When a market sector begins to see a pickup in insider buying, that’s generally a positive sign, indicating that the sector is considered undervalued and showing signs of improving returns in the future. Insiders may sell stock for any number of reasons, but they almost always buy shares because they believe in the prospects of their company.
Recently, insider purchases of real estate investment trusts (REITs) have been on the rise, as company officials sense share prices have stabilized and are at attractive levels. A two-meeting pause of interest rate hikes by the Federal Reserve has also helped secure a bottom in numerous REITs with declining share prices.
Take a look at five REITs with recent insider buying that could be a tip-off that better times are ahead.
Arbor Realty Trust Inc. (NYSE:ABR) is a Long Island, New York-based mortgage REIT (mREIT) that initiates bridge and mezzanine loans for commercial and residential properties. Many of its loans originate through Fannie Mae and Freddie Mac programs.
Arbor Realty Trust generates profits by the spread between the cost of financing a loan and the interest earned from that loan. Many of Arbor Realty Trust’s commercial loans are first mortgage liens that are short term with higher interest rates.
On Nov. 8, Chairman and CEO Ivan Kaufman bought 10,000 shares of Arbor Realty Trust common stock in a transaction totaling $124,700.
On Nov. 16, Viceroy Research issued a highly critical report on Arbor Realty and discussed the reasons for its short position on the mREIT. Shares plunged over 8% after the report was released.
The same day, and perhaps to counter Viceroy’s claims, Arbor Realty Chief Financial Officer Paul Elenio showed his faith in the company by purchasing 7,500 shares of stock at an average price of $12.37, giving him a total of 277,299 shares.
A recent closing price for Arbor Realty Trust was $12.19, slightly below Elenio’s purchase price.
American Strategic Investment Co. (NYSE:NYC) is a New York-based diversified REIT with eight office and retail condominium assets in Manhattan and surrounding areas. As of Sept. 30, it had an 85.1% weighted occupancy with remaining lease terms of 6.6 years.
On Nov. 17, New York City Advisors, a 10% owner of American Strategic, bought 1,536 shares of company stock at an average price of $7.96 per share. The total cost was approximately $12,226.
American Strategic recently closed at $8.17.
Bluerock Homes Trust Inc. (NYSE:BHM) is a New York-based, externally managed residential REIT that buys and rents single-family homes in the Sun Belt and Western portions of the U.S. Bluerock owns over 50 million square feet of residential real estate worth more than $15 billion. Bluerock Homes Trust was originally part of Bluerock Residential Growth REIT Inc., which began in 2008. Bluerock Homes Trust was spun off in September 2022 with an initial public offering (IPO).
On Nov. 17, CFO and Treasurer Christopher J. Vohs purchased 12,000 shares of company stock near the IPO price of $22.50, for a total of $270,000. Vohs now owns 24,000 shares of company stock.
The most recent closing price for Bluerock Homes was $14.89, so an investor buying shares today would be purchasing shares below this insider’s initial price.
Four Corners Property Trust Inc. (NYSE:FCPT) is a Mill Valley, California-based diversified REIT, with a focus on owning restaurants, healthcare and other retail properties in the Sun Belt regions of the U.S.
Over the past seven years, Four Corners has reduced its original stake of 418 restaurants, spun out from Darden Restaurants Inc. (NYSE:DRI), and has steadily acquired more diversified properties. Its portfolio includes 1,106 long-term leased properties with 148 brands across 47 states. Its occupancy and rental rates were 99.8% with a weighted annual lease term (WALT) of eight years.
On Nov. 7, director Douglas B. Hansen purchased 4,950 shares of Four Corners common stock for $21.74, partially by a trust, presently giving him a total of 59,061 shares of common stock.
The most recent closing price for Four Corners was $22.75.
On Oct. 25, Modiv Industrial Inc. (NYSE:MDV) director Thomas H. Nolan Jr. purchased 121.2553 shares of Modiv common stock at $14.49, for a total price of $1,756.98. Nolan now owns 18,524.82 shares.
Modiv has been one of the best-performing REITs year to date, with a total return of 36.41%. Its most recent closing price was $15.41.
Note to investors: While insider purchases are a signal that company officials believe in the long-term value of their stock, insiders don’t always buy at the absolute bottom and there can still be short-term losses. Investors should always perform due diligence on REITs and never make any purchases solely based on insider activity.
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