Prison REITs: The End Is Near

  • Prison REITs - the darkest corner of the REIT sector - have been slammed in 2020 as pandemic-related operational struggles have clashed with ever-intensifying political headwinds.
  • Undoubtedly the most controversial real estate sector, Prison REITs have been under assault from the hard-line "cancel culture" that views private prisons as conspirators in a powerful “prison industrial complex”.
  • While the hard evidence debunks the core claims, these REITs have faced mounting difficulty in accessing capital from an “ESG-focused” institutional investment community, compelling both REITs to slash dividends.
  • Private prisons are facing an existential crisis if Democrats sweep the 2020 Elections, who have pledged to abolish the Federal use of private prisons, amounting to 50% of industry revenues.
  • CoreCivic announced it is abandoning the REIT structure, and GEO Group likely isn’t far behind. While intrinsic value exists, these companies will likely face continued difficulty operating as public entities.

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Disclosure: A complete list of holdings and Real Estate and Housing Index definitions and holdings are available at HoyaCapital.com. Hoya Capital Real Estate advises an Exchange Traded Fund listed on the NYSE. Hoya Capital is long all components in the Hoya Capital Housing 100 Index.

Additional Disclosure: It is not possible to invest directly in an index. Index performance cited in this commentary does not reflect the performance of any fund or other account managed or serviced by Hoya Capital Real Estate. Data quoted represents past performance, which is no guarantee of future results. Information presented is believed to be factual and up-to-date, but we do not guarantee its accuracy.

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