Keep pulling the thread on John Khoury.
Since the beginning of 2022, the GICS Real Estate sector (REITs) is down almost 20% while the S&P 500 is up 40%, resulting in a 60% underperformance.
The average stock price move for REITs on earnings days is now double what it was in the early 2010s.
Long Pond Capital is currently buying Sunbelt apartment REITs at implied cap rates of 6.5% to 7%, which represents a 25-30% discount to private market valuations of 5% to 5.25%.
New construction starts for Sunbelt apartments, industrial, and self-storage properties are down 60-70% from their peak.
John Khoury predicts that over time, AI will create a magnitude of office vacancy that will dwarf the amount of space currently being leased by AI companies.
Since 2017, Hilton's free cash flow per share has grown from $2.19 to a projected over $9.00, while Park Hotels' FCF per share has declined from the same $2.19 starting point.
Historically, the strategy of buying distressed real estate and waiting for it to recover is no longer reliable due to the introduction of secular risks, such as the impact of e-commerce on malls and COVID on offices.
The GICS Real Estate sector is the only sector in the S&P 500 that is still materially down since the beginning of 2022.
Long Pond Capital recently launched an actively managed ETF with the ticker LPRE.
Only 10% of real estate in the United States is owned via public markets, with the remaining 90% being privately held.
Pod-style hedge funds generate approximately 80% of their returns on or the day after quarterly earnings announcements, reflecting their hyper short-term focus.
Hotel management and franchise companies like Hilton and Marriott can grow earnings at 15% per year through a combination of RevPAR growth, net unit growth, leverage, and share repurchases.