David Auerbach, CIO of Hoya Capital, spent over a decade trading REITs at Green Street Advisors in Dallas before getting a front-row seat to the ETF industry's explosive growth at Esposito Securities. Now he runs two REIT-focused ETFs—HOMZ and RIET—managing over $135 million. In this episode, David breaks down the two biggest misconceptions advisors have about REITs: that they're all high yield and that they're all interest rate sensitive. He makes the case that most passive REIT ETFs are far more concentrated than people realize, with just a handful of large-cap names yielding 2–3% dominating the top holdings.
About David Auerbach and Hoya Capital
David's career arc traces the growth of both the REIT and ETF industries. Starting at Green Street Advisors—one of the premier REIT research shops—he watched the REIT universe expand from a niche asset class to a major institutional allocation. His subsequent years at Esposito Securities put him at the center of ETF creation and seeding, working with issuers who were unknown at the time but are now household names. After founding experiences with thematic REIT ETFs and ringing closing bells at both the NASDAQ and NYSE, David joined Hoya Capital in September 2023 when the firm managed roughly $75 million. Today, assets have nearly doubled to over $135 million across two funds.
Hoya Capital was founded by David's partner, a Georgetown alum who built an influential REIT research platform on Seeking Alpha over the past decade. The combination of deep sector research and David's trading and ETF operations expertise gives Hoya a differentiated edge in the REIT ETF landscape.
Investment Strategy and Approach
HOMZ and RIET represent two distinct ways to access real estate: growth and income, respectively. HOMZ tracks the U.S. housing market broadly—homebuilders, residential REITs, service providers, brokers, agents, and home improvement retailers like Home Depot and Lowe's—all wrapped into a single ETF that captures the structural housing supply shortage. RIET takes a fundamentally different approach from passive REIT benchmarks, deliberately overweighting small caps, mid caps, mortgage REITs, and REIT preferred stocks to deliver a 10%+ annualized monthly dividend across roughly 100 holdings with no single position above 1.5%.
The selection process for RIET incorporates a quality score ranking across management, operational history, communication, and transparency, combined with strict weight caps and geographic and subsector diversification constraints. The portfolio also allocates approximately 10% to liquid REIT preferred stocks—a unique feature David believes no other REIT ETF currently offers—adding several percentage points of yield to the bottom line.
Deeper Dive: Insights from the Full Conversation
Beyond the headline strategy, the full conversation between Brad and David Auerbach covered several additional themes worth highlighting for advisors and investors.
On Process and Philosophy
David described RIET's portfolio management using a memorable analogy: "Our focus really kind of plays like the NCAA basketball tournament. Last in, first out type of situation. So really for us, it's the question of the 5 to 10 names at the top or bottom range. Which are those that we really need to look at closely? Because the guys that are toward the top of that portfolio aren't going anywhere. But it's the ones that may be going through some issues—how do we replace them effectively to cover the geography, the sector, the yield, the story?"
On combating the misconception that all REITs are interest rate sensitive: "We're using a REIT-owned property right now to have this conversation. Did you think about where interest rates were before you hit the record button? We use REIT-owned properties every single day of our lives, not thinking about where the 10-year Treasury or the fed funds rate is." David identified 4% on the 10-year Treasury as the key threshold—below 4% benefits REITs, above 4% puts them out of favor relative to fixed income.
Market Context and Positioning
David highlighted a significant M&A wave sweeping the REIT sector: 17 different REITs have merged or pursued strategic alternatives in just the past four months. The driver? Private equity firms finding it cheaper to acquire existing REIT platforms of 100+ properties at discounts to net asset value than to build from scratch in today's construction environment. He pointed to Cohen & Steers' recent Barron's interview highlighting Digital Realty and Welltower—but the name that excited David most was Empire State Realty Trust, trading at $6.50 per share. "Wouldn't you think the Empire State Building is worth more than $6 a share, the most famous office building in the world?"
On the housing supply thesis behind HOMZ: "Until we see the homebuilders deliver a lighter product—instead of a $500,000 delivery, a $300,000 delivery—until we see manufactured housing becoming more respected, the supply-demand imbalance persists." David noted the growing single-family rental market and emerging rent-to-own models as additional structural tailwinds for the housing sector.
Notable Insights
"The top 10 REITs that make up most of the passive REIT ETFs—they're like 2% yield, 3% yield. So you're really not getting that much bang for your investment. When I think about REITs, anything that happens to the stock price is the extra cherry on top of the sundae. We focus on the income side."
"The world of REITs is like your graduating class of high school. You have the valedictorian, the salutatorian—the REITs in the S&P 500 and dividend champions. You have the bottom 10%—the bullies, the troublemakers, the overlevered REITs. It's the middle part of the curve—the 150 REITs that people don't know—where the great stories are."
"Office only represents four or five percent of the portfolio weightings these days across all these sectors. But they get 90% of the headline attention. REITs have this misconception that they're all high yielding, all interest rate sensitive. I disagree."
Key Takeaways
- RIET deliberately inverts the weighting of traditional REIT benchmarks like VNQ—overweighting small caps, mid caps, mortgage REITs, and preferred stocks to deliver 10%+ annualized monthly dividends across ~100 holdings.
- No single position in RIET exceeds 1.5% weight, and the fund is the only REIT ETF combining both common and preferred stocks in a single wrapper.
- HOMZ captures the structural U.S. housing supply shortage through homebuilders, residential REITs, service providers, and retailers in one comprehensive ETF.
- The 4% level on the 10-year Treasury is the key inflection point for REIT investor sentiment—below 4% favors REITs, above 4% creates headwinds.
- 17 REITs have merged or pursued strategic alternatives in just four months, driven by private equity acquiring platforms below net asset value.
- HOMZ and RIET are designed as complements to traditional REIT exposure like VNQ, not replacements—filling the gaps that large-cap-dominated passive funds leave open.
What This Means for Advisors
For financial advisors evaluating REIT exposure for client portfolios, this conversation with David Auerbach challenges two deeply held assumptions: that REITs are uniformly high-yield and uniformly interest rate sensitive. The reality is that passive REIT ETFs are far more concentrated than most advisors realize, with a handful of large-cap names driving performance and suppressing yield. RIET and HOMZ offer a way to access the overlooked middle of the REIT universe—small and mid-cap names, mortgage REITs, and preferred stocks—where income and value opportunities are more abundant.
The themes of income investing, housing supply dynamics, and REIT sector consolidation discussed in this episode are particularly relevant as advisors look for yield alternatives in a rate environment where the 10-year Treasury hovers near that critical 4% threshold.
Listen to the Full Episode
This article is based on an episode of Behind the Ticker, hosted by Brad Roth, Founder and CIO of THOR Financial Technologies. For the full conversation with David Auerbach, including additional nuances and details, listen on Spotify, Apple Podcasts, or watch on YouTube.