3 REITs to Sell in September Before They Crash & Burn

InvestorPlace2023-09-10

A strong case can be made to sell each of these REITs.Broadmark Realty Capital (BRMK): This REIT is the result of a risky merger and is struggling financially.Iron Mountain (IRM): IRM is struggling to...

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These brands are too risky to hold onto.","collect":0,"end_time":0,"defaultTopTitle":"investorplace.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"BK4585":"ETF&股票定投概念","BK4588":"碎股","BK4110":"抵押房地产投资信托","BK4084":"特种房地产投资信托","IRM":"爱恩铁山","BK4234":"特殊用途房地产信托","IVR":"景顺抵押资本"},"translate_title":"3只房地产投资信托基金将在9月份崩盘前出售","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"BRMK":1,"IRM":1,"IVR":1},"content_text":"A strong case can be made to sell each of these REITs.Broadmark Realty Capital (BRMK): This REIT is the result of a risky merger and is struggling financially.Iron Mountain (IRM): IRM is struggling to diversify out of the declining paper storage business.Invesco Mortgage Capital (IVR): This pick is a yield trap you should avoid at all costs. \n\n\n\n \n\nSource: Vitalii Vodolazskyi / Shutterstock\n\n\n\nJust as there are REITs to buy, there are REITs to sell in September. Some of these stocks are no longer in favor due to changes in how we fundamentally navigate through society. One example is the shrinkage of mall foot traffic in favor of e-commerce. Others deserve this title since they’re inherently risky with high debt and volatile cash flows.\nThe fate of other REITs to sell is decided by today’s macro backdrop. High-interest rates will likely stay for the time being. Inflation is also a persistent issue. Although this backdrop might not be the sole or even primary cause of a sell recommendation, when seen along with other company-specific and macro-risks, one is able to argue the case effectively.\nSo, if you’re curious about the REITs to sell in September, read on.\n\nBroadmark Realty Capital (BRMK)\nSource: Shutterstock\nBroadmark Realty Capital (NYSE:BRMK) is a mortgage REIT specializing in hard money lending, with most of its loans backed by residential properties. They are known for charging double-digit interest rates due to the inherent risks associated with hard money loans.\nThe reported mixed Q1 2023 financial results, highlighting a GAAP net income of $4.6 million, which was negatively impacted by one-time merger-related expenses and impairment on the company’s real property owned, totaling $5.9 million. BRMK also noted a significant increase in defaulted loans, with $43.9 million of loans entering default during the quarter.\nAnother reason making BRMK one of those REITs to sell is that it was originally two entities: Broadmark and Ready Capital. Broadmark was suffering financially with inconsistent cash flows and other risks. Therefore, its future is more uncertain, warranting a sell recommendation from me at the current time.\nIron Mountain (IRM)\nSource: Shutterstock\n Iron Mountain (NYSE:IRM) is primarily known for its paper storage business but has been diversifying into the data center business.\nWhile the company’s share price has remained stable, the majority of its business is still in paper storage, which has an uncertain future. The market currently prices IRM at a premium, overlooking the potential long-term decline of the paper storage sector.\nIRM stock also underperformed drastically on several key financial metrics last quarter. Net income for the second quarter dropped to $1.1 million from $201.9 million in the same period of 2022. Service revenue decreased by 1.0% due to component price declines. FFO (Normalized) per share for the second quarter decreased to $0.71 from $0.74 in 2022.\nThese numbers wouldn’t be so alarming if it already had a robust business model. But paper storage is a declining business. Environmental concerns have put pressure on consumers as well as companies to diversify into cloud solutions over physical spaces to store documents. Also, its share price rally may not be strictly logical when seen through the lens of its short-term results. Therefore, I think giving IRM stock a sell recommendation is valid.\nInvesco Mortgage Capital (IVR)\nSource: Shutterstock\nInvesco Mortgage Capital (NYSE:IVR) is a mortgage REIT known for its high dividend yield. In recent quarters, IVR recorded net losses and also reduced its dividend. The company underwent a 10-for-1 reverse stock split in 2022. While that increased the stock price, it also highlighted the company’s challenges. IVR’s high yield comes with the risk of ongoing share price declines and potential further dividend cuts.\nI think IVR is a classic case of why investors shouldn’t chase yield. A high yield may prompt investors to buy it, increasing its share price and sending its valuation into even further illogical territory. Income investors, and especially those who are on a budget, may feel like they’re forced to make decisions such as these, but the risk is rarely worth it when weighed against steep capital depreciation and cuts to dividends.\nThe company reported Q2 2023 earnings of $1.45 per share, with revenues of $12.4 million, missing estimates by $59.1 million. Compared to the same quarter last year, the company’s revenue significantly decreased from $41.1 million. Wall Street analysts’ average recommendation for the stock is a Sell.\nOn the date of publication, Matthew Farley did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.\n\nMatthew started writing coverage of the financial markets during the crypto boom of 2017 and was also a team member of several fintech startups. He then started writing about Australian and U.S. equities for various publications. His work has appeared in MarketBeat, FXStreet, Cryptoslate, Seeking Alpha, and the New Scientist magazine, among others.\n\n\nReal Estate\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\nSubmit\n\n\n\n\n\n\n\nArticle printed from InvestorPlace Media, https://investorplace.com/2023/09/3-reits-to-sell-in-september-before-they-crash-burn/.\n©2023 InvestorPlace Media, LLC\n\n\n\n\nSponsored Headlines","kind":"highlight","is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.29.3","shortVersion":"4.29.3","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2366353664"}