U.S. REITs: Our Best 2016 Month Yet


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March of 2016 has been an enormous success for equity REIT stocks. In total, equity REIT stocks rose by 9 percent in value, which comes as welcome news after the unpleasant seesawing of recent times. However, it is important to note that like always, some equity REITs have benefited more from the surge than others. For example, Manufactured Homes managed no more than 5.6 percent, whereas Timber managed a much more respectable 16 percent.

Regardless, two top performers were Ashford Hospitality Prime and CorEnergy Infrastructure Trust, which have long been popular choices for speculative investors because of their volatile prices. In brief, CorEnergy managed to claim the top position with an astonishing rate of return of 52 percent, which was fueled by two hectic weeks of activity after it released its 10-k in the middle of March. However, the reasons behind the rapid increase remain unclear at the moment. After all, although CorEnergy’s dividend yield remains one of the highest in its field at 15 percent, the performances of its biggest clients, Ultra Petroleum and Energy XXI, remain lackluster because oil prices remain low.

Likewise, Ashford Prime’s stock prices have seen enormous increases in spite of somewhat mixed circumstances. On the one hand, its stock is currently trading at 6 times its AFFO compared to 5 times its AFFO not so long ago, which is still low enough to permit room for further increases in the stock price. On the other hand, it is currently caught up in a struggle between its current external leadership led by Montgomery J. Bennett and Sessa Capital led by John Petry.

In short, the struggle has revolved around governance issues, including a $100+ million termination fee that Bennett has imposed on Ashford Prime in case its shareholders choose to remove its current team of advisors, though this is but one of the concerns that have been brought up by Petry. To correct these problems, Petry wants to bring in new directors to replace the current directors, which will be decided by the shareholders in the annual meeting.

Currently, investor uncertainty regarding the future of Ashford Prime is undoubtedly keeping its stock prices low, particularly since Sessa Capital has little experience as an activist. As a result, it remains to be seen whether the REIT stock can continue rising higher for the foreseeable future.

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Source: Ashford Hospitality Prime, Inc(NYSE:AHP), CorEnergy Infrastructure Trust(NYSE:CORR), Ultra Petroleum Corp.(NYSE:UPL), Energy XXI Ltd.(NasdaqGS:EXXI)

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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