Performance Review: H2 2025

A couple winners, one thesis that clearly hasn't played out, and slow progress on others over a decent period for listed real estate returns

The context

2025 ended up as a decent year for Global REITs. Total returns for the FTSE EPRA/NAREIT Global Real Estate Index moderated a bit in the second half of the year but ended up at 11.1% (total return). The US REIT market did much worse than the rest of the world, with the FTSE NAREIT All Equity REITs index delivering just a 2.3% total return for the year.

Long Pond - one of the few remaining long/short real estate focused funds out there - launched a long-only ETF (Ticker: LPRE) in 2025. Their timing was lucky (although I am sure it didn’t feel it at the time) as it was right in the midst of the “Liberation Day” stock market sell-off. They generated a NAV return of 13.6% (net) from April 3rd through the end of the year. This is an interesting benchmark to track going forward as its managed by a very well-regarded specialist team, has reasonable fees (1% management fee), and invests in a focused portfolio of ~25 high-quality global REITs and real estate businesses.

It was, however, another year of underperformance for listed real estate vs. the S&P 500, which did 17.8% in 2025.

Closed / exited ideas

Dream Residential REIT

Links to original write up in title, will also post links to follow-up posts going forward

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

• Close price: US$10.80 per share (November 19, 2025), US$0.175 of distributions paid

• Total return: 33%

• Annualized return: 49% / IRR: 52%

This idea worked out well. In August, they announced an agreement with Morgan Properties to be acquired for $10.80 per share in cash. The transaction closed in November. This was basically in-line with my net liquidation value estimate of $11.04 per share in the original write-up. No complaints!

Aberdeen Property Income

• Write up price: £0.0215 (November 2025).

• Close price: £0.025 (Dec 31, 2025)

• Total return: +/- 0%

• Annualized return: not meaningful

This was an attempt to take the last puff of the cigar butt left after the take private of a UK small REIT, which held only cash and a piece of land in Scotland. Unfortunately, while I thought there were good reasons and reasonable incentives for the manager to get the final asset sold in Q4, this did not happen.

I don’t have a high level of confidence around the timeline for selling the last asset so recommended exiting at the end of the year. This is a very illiquid nano cap so I always knew that getting out would be much harder than getting in (and I had hoped not to have to sell and instead receive a liquidation distribution). I am still slowly getting out of my small position for my small personal account several weeks later at prices around £0.0215.

Active ideas

abrdn European Logistics Income

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

• Close price: £0.27 per share (Dec 31, 2025), £0.42 of distributions paid to-date

• Total return: 21%

• Annualized return: 23% / IRR: 29%

This liquidation has outperformed my original thesis. Cumulative distributions represent ~85% of share price when I wrote up the name and adding the current share price gets to my net liquidation value estimate at the time.

There have been some wrinkles along the way. Recent sales have underperformed my valuation estimates, which has led me to lower my estimates on the remaining 5 properties. A private Polish real estate company - DL Invest - has entered the frame, requesting a general meeting to hold a vote on changing the strategy. I think (and hope) their efforts are too little too late, as the sales processes on the few remaining assets are well advanced. Management anticipate completing asset sales in Q1 2026 (see most recent update)

FrontView REIT (and investment update HERE)

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

• Close price: $14.76 per share (Dec 31, 2025), $0.43 of distributions paid to-date

• Total return: 32%

• Annualized return: 44% / IRR: 47%

This is another idea that has worked. My original thesis has largely played out as fears around their portfolio quality have proven overblown and the discount to net lease peers overdone. They’ve been disciplined in terms of capital allocation, selling assets to fund acquisitions rather than raising dilutive equity.

Not all sunshine and roses, however, as the Co-CEO was fired abruptly soon after my write-up although it appears to have been due to reasons not related to the company (if you know the real reason, I’d love to hear more). By the end of the year, the share price was tracking towards my base case valuation estimate in the original write-up was $15.45 per share based on an 8% cap rate and ~14x AFFO multiple.

In November, I wrote up the name again at $14.50 per share. Their operating results, the pricing on their property dispositions, and enhanced disclosures all gave me greater confidence in the value of their portfolio. They also entered into a creative preferred equity financing deal with Maewyn Partners (founded by Charles Fitzgerald, a REIT veteran who formerly ran V3 Capital Management) that allowed them to fund their 2026 acquisition pipeline accretively. It also allowed them to provide preliminary 2026 AFFO guidance, which I felt was set conservatively to provide the opportunity to “beat-and-raise” this year.

As a result I moved my base case NAV estimate up to ~$19.85 based on a 7.5% cap rate and ~15.5x 2026e AFFO multiple (although this is before accounting for dilutive from the convertible preferred offering, which will start to kick in at $17 per share once drawn). We will see how this exercise of “watering the flowers” and adding to winners plays out.

Net Lease Office Properties

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

• Close price: $25.79 per share (Dec 31, 2025), $7.20 of distributions paid to-date

• Total return: 7%

• Annualized return: 12% / IRR: 13%

There have been more disappointments than positive surprises with this idea. I definitely think I talked myself into this position more than I should have. In particular, I was overly optimistic in valuing the asset I was (and am) most worried about - KBR Tower in Houston. This asset is on the market with broker guidance coming in ~30% below my initial valuation estimate and I now value it at a 10% discount to this figure, or $47m lower than my initial estimate.

My latest valuation estimate is ~$23 per share, which is ~13% / or ~$3.50 per share below my initial estimate, once adjusted for the $12.20 per share in distributions. Effectively all of this delta on a net basis is attributable to KBR Tower.

Share have traded down so far in 2026 and currently reflect a ~13% discount to my liquidation value estimate. Some of their best properties remain to be sold - Omnicom, Google - and distributions have made this a smaller position so I am holding on but value feels more marginal than it did when I originally wrote it up.

After writing this, NLOP announced three asset sales including Google and KBR Tower. KBR marginally underperformed my estimate (sale price of $66m vs. my $71m estimate) with Google slightly outperforming ($585 PSF and just over a 7.5% cap rate), leaving my liquidation value estimate effectively unchanged. A distribution of $6.75 (~1/3 of the share price) has been announced for 17 Feb.

Logistea AB

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

• Close price: SEK 14.34 per share (Dec 31, 2025), SEK 0.05 of distributions paid to-date

• Total return: -1%

• Annualized return: -2% / IRR: -1%

Company is executing more or less how I expected: maintaining occupancy due in large part to limited near-term lease expiries, seeing some like-for-like NOI growth through inflation-linked leases, improving financing terms and lowering their cost of debt, and pursuing accretive acquisitions. They have acquired ~ SEK 335m of industrial and logistics properties at a 8.5% cap rate in Q4 funded by cash on hand and debt with an average cost of ~4.6%. To be fair, acquisition volume is not huge versus their SEK 14 billion enterprise value.

I think their current valuation is not shockingly cheap but is undemanding at a mid 7% cap rate and an after tax ~16x funds from operations multiple. The company is cheaper now than when I wrote it up (at a ~18x after tax multiple) as funds from operations have increased by ~10% per share. I think they will be able to continue to drive earnings growth in 2026 through acquisitions and lowering their cost of debt. I will be watching tenant credit issues, re-leasing of 2026 expiries, and Nordic interest rates as the key factors that could represents threats or opportunities.

BSR REIT

• Write up price: $13.30 (July 2025).

• Close price: $12.55 per share (Dec 31, 2025), $0.23 of distributions paid to-date

• Total return: -4%

• Annualized return: -8% / IRR: -8%

US multifamily in general has had a tough second half of the year as fears around the health of the consumer and weakness coming out of the peak of the leasing market has made investors start to think that it will take longer to work through excess supply than previously expected and the market may only return to rent growth in ‘27 instead of ‘26.

BSR’s portfolio in Houston, Dallas - Forth Worth, and Austin has been impacted by new supply but all-in-all has held up well. Same store NOI growth was effectively flat for the first 9 months of 2025 vs. 2024 and blended leasing spreads were a hair over 0% (new leases down about 3% and renewals up 3%). Occupancy was down ~100 bps year on year as of Q3. Austin is the weakest market in the country with continued strong demand more than offset by a massive about of new supply that has come online. Blended leasing spreads in Austin were -3% in Q3 and I expect rents to continue to fall and occupancy to be weak for at least the next couple of quarters before the peak leasing season starts in the Spring.

In December they held an Investor Day in conjunction with NAREIT in Dallas (slides, transcript of prepared remarks), which outlined their near-term operational objectives, capital allocation priorities, and a successful recast of their RCF and term loan:

• They laid out their target to increase FFO by $0.13 - $0.22 per unit by YE 2028 (+17% - +28% vs. 2025 Q3 annualized) along with the key building blocks that will get them there, before considering considering market-wide leasing trends, future rent growth, etc.:

  • The largest contributor is leasing up their 2025 acquisitions and Austin development, 250 vacant units in total, which have the potential to drive incremental FFO of $0.06 - $0.10 per share.

  • They also see the potential for rolling out operational initiatives including bulk internet and valet trash pick-up to drive incremental FFO of $0.04 to $0.08 per share.

  • The last, and murkiest bucket is “platform growth” to drive FFO of $0.03 to $0.04 per unit. They talked about JVs, third-party management as ways to get more value out of their operating platform. I think this is pretty optimistic, however, and should be handicapped.

• In term of capital allocation, they intend to avoid making further acquisitions now that they have recycled capital from their portfolio sale to AvalonBay and will focus on revenue enhancing CAPEX (related to the projects above where they see ROIs from 10% up to 35%) and “financial solutions”, including share repurchases.

• Importantly they extended their revolving credit facility and term loan, both of which were due to mature in 2026. The RCF with $323m drawn now matures in 2029 and the $160m term loan was extended for a year to 2027. They also lowered their cost of debt on both facilities slightly. They now have only $28m of mortgage debt maturing in 2026.

While the share prices doesn’t reflect it, I think things are moving in the right direction at BSR. They are focused on execution after recycling capital into lease-up properties in Dallas / Houston at an attractive basis. They have levers to pull to drive operating results in a challenging environment. Their leverage remains high compared to REIT peers but they’ve extended the maturities of their non-mortgage debt and eliminated a debt maturity cliff in 2026.

And most importantly as new multifamily starts in their markets have declined significantly, they will be well-positioned to perform and be an interesting M&A target if (hopefully when) market fundamentals and sentiment improves.

Veris Residential

• Write up price: $14.70 (July 2025).

• Close price: $14.88 per share (Dec 31, 2025), $0.08 of distributions paid to-date

• Total return: 1%

• Annualized return: 3% / IRR: 4%

Operations have been steady and positive at Veris. The biggest update in Q3 results was putting their last remaining significant Jersey City land site - Haborside 8/9 - under contract (expected to close in Q1 2026). Wasn’t a fantastic price - I had originally thought it could be worth $85m or more - but provides proceeds from non-income producing assets to continue to delever their balance sheet and lower their net debt / EBITDA, which they anticipate will get down to ~9x after the land sale closes, and targeting 8x by the end of 2026.

I anticipate that asset sales will continue and hope they made progress on this in Q4. They raised the high end of their disposition guidance to $650m, implying ~$100m of potential dispositions to come. I’d expect sales to come out of their Boston and Northern NJ portfolios, further consolidating the portfolio in Jersey City and Port Imperial / Hoboken.