your mom and pop and your grandma and grandpa's manufactured housing names and properties from back in the day. And this could be one of the solutions to fix the housing affordability gap.

There are two other publicly traded players that are in the space: Equity Lifestyles (ELS), Sun Communities (SUI). That could be another interesting angle. I do think, though, we have a lot of publicly traded apartment REITs that are out there. One was technically in play center space. They put themselves on the block to explore strategic options. Evidently they weren't getting the prices that they were hoping for.

And last week announced that they're selling $250 million of apartment properties to kind of try to simplify the story. But with so many of these REITs that are coast to coast, as big as they are, frankly it is a sector that could be ripe for consolidation.

It would shock me if we see some of the biggest players out there, like a Camden (CPT) or a Mid-America (MAA) be looking at some of these companies or properties? Not at all.

And remember, I think with everything that's happened with the Avalon and Equity Res merger, then it does kind of send shockwaves through the industry because of how important size and scale matters and the scope of operations.

Rena Sherbill: I've started to ask people recently at the end of conversations if they have a motto when it comes to investing or life. Do you have one?

David Auerbach: Boy, I got a lot actually. You heard me say it earlier, and I will say it again. REITs don't react to day-to-day headlines. REITs are an investment vehicle that you need to look at with 25 to 50 year glasses.

Remember, a REIT is just a tax structure, period. But it's a way for the companies to pass through net income to shareholders in the form of dividends.

You're seeing a lot more REITs kind of go towards this monthly dividend paying schedule. But forget about that for a second. Think about the REIT dividend income stream. If you're able to reinvest those dividends and compounding that income over the course of 25-50 years, whatever it is, the sooner you start investing in the REIT sector, as in you just had a child, you just had a grandchild.

And you build a sleeve of 12 monthly dividend-paying stocks that reinvest the dividends for them, you're talking about setting that dependent up for long-term economic growth. How do you create generational wealth that starts on day one? And there's a lot of research that out there out there that highlights portfolios that include REITs versus those that don't.

And when they were included in the portfolio could be the difference, frankly, between having seven figures in your retirement account and six figures in your retirement account.

One more point to note. This sector continues to evolve. You know, if you think back 10 years ago, we didn't have cannabis REITs, data center REITs weren't as prevalent as there was today. AI wasn't really even a thing back when I started at Green Street in in the Nasdaq crash of 2000 days.

There was just a handful of sectors: office, resie, mall, strip centers, self-storage, industrial, office. That was basically it. Now we have 20 subsectors that are out there. What's next? What's the next frontier that we're going to tackle? And I don't know what that answer is, because if I did, trust me, I'd be already in Fiji living off my retirement dreams. But it's interesting to see how this sector continues to grow and evolve.

As I mentioned, this M&A story, we have 55 less REITs than we did just a handful of years ago because of all of this consolidation. And though we've seen some new players come to market and some great stories and some more volatile names that are out there, we're going to continue to see more companies come and we're going to see a lot more companies go away as well.

Rena Sherbill: David, I appreciate this conversation as I appreciate all our conversations. You mentioned Hoya Capital writings, where can people find that analysis? Where else can people read your writings, get in touch with you, et cetera?

David Auerbach: So we're everywhere. Thank you for that. Hoyacapital.com is our website. We are on Seeking Alpha iREIT + Hoya Capital. I publish a daily newsletter, the Daily REIT Beat you can find that at the dailyreitbeat.com. We have a TV channel, REITtv.com. There's my jobs website, allthereitjobs.com. If you want to get your foot in the door in the REIT industry.

We're very big on social media, myself, Hoya, we're posting multiple times a day on LinkedIn, Twitter, publishing videos on a lot of short form platforms as well. Our job is to educate. As I like to tell people, I don't care if you buy our ETFs or not. What I do care about is investing in the sector.

"I don't want to invest in REITs because they're interest rate sensitive." Boom. Let's talk about that. And if our funds aren't for you, that's great. Let's find the right REIT stock, REIT ETF, closed end fund, whatever it is. Let's find the right story that resonates with you.

Cause frankly, and again, I'm biased, but I think there's a REIT out there for every single investor.

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.