Manufactured Home REITs Have Experienced Good Gains

chart01.pngUnder the perception that Janet Yellen will not raise interest rates for a while, many investors have been searching for yield. Popular REITs like net lease stocks appreciated, but we have started to take notice in interest on other REIT sectors. For instance, manufactured homes have experienced some good gains.

There are three stocks that make up the manufactured home REIT sector. These stocks had around a 10% return last June, which was more than the average REIT. Even the undervalued UMH, whose portfolio is mainly focused on fracking regions in Pennsylvania and Ohio, have also rallied by 13% in June. Not to mention, that they are now accumulating over 20% a year to date return. The stock is yielding almost 6% and its dividends have not been covered yet.

As a result, all three of these stocks seem to be fairly priced, and we are not currently seeing any upside right now. It is still possible that Yellen could lend a hand to REIT stocks again, but this is not something that I would consider an investment strategy. With her short history, that is mainly made up of flip-flopping, it is fair to say that the Fed’s opinions have been swinging to the moods of the world’s economy.

Equity LifeStyle Properties has already released Q2 results. They have shown that the market fundamentals are continuing to hold strong. For manufactured business, which includes the majority of revenues, occupancy has increased for the 27th consecutive quarter. Plus the monthly rent base is continuing to trend upwards. For their Recreational Vehicle business, the same-store NOI rose by 6%.

Both Sun Communities and UMH Properties will release their Q2 results this week. Sun Communities are coming from the major acquisition of Carefree Communities. This caused an increase in its number of communities by approximately 44%. This will be the first time we will review the consolidated results of such a large company.

To sum up, I would wait for the Sun Communities and UMH Properties Q2 results. However, this time around I am not hopeful that there will be a window of opportunity.

Source: Sun Communities Inc.(NYSE:SUI), Equity LifeStyle Properties, I(NYSE:ELS), UMH Properties Inc.(NYSE:UMH)

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 is long FCH, XHR, CLDT, and PEB.

An Industrial REIT Opens Q2 Season With Good News

chart01.pngLast Tuesday, Prologis, the largest industrial REIT with a market cap of $27 billion, officially opened the Q2 season for U.S. equity REITs with good news. Although the stock fell flat following the release, the results were better than expected, crowning a year-to-date return of about 21%. For us, one of the most important results were upping the same-store NOI midpoint growth for 2016 to 5%.

The 2016 increase of same-store NOI is an indication that industrials have not yet their reached saturation point. The 5% growth is just slightly lower than last year’s numbers. Same-store metrics allow investors to determine what portion of growth has come from existing properties and what portion can be attributed to the opening of new stores. Prologis, with its large number of properties, gives us a fairly clear indication that the industry growth is still coming from within.

Investors realized that the company’s exposure to the UK was minimal, a realization that was reinforced by CEO Hamid Moghadam during the Q2 release call. When the Brexit results were announced, the stock fell more than 5% in the following days before and then recovering to the current level of $51. 28% of Prologis’ square feet are located abroad, so initial concerns regarding the potential impact on the company were valid. However, it turns out that the UK actually makes up less than 3% of their portfolio.

You really cannot go wrong with Prologis. This is a global, large cap with lower volatility and a diversified portfolio that has experienced management and enjoys an investment grade credit rating. However, with the recent rally, it is becoming increasingly harder to extract any upside and stock appears to be in the right place.

In conclusion, we cannot say for sure that Prologis is right for your portfolio, but we definitely see Prologis as a good fit for anyone looking for a lower return, lower risk investment.

Source: Prologis, Inc.(NYSE:PLD)

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 is long FCH, XHR, and CLDT.

Despite Management’s Bearish Views, This Hotel REIT Gained 10%

chart01Hotel REITs shone brightly last week. It was by far the best performing sector with an average 1-week return of nearly 5%, as opposed to a REIT average of 1.7%. One of the reasons was LaSalle Hotel Properties, which released Q2 results. The stock was the best performing stock of the week, reaching 10% appreciation.

LaSalle Hotel Properties grossed $245 million in proceeds from the sale of its hotels, but the hotel REIT doesn’t plan to put it to work. Instead of investing in new properties or redevelopment, the company is planning on reducing leverage and improving its already good debt profile. Why is the company not taking advantage of opportunities and spending less in capital expenditures?

LaSalle’s lack of activity is a major letdown in an industry that has likely passed its cycle peak. This means, since the lodging industry itself lacks strong catalysts, the lack of internal action will not help LaSalle stock either. The management has a bearish view on the market and has repeatedly said that demand is decelerating, while supply is increasing. In the end, they wanted to see property prices come down, which isn’t happening.

Having been granted investment grade credit rating, the company is improving its already enviable debt metrics in the industry. Net debt to EBITDA is one of the lowest at 2.7 times, net debt to total market capitalization is around 26%, and the debt maturity profile is staggered, without any meaningful payments in the next three years. I want to think, that by doing this, the company is getting ready for a major transaction, but it’s probably just wishful thinking.

With significant exposure on the West Coast, the company is on track to capitalize on the region’s tailwinds. In Q2, its Los Angeles RevPAR increased by 17%, whereas most of the remaining regions were relatively okay. The company also has significant exposure to Boston, San Francisco, and San Diego. On the other hand, its New York RevPAR has decreased by 7%. In the end, the portfolio’s positives outweigh the negatives.

LaSalle is a midcap hotel with one of the highest multiples among its peers. The multiple is 14 times its estimated 2016 AFFO, while the average for hotels is about 10 times. It’s worth mentioning that this is still lower than the whole U.S. equity hotel average and its share price is 19% lower than its 52-week high. For that reason, the stock should have some room to grow.

In conclusion, we are monitoring LaSalle stock, but like the management, we decided to step aside and watch. Instead, we are prioritizing hotels that are actually in action.

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 July 22, 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.

Source:LaSalle Hotel Properties(NYSE:LHO)

As of May 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 is long FCH, XHR, CLDT.