Bireme Capital’s Kite Realty Group Trust (KRG) Investment Thesis

Bireme Capital, an investment management firm, published its fourth-quarter 2020 Investor Letter – a copy of which can be downloaded here. A net return of 47.1% was recorded by the fund for the year end 2020, outperforming its S&P500 benchmark that delivered an 18.3% return. You can view the fund’s top 5 holdings to have a peek at their top bets for 2021.

Bireme Capital, in their Q4 2020 investor letter, said that Kite Realty Group Trust (NYSE: KRG) will soon return to paying a $1.10-1.30 annual dividend. Bireme Capital identifies Kite Realty Group Trust as one of the companies at the other side of the value spread, the other end of the “barbell market”. Kite Realty Group Trust is a real estate investment trust company based in Indianapolis, Indiana.  It currently has a $1.6 billion market capitalization. Since last month, KRG delivered a 17.71% return, extending its YTD gains to 31.08%. As of March 4, the stock closed at $19.56 per share.

Here is what Bireme Capital has to say about Kite Realty Group Trust in their Q4 2020 investor letter:

“Since March we have increasingly tilted the long book towards stocks whose businesses will improve as the pandemic fades, a strategy we first discussed in our 1Q20 letter. Now that 2020 is — thankfully — over, let’s take a look back at some of our predictions from Q1.

Kite Realty Group (KRG) is a Real Estate Investment Trust that owns grocery-anchored strip malls. In Q1, we said:

“Unfortunately, COVID-19 has severely impacted service businesses, including restaurants, most of whom have been forced to close or reduce capacity. As a result, KRG stock fell as much as 63%, from $19 to $7… At $7 per share, KRG traded for an 18% dividend yield and an implied 12.3% capitalization rate, rare numbers in the real estate world outside of failing properties. We do not think KRG is failing. We do not think this is the last time that people will work out in gyms, sit down at restaurants, get their nails done, or pick up their dry cleaning. It is our view that most of these businesses will survive and eventually pay rent again, although there will likely be a 6-12 month period of shared pain between tenants, employees, landlords, banks, and taxpayers… As consumers slowly return to service businesses, we think KRG will return to trading at much higher prices. “

If anything, this prediction was pessimistic. While many of KRG’s tenants were closed in April, almost all of them were operating as of late October. The company continues to sign new leases with >10% price increases; tenants realize the importance of good locations irrespective of COVID-19. We think KRG will soon return to paying a $1.10-1.30 annual dividend as they did prior to the pandemic. This is an attractive 6-7% yield on the $18 share price.”

Residential REIT Stocks

robert cicchetti /

Our calculations show that Kite Realty Group Trust (NYSE: KRG) does not belong in our list of the 30 Most Popular Stocks Among Hedge Funds. As of the end of the fourth quarter of 2020, Kite Realty Group Trust was in 4 hedge fund portfolios, compared to 7 funds in the third quarter. KRG delivered a 16.04% return in the past 12 months.

The top 10 stocks among hedge funds returned 231.2% between 2015 and 2020, and outperformed the S&P 500 Index ETFs by more than 126 percentage points. We know it sounds unbelievable. You have been dismissing our articles about top hedge fund stocks mostly because you were fed biased information by other media outlets about hedge funds’ poor performance. You could have doubled the size of your nest egg by investing in the top hedge fund stocks instead of dumb S&P 500 ETFs. Here you can watch our video about the top 5 hedge fund stocks right now. All of these stocks had positive returns in 2020.

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best innovative stocks to buy to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website:

Disclosure: None. This article is originally published at Insider Monkey.