If the U.S. real estate cycle lasts an average of 18 years, we can say that Urstadt Biddle Properties is about to complete an entire cycle distributing increasing dividends. Originally founded in 1969, the shopping center REIT was reorganized in 1997. The following year it became a publicly traded company. Since then, the company has increased their dividends every year, even during the Great Recession. Only 10% of our equity REIT roster boasts a record that is equivalent to or better than this one, so it is definitely worth putting this company on your radar.
A Few Quirks
Urstadt Biddle is a small cap REIT with a few interesting quirks worth mentioning. First of all, the company has been structured so that the senior executives have majority control of the company. They created a second type of stock (class A common stocks) for investors in general. Although they are the majority of the shares, Class A shares only have 1/20th of the voting power of regular common stocks. However, class A shares have rights equal to common stocks when it comes to distributions. In the end, chairman Charles J. Urstadt and CEO Willing L. Biddle retain approximately two-thirds of the voting power, which protects against activist attacks.
Second, the company has a completely different financial calendar from other companies. Their fiscal year ends on October 31. Although this shouldn’t affect their performance, it does mean their financial data is not in sync with almost all of the remaining equity REITs, who end their fiscal year on December 31.
A third peculiarity is the company’s concentration in the New York tristate area, outside New York City. The company has 73 properties anchored by supermarkets, wholesale clubs, and other local retailers. They are in infill markets, which are harder to penetrate, but, once they did, they have maintained high rates of occupancy. They have recently suffered a drop in occupancy due to vacancy of some properties.
Shopping Center REITs are Doing Better than Mall REITs
When compared to malls, shopping center REITs are enjoying a much smoother ride. Investors have competed to buy shopping center REITs. Their dividend yields have been below the average REIT.
Regional malls have been declared dead by many due to e-commerce, which doesn’t seem to be happening with grocery anchored shopping centers. While Amazon has always presented itself as a threat to retail, I haven’t bumped into anyone saying grocery stores are doomed. At least, not yet.
But even if that is the case, Urstadt has one of the highest average rents among shopping center REITs, which serves as a buffer for potential shakeouts. The company has really managed to position itself in robust lease markets.
In summary, Urstadt has yielded slightly above average, perhaps because of its lower market cap and quirks. AFFO multiple has been at 18x, so this definitely isn’t a bargain, but it can be a fair entry point to the sector.
Source: Urstadt Biddle Properties Inc.(NYSE:UBA), Fast Graphs, Yahoo!Finance
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