FrontView REIT - Trim / Sell Decision at ~$19.60 per share. The stock has continued to do well, gaining ~8% since Q1 earnings. After much hand-wringing, I have decided it’s worth trimming here from what was a large position (for me) to a “normal sized” ~4% position.

Decision to trim really driven by valuation. Now trades at a ~7% cap rate, which is below where they’ve been acquiring properties, and a ~15x AFFO multiple. FVR went from trading at a discount to peers to now trading at a premium to NTST / FCPT, on parity with EPRT, and just a ~1x discount to ADC. Reflects a ~8% premium to my mid-point NAV / fair value estimates and near the high-end of my range.

I also think there is a healthy amount of risk / uncertainty around interest rates if inflation ends up increasing significantly, which will affect the rate-sensitive net lease REIT sector.

On the other hand, things are just starting to get good for a net lease REIT once they trade at a premium to NAV. This allows them to tap into the inherent reflexivity of REITS where trading at high equity values / premium to NAV allows for NAV and earnings accretive external growth by issuing equity to buy assets. This is particularly true for a small REIT like FVR where a limited number of acquisitions and the high G&A loan relative to their NOI base can result in quite attractive growth.

In addition, the underlying business model is not super economically-sensitive so absent a major tenant credit event, a weak economic environment is not a huge headwind. And if it results in rates declining, could even be a tailwind to net lease property values.

Plus I don’t have a lot of great, cheap ideas I am excited about currently so I will be sitting of the capital for a little while at least and crystallizing a capital gain and tax bill to sit on my hands never feels good.

So I’ve decided that on balance, I should take some chips - and risk - off the table. I am trimming effectively all of my gain and about 20% of my original investment.