Insider Weekends: REIT Week

We saw several insiders of real estate investment trusts or REITs purchase shares this week. The buying was broad based across multi-family, office, retail and diversified REITs. When discussing alternative income options earlier this week, we wrote the following about REITs,

The other asset class that yield hungry investors flocked to was real estate investment trusts or REITs. The Vanguard Real Estate ETF (VNQ) with nearly $35 billion in assets is down more than 28% year-to-date. The drop in the value of REITs has helped the yield of all equity REITs trend up to 3.99% (as of September 23, 2022). There is obviously quite a bit of variability in the yields offered by various sub-sectors as you can see from the table below (provided by NAREIT).

Some of these REIT sub-sectors are starting to look interesting and I am watching a diversified REIT that was a spotlight idea in our September 2022 Special Situations Newsletter closely. While REIT yields are up, we are not at a point where increasing exposure to REITs makes sense because of some fundamental headwinds they face. After years of refinancing their debt at lower interest rates, they will now have to refinance at higher rates. Unless they have pricing power in the markets they operate in, this could translate into lower payouts.

One of the more interesting REIT purchases this week was that of the small-cap apartment REIT, BRT Apartments Corp (BRT). CEO Jeffrey Gould acquired 39,173 shares at an average price of $20.69 per share for a total amount of $810,529. Unlike other REITs, BRT’s stock has shown a lot of strength and is actually up 9.95% over the last year despite a recent pullback. The stock is trading above pre-pandemic highs and Mr. Gould has a history of buying stock during pullbacks, which has served him well as you can see from the 5 year price chart of BRT below.

BRT sports a dividend yield is 4.82%, and and the payout ratio is 76.8% based on funds from operations (FFO). The payout ratio based on net income is lower because there was a big spike in net income from selling certain joint venture properties. This is one of many reasons why REIT investors focus on FFO or adjusted funds from operations (AFFO) instead of net income. It was good to see that as of March 31, 2022, the occupancy rate for the company’s apartments was 96.4%. Well run multi-family REITs generally have occupancy rates north of 95% and the lowest I remember quality REITs like Avalonbay (AVB) dip to during the Great Recession was an occupancy rate in the low 90s. A big drop in the price of Avalonbay by the first quarter of 2009 translated into a very juicy yield of 8%. I don’t think we will get to those levels but I would be interested in nibbling on multi-family and diversified REITs if I see them get to the 6% or higher yield level.

Another REIT purchase that made the list this week was insider buying at The Macerich Company (MAC) (a retail REIT based primarily in both the West Coast and East Coast), which saw purchases from 4 different insiders, including both the president Edward C. Coppola, as well as the CEO, Thomas E. O’Hern. Both of them increased their stakes in the company by 8.68% and 6.93% respectively.

On the sell side, it was interesting to see the CEO and Chief Architect of vertical liftoff aviation company Joby Aviation (JOBY) sell 438,625 shares at an average price of $5.01. He was a buyer of the stock in late May and June of this year. These sales come after Kittyhawk, the air taxi company backed by Google co-founder Larry Page, decided to shut down. As expected, Joby does not have any revenue but has enough cash on the balance sheet to allow them to survive for about three years at the current burn rate.

Welcome to edition 639 of Insider Weekends. Insider buying declined significantly last week with insiders purchasing $39.43 million of stock compared to $190.12 million in the week prior. Selling also decreased to $238.37 million compared to $504.72 million in the week prior.

Sell/Buy Ratio: The insider Sell/Buy ratio is calculated by dividing the total insider sales in a given week by total insider purchases that week. The adjusted ratio for last week went up to 6.05. In other words, insiders sold more than 6 times as much stock as they purchased. The Sell/Buy ratio this week was unfavorable compared to the prior week when the ratio stood at 2.65.

Notable Insider Buys:

1. Braze, Inc. (BRZE): $34.83

Director Matthew Jacobson acquired 110,650 shares of this customer engagement platform, paying $34.02 per share for a total amount of $2.3 million. These shares were purchased indirectly by ICONIQ Strategic Partners VI, L.P.

You can view the list of recent insider transactions for Braze, Inc. here.

2. Rocket Companies, Inc. (RKT): $6.32

Shares of this tech-driven real estate, mortgage, and e-Commerce company were acquired by 2 insiders:

• Chief Executive Officer Jay Farner acquired 151,300 shares, paying $6.60 per share for a total amount of $998,737. Mr. Farner increased his stake by 3.52% to 4,447,807 shares with this purchase.
• Director Matthew Rizik acquired 16,400 shares, paying $6.59 per share for a total amount of $108,157. Mr. Rizik increased his stake by 4.34% to 394,002 shares with this purchase.

You can view the list of recent insider transactions for Rocket Companies, Inc. here.

3. BRT Apartments Corp. (BRT): $20.31

President and CEO Jeffrey Gould acquired 39,173 shares of this real estate investment trust, paying $20.69 per share for a total amount of $810,529. These shares were purchased indirectly through a trust.

You can view the list of recent insider transactions for BRT Apartments Corp. here.

4. The Macerich Company (MAC): $7.94

Shares of this retail REIT were acquired by 4 insiders:

• President Edward C. Coppola acquired 50,000 shares, paying $7.98 per share for a total amount of $399,000. Mr. Coppola increased his stake by 8.68% to 625,739 shares with this purchase.
• Chief Executive Officer Thomas E. O’Hern acquired 12,820 shares, paying $7.77 per share for a total amount of $99,560. Mr. O’Hern increased his stake by 6.93% to 197,900 shares with this purchase.
• EVP, Business Development Kenneth Volk acquired 10,000 shares, paying $7.57 per share for a total amount of $75,750. These shares were purchased indirectly through a trust.
• Chief Financial Officer Scott W. Kingsmore acquired 4,000 shares, paying $7.55 per share for a total amount of $30,180. These shares were purchased indirectly through a trust.

You can view the list of recent insider transactions for The Macerich Company here.

5. BitNile Holdings, Inc. (NILE): $0.183

Executive Chairman Milton C. Ault III acquired 2,396,014 shares of this cryptocurrency and digital finance company, paying $0.21 per share for a total amount of $507,120. Mr. Ault increased his stake by 5.62% to 45,049,871 shares with this purchase. These shares were purchased indirectly by Ault Alpha LP.

You can view the list of recent insider transactions for BitNile Holdings, Inc. here.

You can view the full list of purchases from this Insider Buying page.

Notable Insider Sales:

1. Airbnb, Inc. (ABNB): $105.04

Director Joseph Gebbia sold 261,635 shares of Airbnb for $106.07, generating $27.75 million from the sale. 250,000 of these shares were sold indirectly through a trust and 11,635 shares were sold as a result of exercising options immediately prior to the sale.

You can view the list of recent insider transactions for Airbnb, Inc. here.

2. Royalty Pharma plc (RPRX): $40.18

Shares of this biotech company were sold by 2 insiders:

• Director Mario Germano Giuliani sold 243,973 shares for $41.15, generating $10.04 million from the sale. These shares were sold indirectly by Skyeline Management Ltd.
• EVP & Chief Scientific Officer James F. Reddoch sold 100,000 shares for $41.23, generating $4.12 million from the sale. These shares were sold indirectly by Reddoch RPI LLC.

You can view the list of recent insider transactions for Royalty Pharma plc here.

3. Chipotle Mexican Grill, Inc. (CMG): $1502.76

Chief Legal Officer & GC Roger E. Theodoredis sold 2,318 shares of this restaurant chain for $1402.57, generating $3.25 million from the sale.

You can view the list of recent insider transactions for Chipotle Mexican Grill, Inc. here.

4. Laboratory Corporation of America Holdings (LH): $204.81

Chief Financial Officer, EVP Glenn A. Eisenberg sold 25,000 shares of this global life sciences company for $210.62, generating $5.27 million from the sale.

You can view the list of recent insider transactions for Laboratory Corporation of America Holdings here.

5. Joby Aviation, Inc. (JOBY): $4.33

Shares of this vertically integrated air mobility company were sold by 2 insiders:

• CEO and Chief Architect Joeben Bevirt sold 438,625 shares for $5.01, generating $2.19 million from the sale. These shares were sold indirectly through a trust.
• Head of Government Affairs Gregory Bowles sold 32,611 shares for $5.00, generating $163,130 from the sale.

You can view the list of recent insider transactions for Joby Aviation, Inc. here.

You can view the full list of sales from this Insider Sales page.

The list of all insider purchases and sales by management people is only available to InsideArbitrage Premium and Plus members.

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