Real Estate Reimagined: Growth vs. Income REIT Investing
Explore the world of Real Estate Investment Trusts (REITs) with David Auerbach of Hoya Capital and take a deep dive into the firm's HOMZ and RIET ETFs on this episode of Behind the Ticker.
In this episode of Behind the Ticker, Brad Roth Brad Roth, Managing Partner and CIO of Thor Financial Technologies, sits down with David Auerbach, CIO of Hoya Capital to talk the Hoya Capital High Dividend Yield ETF (RIET)and the Hoya Capital Housing ETF (HOMZ). From the monthly dividend company to the unique value of small- and mid-cap REITs, learn how Hoya balances growth and income in a shifting interest rate environment.
Listen to this episode on Spotify, Apple Podcasts, or your preferred streaming platform. Prefer video? You can watch the conversation here.
Key Takeaways
REITs are misunderstood. There are two common misconceptions of REIT investors. First, that all REITs are high yield — the top 10 REITs in most passive ETFs yield only 2–3%. Second, that REITs are interest rate sensitive. His counterpoint: we all use REIT-owned properties every day without thinking about the 10-year Treasury. He tied REIT performance more to the 10-year Treasury than the Fed funds rate, with 4% on the 10-year being the key threshold — below 4% favors REITs, above 4% creates headwinds.
The M&A cycle is heating up. David noted that 17 REITs have merged or pursued strategic alternatives in just the past four months. Private equity finds it cheaper to acquire existing REIT platforms of 100+ properties than to build from scratch, especially with many REITs trading at discounts to net asset value. He cited Cohen & Steers highlighting Empire State Realty Trust — the company that owns the Empire State Building — trading at just $6.50 per share.
Boring is good. David framed REITs as the "ballast of the ship" and "the tortoise" in a portfolio. Office, which gets 90% of the negative headlines, only represents 4–5% of REIT weightings across sectors. Meanwhile, ground lease REITs have 99-year lease terms, and even standard commercial leases run 5–10 years with built-in rent escalators.
Small and mid-cap REITs are where the value is. Everyone knows the valedictorian (S&P 500 REITs) and the troublemakers (overleveraged, dividend-cutting REITs), but the middle of the curve — roughly 150 names — contains quality stories that nobody talks about.
Portfolio construction advice for advisors. For advisors already holding VNQ or IYR, David positioned RIET and HOMZ as complements rather than replacements. He emphasized the importance of looking beyond the top 10 holdings of any REIT ETF, citing one major fund where just three names represent 23% of the portfolio weight.
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Disclaimer: The market insights, projections, and investment strategies expressed in this article are solely those of the contributor and do not necessarily reflect the views or opinions of ETF.com This content is provided for informational purposes and does not constitute financial, investment, or legal advice.
