Performance review: H1 2025

Thoughts on performance and portfolio allocation coming out of the first half of the year

It feels a little silly to review performance as I only started to write up ideas (somewhat) consistently starting this year. However, I think accountability is an important part of improving as an investor and regularly reviewing performance - in good time and bad - provides the opportunity to review past decisions. Reviewing performance of a real estate investment, even one made in the public rather than private market, just a couple months after making it probably doesn’t provide a lot of signal but I plan to write these “performance reviews” regularly, probably on a semi-annual basis, going forward.

The context

Macroeconomic headlines and uncertainty aside, the first half of 2025 was a pretty good period for equities and listed real estate. The S&P 500 total return was 6.2% and the FTSE EPRA/NAREIT Global Real Estate Index did a little better at 6.9%. This sliver of outperformance is a small silver lining for listed real estate investors after underperforming the S&P 500 significantly since 2022.

An aside on benchmarks - I use these indices as a reference point mostly because they are both easy to find the data on and for individuals to invest in through low-cost ETFs (Blackrock’s REET 0.00%↑ tracks the FTSE EPRA/NAREIT Global RE index with a 14bps expense ratio). Thus, while not perfectly comparable, I think between the two, they provide a decent benchmark for me to have to beat to make investing worth my time and effort.

Updates and performance

abrdn European Logistics Income

• Write up price: £0.57 per share (Jan 2025).

• Close price: £0.62 per share (June 30), £0.057 of distributions paid to-date

• Total return: 19% [All returns in local currency terms]

• Annualized return: 43% / IRR: 52% [I intend to measure performance in terms of annualized return, which is the total return divided by the time period of the investment in years, as well as IRR to account for the well-documented issues with IRR that are frequently used to “juice” returns in the world of private market investing]

The company announced three asset sales at basically the same time I published the write up ahead of my valuation estimates. As of April, three properties (I believe their Polish assets) were held for sale and four were in the second round stages of bidding. I anticipate we see additional asset sale announcements before everyone in Europe goes on holiday later this month. If we don’t see asset sales, that would be a yellow flag.

This position has done well. I still feel comfortable with where I am marking the asset values for this liquidation but headwinds have definitely intensified in the form of both US tariffs, and the potential impact on European manufacturing, along with the fact that long-term rates have drifted up marginally in 2025. I expect near-term asset sales that will shed additional light on valuations and whether I’ve been conservative enough given the environment.

Dream Residential REIT

• Write up price: US$8.25 per share (March 2025).

• Close price: US$9.40 per share (June 30), US$0.105 of distributions paid to-date

• Total return: 15%

• Annualized return: 52% / IRR: 62%

Company has been quiet both on the operational front and on the strategic review process with Q1 results little changed from Q4. While shares have traded up, valuation continues to look attractive. If anything demand has been stronger than most expected in sunbelt markets, somewhat offsetting the supply wave that’s working its way through the system. Fundamentals will continue to be challenging through the year. I would only expect improvement in the data going into the 2026 Spring leasing season but believe there are private buyers who would take a view on the portfolio or more likely, individual assets, ahead of seeing a bottom in the data.

FrontView REIT

• Write up price: US$11.50 per share (April 2025).

• Close price: US$12.00 per share (June 30)

• Total return: 4%

• Annualized return: 19% / IRR: 20%

There’s been a lot of news at FrontView in just a couple of months. First, they’ve been through two CFOs - first, the CFO that had been at the company for less than a year departed (seemingly his choice, he wasn’t fired) and just weeks later, the interim CFO, who was also Co-CEO, was terminated for cause. They’ve now hired a new CFO, Pierre Revol, who starts July 21st and looks reasonably experienced. Formerly SVP Capital Markets at CyrusOne (data center firm) and before that was at Sprit Realty Capital, a net lease REIT that was acquired by Realty Income. If anyone has a view on this hire, please let me know!

In conjunction with Q1 earnings, they lowered their acquisition target for the year to $135m but made good progress with ~$70m acquired at a ~8% cap rate. Sold 1 property ($2m) at a 7% cap. They highlighted progress in the works at the 12 properties that are dark / tenants have vacated. Three continue to pay rent and one was sold (for $2.6m, ahead of carrying value). The remainder are in some stage of the sale / lease process and will be looking to see results on this front in coming quarters.

The C-Suite changes gives me pause. The dynamics around the Co-CEO / Interim CFO departure do feel like an idiosyncratic issue and not related to the company’s operations and finances (as management have stressed repeatedly). It will be hard to execute with all these personnel distractions but fortunately net lease real estate is basically a Warren Buffett “ham sandwich” business. And the valuation remains cheap enough that I think plenty of risk is already priced in. Just an anecdote but the shares not trading down on the news of the CFO termination could indicate sentiment is already bombed out.

In my thesis I expected there to be an overhang on the stock price as OP unitholders who were legacy investors in the REIT convert units into shares and sell. I expect this to continue and we’ll be able to track it through the number of OP units vs. common shares in their quarterly supplementals. So I don’t expect a quick recovery in the stock price.

I will be watching operations and capital allocation to determine if the thesis is playing out - their ability to address the 12 problem properties and capital allocation discipline in the face of a low share price / high cost of equity will be informative with respect to management quality.

Net Lease Office Properties

• Write up price: US$30.75 (May 2025).

• Close price: US$32.55 per share (June 30)

• Total return: 6%

• Annualized return: 54% / IRR: 68%

Write up is quite recent so not a lot of news released since but some movement under the surface with confirmation of at least two more of their more valuable properties (JP Morgan in Forth Worth, and PPD in Raleigh-Durham) being marketed for sale in addition to Google in Venice Beach, CA.

Logistea AB

• Write up price: SEK 14.50 per share (June 2025).

• Close price: SEK 15.50 per share (June 30)

• Total return: 7%

• Annualized return: 131% / IRR: 260%

Less than a month since I wrote up my thoughts on this company so results so far entirely noise. There have been a couple Sweden ex-Stockholm light industrial / logistics transactions reported with Catena selling a brand new logistics warehouse in Gothenburg with a 10 year lease to Volvo for a sub 5% cap rate (>SEK 25,000 per sq m) and Stendorren acquiring three light industrial properties in Vasteras, one with a 7-year WAULT for a 6.6% cap rate / SEK 20,000 per sq m and the other two leased to one tenant for 10 years for a 6.9% cap rate / SEK 17,000 per sq m.

Bonus mention: Inventrust, which I wrote a quick note on in May is down about 4%. In the meantime, as telegraphed they sold 5/6 their SoCal portfolio for $306m at what I estimate to be a ~5.5% cap rate. Price is ahead of my NAV estimate and redeploying proceeds will be accretive given looking at acquisitions in the mid 6% cap rate range (quick breakdown of transaction / implications here)

I don’t see a near-term catalyst to close the discount to NAV but I think the company is well-positioned to grow NOI and FFO per share at a decent 3% - 5% clip for the next couple of years assuming the economic environment doesn’t nosedive. In a downturn, I think InvenTrust’s predominantly grocery-anchored shopping centers will do OK compared to more economically sensitive segments of real estate and the economy.

Not impossible we see this as a M&A target in the medium-term if shares continue to languish. Kimco, one of the largest listed grocery-anchored shopping center REITs recently issued $500m of 10-year notes at a 5.35% effective yield and at $27.30 per share, IVT trades at a 7.3% implied cap rate with my NAV estimate being ~$33 per share based on a 6.35% cap rate. This would offer a ~100 bps spread over REIT unsecured debt cost of capital. Thin, but not an impossible proposition to build exposure to IVT’s sunbelt markets. Or maybe wishful thinking!