Update On Our Big Five REITs And The Markets

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Hey everyone, Tim Melvin here with an update for Real Income Free subscribers. Let’s dive into some major developments in the market, revisit the Big Five Strategy (you can get the full list, for free, of all five REITs and why you should own them right here), and highlight three of the five REITs I believe are must-own investments right now. We’ll cover the remaining two next week.

Major Market Developments

1. DeepSeek’s AI Breakthrough – A Real Threat or Misdirection?

One of the biggest stories this week is China’s DeepSeek unveiling an AI model that allegedly rivals OpenAI, Claude, and Galaxy. Here’s the twist:

• They claim to have done it without high-end chips, massive data centers, or substantial GPU resources.

• The project supposedly cost only $6 million—a fraction of what U.S. tech giants spend.

• The skepticism: There are allegations that China may have either stolen OpenAI’s source code or found a way around U.S. semiconductor sanctions.

• The bigger picture: If China is serious about AI dominance, whoever leads in AGI (Artificial General Intelligence) could also lead in quantum computing. The winner dictates the future.

2. The Fed Meeting – No Surprises

As expected, the Federal Reserve held rates steady with no major changes. Jerome Powell emphasized:

• GDP grew 2.4% last quarter.

• The job market remains strong with moderate wage growth.

• The Fed will stay the course, signaling no immediate rate cuts.

Meanwhile, President Trump took to Truth Social, arguing he knows interest rates better than Powell and will take steps to lower inflation. However, monetary policy must remain independent to avoid future economic instability.

3. Trump’s Tariffs on Mexico & Canada – A Trade War Brewing?

Trump announced a 25% tariff on imports from Mexico and Canada, citing:

• The fentanyl crisis and trade deficits as key reasons.

• Historically, trade deficits don’t always indicate economic weakness—they often mean a country is wealthy enough to buy more than it exports.

• The real concern: This is the first time punitive tariffs are being placed on U.S. allies, so market reactions could be volatile.

4. The Washington D.C. Plane Crash

A tragic collision between an American Airlines flight and a U.S. military Black Hawk helicopter resulted in 67 fatalities. Right now, there are too many theories and too few facts. I’ll wait for more information before drawing any conclusions.

The Big Five Strategy – First Three REITs

At Real Income, we focus on income-producing real assets—particularly REITs, energy, and infrastructure. This week, Blackstone made a major move in commercial real estate, signaling a bottom in the market.

John Gray, Blackstone’s President, stated:

"Office real estate has bottomed—especially in Class A properties."

KKR echoed similar views, suggesting it’s time to embrace risk in commercial real estate. With that backdrop, here are three REITs from our Big Five list that provide strong income and growth potential:

1. Boston Properties (BXP) – The King of Class A Offices

• Largest owner of premier office buildings in the U.S.

• 184 properties, 89% leased (far above industry average).

• Long-term leases with an average of 7.5 years remaining.

• Key markets: Boston (97% leased), NYC (92%), DC (93%), LA (86%), SF/Seattle (83%).

• Tenant base: Salesforce, Google, Bank of America, Biogen—blue-chip tenants unlikely to default.

🟢 Investment Case:

Class A office space is rebounding. No new major supply is coming, which means rents will rise, and demand will remain strong. BXP is a bargain at current levels with a 5.4% dividend yield.

2. Digital Realty Trust (DLR) – The Data Center Giant

• Largest data center REIT with 3000+ MW of capacity globally.

• Presence in the U.S., Europe, Asia, Latin America, and Africa.

• Key tenants: Oracle, IBM, Meta, AT&T, Lumen, LinkedIn—rock-solid rent collection.

• AI, cloud computing, and digital expansion are driving demand.

🟢 Investment Case:

DeepSeek’s AI claim is questionable—AI needs data centers.The surge in cloud computing and AI-driven workloads will drive up data center rents. DLR is yielding nearly 3% and is undervalued after recent weakness.

3. Equity Residential (EQR) – Luxury Apartments in Prime Markets

• Founded by Sam Zell—a legendary real estate investor.

• Owns 84,000+ apartment units across top-tier U.S. cities.

• Tenants earn an average of $165,000/year, ensuring high rent stability.

• Markets: NYC, Boston, LA, San Francisco, Seattle, Denver, DC.

• Track record: 11% annual returns over 30+ years.

🟢 Investment Case:

The U.S. has a housing shortage. People stay in apartments longer, and high-end properties see strong demand. EQR is yielding 3.86%, offering stable income and long-term growth.

Final Thoughts – Why Now?

The real estate market is setting up for a massive recovery:

1. Blackstone & KKR are buying aggressively—smart money smells a bottom.

2. REIT valuations remain deeply discounted (~75% NAV in our paid portfolio).

3. Rents and occupancy are improving, especially in Class A office and multifamily.

I’ll cover the final two REITs next week. If you’re on the fence, start with these three and consider joining Premium, where we’re actively investing in undervalued real estate. Click here to see how to upgrade!

Enjoy the rest of your week! I’ll be back if there’s anything crazy, weird, or exciting happening.