U.S. REITs – Opportunities Have Existed

chart01With the constant threat of the Federal Reserve to raise interest rates, investors have been disappointed in the prices of the shares. Stocks, especially ones from weaker sectors, have gone through periods of market volatility that depressed prices. That does not mean that opportunities have not existed.

We do not doubt that this is one of the best performing years for the REIT looking at it from an operational point of view. So far in 2015, we have not seen an FFO of all listed equity REITs grow above 30 percent as it did in 2014, but the equity REITs have continued to grow since the year 2010. In the third quarter of 2015, the FFO grew around 13 percent.

chart02Investors that are looking to make only a stable income have been content. They have seen third quarter distributions increase by 14 percent in Q3. Also, a few stocks are even yielding between 10 and 20 percent.

The market volatility has created a disconnect between net asset value and the share price that activists want to take advantage of. They seek to unlock the net asset value by forcing property sales, mergers, or even the company sales. A recent example would be activist Land & Buildings and the merger between the companies American Residential Properties and American Homes 4 Rent.

Other investors have demonstrated their interest in REITs via non-exchanged trade REITs. For example, Fundrise, a real estate crowdfunding website, has recently made an offering available that oversubscribed by more than 400 percent.

Sources:American Homes 4 Rent (NYSE:AMH), American Residential Properties, Inc. (NYSE:ARPI), REIT.com

Disclaimer: This newsletter is not engaged in rendering tax, accounting, or other professional advice through this publication. No statement in this issue is to be construed as a recommendation to buy or sell any security or other investment. Please do your own due diligence before making any investment decision. Some information presented in this publication has been obtained from third-party sources considered to be reliable. Sources are not required to make representations as to the accuracy of the information, however, and consequently the publisher cannot guarantee accuracy.

Disclosure: The author has no positions in any shares mentioned, and no plans to initiate any positions within the next 72 hours.

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