U.S.REITs: Data Center Up, Self Storage Down

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In a week during which several REITs have released their Q1 results, REIT stocks were slightly up. While data center stocks were the best performing sector, self storage was the worst. This week’s highlight was the merger between two office REITs.

Among data center REITs, CoreSite Realty shares saw a 5.2% increase in the last week when the company announced stronger results for the year. They also saw a 4% increase in their 2015 FFO per share guidance. The FFO multiple of the $2.3 billion market cap company is currently around 22 times.

For yet another week, self storage stocks fell. We’ve been noticing the formation of a negative sentiment against this sector. Despite the high multiples, this is the first time we have seen a real movement to dump the stocks, which fell, on average, by 10% in April.

For instance, Public Storage, the largest self storage REIT, saw a 6% increase in dividends during the last week, yet this wasn’t enough to excite the public. Despite the good Q1 results, their shares were down by almost 5%. Rather than investing in the common, many investors have opted to invest in their preferred stocks.

However, last week’s highlights definitely involved office REITs. Cousins Properties and Parkway Properties entered into a stock to stock merger where Parkway shareholders will receive 1.63 shares of Cousins stock for each share of Parkway stock they own. Following its merger with Cousins Properties, Parkway shares went up by 9.2%, while Cousins shares went down by -0.3%.

Right after the merger, the Houston assets will be spun off into a new publicly traded REIT called HoustonCo. The merger will produce a larger Cousins, which will focus on the Sun Belt markets, while excluding exposure to energy markets. HoustonCo will be an independent and internally managed REIT led by some Parkway executives.

On a final note, the shares of Investor Real Estate Trust plummeted by 13% when the activist Land and Buildings went short. L&B believes IRET has 35% downside due to North Dakota’s struggling energy market and a weak apartment market.

Source: CoreSite Realty Corporation(NYSE:COR),Public Storage(NYSE:PSA),Cousins Properties Incorporate(NYSE:CUZ),Parkway Properties Inc.(NYSE:PKY),Investors Real Estate Trust(NYSE:IRET)

Disclaimer: This is not a recommendation to buy or sell stocks. The highest-yield stocks are not necessarily the best portfolio investment choice. The purpose of this report — which is essentially a snapshot of information available on April 29, 2016 — is to reduce your stock analysis by enabling you to compare stock and sector performance. Please do your own due diligence before making any investment decision.

As of March 31, 2016, the equity REITs are constituent companies of the FTSE NAREIT All REITs Index. Companies whose equity market capitalization is lower than $100 million have been disregarded.

This report 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. 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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