In November 2023, the MSCI US REIT Index (RMZ) produced a total return of +10.4%. The Chilton REIT Composite outperformed the benchmark for the month by producing a total return of +11.2% both gross and net of fees. Year to date, the Chilton REIT Composite has outperformed the RMZ by producing a total return of +8.2% gross of fees and +7.6% net of fees, which compares to the RMZ’s total return of +3.5%. See table on page 2 for historical numbers.

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Monthly Attribution

Positive contributors to relative performance for the month of November included an overweight allocation to the cell tower sector and stock selection within the residential and healthcare sectors. Conversely, an underweight to the office sector, an overweight to the shopping center sector, and stock selection within the industrial sector detracted from relative performance.

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Year to Date (YTD) Attribution

Year to date, positive contributors to relative performance included an underweight to the triple net and office sectors, and stock selection within the healthcare sector.  An overweight to the cell tower sector, and an underweight to the specialty and regional mall sectors detracted from relative performance.

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YTD Contributors Summary

• An underweight allocation to the office sector contributed to the Composite’s performance.  Office stocks have come under pressure as recession fears and hybrid work policies post pandemic have impacted the outlook for leasing demand.  Further, debt market volatility has increased financing concerns, particularly in office.

• An underweight to the triple net sector also contributed to relative performance.  During periods of rising interest rates, the sector’s long lease structure presents a headwind to increasing rents at the same pace as other property types.  Additionally, external growth appears more challenging due to lower spreads to the cost of capital.

• Stock selection within the healthcare sector has also contributed to the Composite’s performance.  Primarily, our composite has held a meaningful overweight to senior housing focused REITs, which have outperformed the broader healthcare space alongside improving fundamentals.

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YTD Detractors Summary

• An overweight allocation to the cell tower sector has detracted from the Composite’s performance.  Given the long lease terms typical in cell towers, the group has been impacted from the specter of rising rates this year and some slowdown in leasing from the major carriers.  Looking past near term headwinds, we believe the non-cyclical nature of the group should drive higher earnings growth over the long term.

• An underweight allocation to the specialty sector also detracted from the Composite’s relative performance.  In particular, Iron Mountain (NYSE: IRM) has performed well thus far in 2023 due to its data center division, weighing on Composite performance.

• An underweight to the regional mall sector also detracted from the Composite’s performance.  While our Composite holds an overweight position to shopping center REITs, we currently have no exposure to regional malls.  The group has held up better than anticipated this year led by Simon (NYSE: SPG).

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Market Commentary

In the December 2023 REIT Outlook titled, “Property Type Round-Up from REITWorld” we discuss our key takeaways from the annual REITWorld conference, a jam-packed three day event in mid-November that took place in Los Angeles this year. The conference allowed us to catch up in person with CEOs and CFOs of our portfolio companies, ramp up on potential new ideas, connect with peers, and explore properties in the city that are owned by REITs. We came away from the conference with several actionable ideas that are highlighted throughout along with sector specific summaries discussing shopping centers, regional malls, healthcare, multifamily, single family rentals, manufactured housing, self-storage, industrial, office, and life science.

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Additional Disclosures

Past performance is not indicative of future results.  Investment returns and principal value will fluctuate so that an investor account, when redeemed, may be worth more or less than their original cost.  Current performance may be lower or higher than the performance data quoted. MSCI US REIT Index and Vanguard Real Estate ETF performance is presented as a benchmark for reference only and does not imply any portfolio will achieve similar returns, volatility or any characteristics similar to any actual portfolio.  The composition of a benchmark index may not reflect the manner in which any is constructed in relation to expected or achieved returns, investment holdings, sectors, correlations, concentrations or tracking error targets, all of which are subject to change over time.

The information contained herein should be considered to be current only as of the date indicated, and we do not undertake any obligation to update the information contained herein in light of later circumstances or events. This publication may contain forward looking statements and projections that are based on the current beliefs and assumptions of Chilton Capital Management and on information currently available that we believe to be reasonable, however, such statements necessarily involve risks, uncertainties and assumptions, and prospective investors may not put undue reliance on any of these statements. This communication is provided for informational purposes only and does not constitute an offer or a solicitation to buy, hold, or sell an interest in any Chilton Capital Management investment or any other security.