In the third quarter, the Chilton REIT Composite has outperformed the RMZ by producing a total return of +17.4% gross of fees and +17.2% net of fees, which compares to the RMZ’s total return of +16.1%.  Year to date, the Chilton REIT Composite has outperformed the RMZ by producing a total return of +16.5% gross of fees and +15.9% net of fees, which compares to the RMZ’s total return of +15.8%.  See the table on page 2 for historical numbers.

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Quarterly Attribution

Positive contributors to relative performance for the third quarter of 2024 included stock selection within the healthcare sector, an overweight in the cell tower sector, and an underweight allocation to the hotel sector.  Conversely, an overweight to the residential sector, an underweight to the specialty sector, and an underweight to the triple net sector detracted from relative performance.

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Year to Date (YTD) Attribution

Year to date, positive contributors to relative performance included an overweight to the healthcare sector, stock selection within the office sector, and an underweight to the hotels sector.  Conversely, an overweight to the cell tower sector, an underweight to the specialty sector, and stock selection within the residential sector detracted from relative performance.

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YTD Contributors Summary

• An overweight allocation to the healthcare sector contributed to relative performance.  The Composite has held a meaningful overweight to senior housing focused REITs, which have outperformed the broader sector.  This exposure was further bolstered when the Composite added American Healthcare REIT (NYSE: AHR) after its February IPO.   

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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 materially.

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• An underweight allocation to the hotel sector contributed to relative performance.  While this sector was one of the best performers in 2023, hotels have lagged the broader REIT universe this year due to struggling fundamentals.

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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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• An underweight allocation in the specialty sector also detracted from relative performance.  In particular, Iron Mountain (NYSE: IRM) has outperformed in 2024 due to its data center division, weighing on Composite relative performance.

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• Stock selection with the residential sector also detracted from the Composite’s performance.  Specifically, the Composite has held overweight positions in the two single family rental REITs (American Homes 4 Rent (NYSE: AMH) and Invitation Homes (NYSE: INVH)) as well as Sun Communities (NYSE: SUI), all three of which have underperformed the residential group overall.

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Market Commentary

The ‘X’ Factor for REITs | August 2024

Essential Business Spotlight: Cold Storage | September 2024

Assessing the Impact of Mortgage Rates on REITs | September 2024

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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.