In March 2024, the MSCI US REIT Index (RMZ) produced a total return of +2.0%.  The Chilton REIT Composite underperformed the benchmark for the month by producing a total return of +1.7% both gross and net of fees.  Year to date, the Chilton REIT Composite has underperformed the RMZ by producing a total return of -2.1% gross of fees and -2.3% net of fees, which compares to the RMZ’s total return of -0.3%.  See the table on page 2 for historical numbers.

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Monthly Attribution

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

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YTD Contributors Summary

• An underweight to the triple net sector contributed to relative performance.  The sector underperformed due to interest rate increases in the first quarter following a sharp decline mid-December.  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.

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• Stock selection within the office sector also contributed to relative performance.  Most notably, the Composite has held a meaningful overweight in Highwoods Properties (NYSE: HIW), which has outperformed the broader office sector by more than 1,600 bps YTD.

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• Stock selection within the shopping center sector contributed to the Composite’s relative performance.  Most notably, our overweight exposures to InvenTrust (NYSE: IVT) and Brixmor (NYSE: BRX) have greatly contributed to outperformance.

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YTD Detractors Summary

• An overweight allocation to the cell tower sector detracted from the Composite’s relative performance.  Given the long lease terms typical in cell towers, the group has again been impacted from the specter of rising rates this quarter and continued 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.

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• Stock selection within the industrial sector also detracted from the Composite’s relative performance.  In particular, Americold (NYSE: COLD) and Rexford (NYSE: REXR) underperformed in the first quarter of 2024, weighing on Composite performance.

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• 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 quarter led by Simon Property Group (NYSE: SPG) due to positive tenant headlines and fundamentals remaining relatively strong.

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Market Commentary

In our April 2024 REIT Outlook titled, “The Time is REIT Now,” we once again contrast public REITs versus private owners.  In today’s market, public REITs are in the catbird seat versus private owners due to their favorable access and cost of capital.  Historically, public REITs have grown market share during these periods, at both the property and corporate level.  We believe that public REITs will be able to take occupancy away from private peers due to their willingness and ability to spend on capital expenditures.  Furthermore, they are ready and able to make significant acquisitions as private owners go into default or are forced to sell.  They have been preparing for this market for almost 15 years, and the time is finally REIT.

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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.