• Taylor Sugar

Bear Market Defensive Shift : Hard Reit Portfolio

Updated: Oct 28



Here we are in the middle of a bear market with high volatility, rising interest rates, a tightening US FED, War in Ukraine, high oil prices, high inflation, bad sentiment, a liquidity crunch, a crypto meltdown and a potential recession on the horizon.


Looking at the Hard Reit Portfolio I am thinking about how each position will respond to inflation, a recession, rising interest rates and higher volatility.


Completing this process led me to make a Defensive Strategy Shift and sell both Dream Office Reit and Primaris Reit and move the capital into Riocan Reit and HR Reit.


The 40% discount to NAV available on HR Reit is very similar to the discount on

Dream Office Reit and Primaris Reit.

HR offers both a strong offense (5% SPNOI, 96% Occupancy, 7.71% AFFO Yield) and strong defense (96% Occupancy, 46.40% Payout Ratio, 4% Average Interest Rate, 100% Fixed Debt) in addition to the 40% discount to NAV.


Riocan Reit is available at a 23% discount to nav and offers both

strong offense (4.1% SPNOI, 8.9% Blended Leasing Spreads, 7% Affo Yield) and strong defense (97% Occupancy, 57% Payout Ratio, 3.08% Average Interest, 94% Fixed Debt)

VICI Properties is a very defensive position with 35 year leases, 100% occupancy, 100% rent collection through covid, 3.97% average interest rate, 100% fixed debt. VICI trades at a premium and has held up relatively well in the current market volatility.


Updated Asset Allocation : Hard Reit Portfolio


Bitcoin


Despite the large crash in the price of Bitcoin I have managed to keep a 13% allocation to Bitcoin in the portfolio. This has been accomplished by being more aggressive with dollar cost average purchases into bitcoin. I believe the market sentiment is extremely poor and the current price of bitcoin represents an excellent opportunity to stack some sats.


One important lesson that has been reinforced in all of the recent market volatility and liquidity challenges of many crypto market participants is the importance of holding bitcoin in self-custody. This reduces unnecessary counterparty risk and is the safest way to hold bitcoin.

Looking at Bitcoin fundamentals the hash rate of the network is very close to all time highs and has been quite resilient given all of the geopolitical conflicts and market volatility.


I view the hash rate as a fundamental value proxy for bitcoin as it represents the capital dedicated by market participants to the network (hardware and energy) as well as the strength of the network.


Disclaimer: This article should not be taken as legal investing advice. The choice is yours whether to invest in any asset or not (please do your own research).


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