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5 at 5: Your Daily Digest for Real Estate Investing, 4/7/21


Apr 07, 2021 by Marc Rapport
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Malls emptying at a record clip, rental affordability rocked by pandemic, co-working to fill office space, two mortgage REITs to consider, and GEO Group under the gun.

In Today’s News

Mall Vacancies Rising at Record Pace and Hit a New High

CNBC reports today that the vacancy rate for regional malls in the United States hit a record 11.4% in the first quarter of 2021 and just notched a record spike from one quarter to the next, according to Moody’s Analytics’ (NYSE: MCO) commercial real estate division.

The Millionacres takeaway: Investors in retail REITs (real estate investment trusts), especially malls, will have to pick and choose even more carefully to see gains in this troubled sector. Here are two to consider.

How 2020 Changed Housing Affordability

A report released today by Zumper shows graphically how rents have fallen in the most expensive cities with the highest incomes and rose in cheaper areas where incomes tend to be lower. The result, according to the report: “Thus, 2020 gave rise to a divergence between rents and income, which likely led to an aggregate decrease in housing affordability in the U.S.”

The Millionacres takeaway: Investors who have or can procure safe housing in the affordable ranges for their communities will have no problem finding tenants. Here are some tips about that from one of our writers.

Office Landlords Faced With Rising Vacancy Are Turning to Co-Working

Even as co-working businesses have struggled to survive the coronavirus pandemic, landlords saddled with vacated offices have come to realize co-working space is better than empty space.

The Millionacres takeaway: This Bisnow Houston article shares insight from operators in that huge market. Check out this piece of our own about doing the same in pretty much any suburban setting.

Today on Millionacres

2 Mortgage REITs to Buy in April

Mortgage REITs that have maintained a strong portfolio of debt assets through the pandemic are positioned to enjoy a nice boost in earnings over the next couple of years. But not all mREITs are created equally.

The Millionacres takeaway: Our Kevin Vandenboss explains why two such mREITs stand out for their exposure to both the commercial and residential mortgage markets.

GEO Group Suspends Its Dividend, Will Evaluate Its REIT Structure

For-profit prison operator GEO Group (NYSE: GEO) has suspended its dividend and is evaluating whether it makes sense to remain a REIT or follow fellow private prison operator CoreCivic (NYSE: CXW) in converting back into a traditional corporation.

The Millionacres takeaway: Both these REITs are facing pressure from a Biden administration that has decided not to renew their federal contracts. While there’s still business from other sources, that may not be enough to make either of these firms a sound long-term investment.

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Marc Rapport has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Moodys. The Motley Fool has a disclosure policy.