First Industrial: Third In The Pack

logoFirst Industrial Realty (NYSE:FR), founded in 1993 and currently the third largest company in the industrial REIT pack, has seen improvements in its logistics market dynamics over the last few years. Pounded during the great recession, during which time funds from operations went negative and share prices plummeted from $ 32.13 (September of 2008) to a mere $1.76 (March of 2009), First Industrial’s dividend distribution went on hiatus for several years, until 2013. First Industrial owns 629 industrial properties located in 25 states, whose total amount of gross leasable area is about 63 million square feet.

The company focuses its strategy on top industrial real estate markets in the United States, especially where the fundamentals have been favorable, i.e., increasing demand and short supply. They also try to find niches that can benefit from global trade and local consumption growth. Such fundamentals have enabled First Industrial to thrive since 2010. Occupancy, cash rental and same-store net operating income have increased from 85 to 94, -15 to 2 and -3 to 6 percent respectively. The top markets have also been those of DCI Industrial — Southern California and Chicago — while other main markets have been Central Pennsylvania and Minneapolis.

Metrics01

Metrics02

In the first quarter of 2015, in comparison with the same period of 2015, First Industrial has demonstrated mixed results among its peers — on the one hand:

  • Dividend yield of 2.4 percent has been one of the lowest.
  • Debt-to-capitalization of 35 percent has been one of the highest.
  • Funds from operations per share tanked by 18 percent because of interest rate protection write-off.

Presence

On the other hand:

  • Dividend-per-share growth of 25 percent has been one of the highest.
  • Dividend payout of 50 percent has been one of the lowest.

First Industrial has definitely not been lagging behind its peers like DCT Industrial — which has not increased dividends for six years — but it still is not an obvious purchasing choice in the industrial REIT sub-sector. I would continue monitoring.

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Source: First Industrial Realty, Fast Graphs


Written by Heli Brecailo

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.​

QTS Realty – Dilution does not alter outlook

Analyzing QTS Realty Trust (NYSE: QTS) is challenging given the brief history. A small market capitalization company in the data center REIT space, QTS was listed on the New York Stock Exchange in October 2013. A potentially larger obstacle is to build a great future, which is not an issue for QTS’s management, despite bumps in the middle of the road.

Q1 15 Performance

In their Q1 2015 earnings report released Monday, April 27, QTS announced that the March issuance of an additional 5 million shares diluted FFO. The midpoint 2015 Alternate FFO guidance was reduced from $2.29 per share to $2.12 per share. The total fully diluted shares and limited partnership units outstanding increased from 37.5 million to 42.8 million.

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However, this event did not alter much the price target for 2015. Price-to-FFO has been approximately 17 which is in between year-end price-to-FFO for 2013 and 2014 and close to its peers’ median. The company’s dividend yield of 3.5 percent is also on par with their peers’ median.

Based on the above information, QTS has been an average performer in the data center REIT sector.

Summary

2013 2014 2015P
Dividends declared per common share, $ 0.24 1.16 1.28
Q1 Dividend, $ N/A 0.29 0.32
Listed on the NYSE 10/9/2013
Dividend payout ratio, in percent 74.5 62.2
Weighted average shares – diluted (CS&OP) 36,794,215 37,133,584 42,812,502
Dividend yield, in percent 3.9 3.4 3.4
FFO, $ ‘000s 45,964 70,958
FFO per share, $ 1.25 1.91
Alternate FFO (Operating), $ 000s 49,512 74,145 89,200
Alternate FFO per share (Operating), $ 1.35 2.00 2.12
AFFO, $ ‘000s 47,408 69,236
AFFO per share, $ 1.29 1.86
Debt to Implied Enterprise Value, in percent 27.6 33.4
Revenues – Q1, $ 000’s N/A 48,943 61,386
Revenues – Q1, in percent N/A N/A 25
Share Price on 31 December, $ 24.78 33.84 37.48
P/FFO on 31 December (Alternate) 18.4 16.9 17.7
 2015P=2015 Projections

Source: QTS Realty Financials and Q1 2015 Presentation


Written by Heli Brecailo

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.​

Public Storage – King of Self-Storage (Series 5 of 5)

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As the world’s largest owner and operator of self-storage facilities, Public Storage (NYSE: PSA) is the de-facto leader of the industry. Structured as a REIT, PSA boasts an extensive network of 2,300 facilities across 38 states in the US. This presence has created a very strong and recognized brand. PSA wisely leverages their size to maximize economies of scale and gain access to capital. In a fragmented market where creating a new location is fairly straightforward, these benefits facilitate the company’s continued expansion.

Overall, PSA’s stock has been a solid investment. As a large, well established company, PSA’s growth rate has predictably lagged its smaller cap peers. However, the dividend payout has never been decreased since its IPO in 1996. As a sign of PSA’s strength, the dividend has increased an average of 21 percent per year over the past five years. Investors have also benefited from a lower beta coefficient enabling the stock to weather down markets.

Leaders of their sector and industry earn privileges few companies in the US can boast. In examining PSA’s financials, the company has an impressive debt-to-enterprise ratio of less than one percent. Unlike most REITs, the company chooses to issue preferred shares as a method of financing. Although this comes at a higher cost, PSA justifies the strategy with the following points:

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  1. REITs, by law, must distribute a significant portion of operating income. Subsequently, conventional debt can become difficult to repay with operating income
  2. Refinancing risks do not exist since sinking fund requirements, maturity date and redemption issues are eliminated
  3. PSA retains the option of redeeming preferred shares at a specified future date.
  4. Preferred shares are not subject to covenants
  5. Dividends on the preferred shares can be applied to satisfy our REIT distribution requirements.

The credit ratings on their preferred shares are “A3” by Moody’s, “BBB+” by Standard & Poor’s and “A” by Fitch Ratings.

Regarding valuation, PSA’s has been on par with previous years. Over the past three years, the Price-to-FFO multiple has fluctuated between 20.0 and 23.7. Although historically high, PSA’s current Price-to-FFO multiple is within its historical range. In addition, historical yield has been hovering around 3.0.

Takeaway

PSA can be a solid addition to balance a portfolio.

Summary

2011 2012 2013 2014 2015P*
Dividends declared per common share, $ 3.65 4.40 5.15 5.60 5.60
Q4 Dividend, $ 0.95 1.10 1.40 1.40
Dividend payout ratio, in percent 65 69 72 72
Dividend yield, in percent 2.7 3.0 3.4 3.0
FFO per share, $ 5.67 6.31 7.53 7.98 8.68
FFO per share (Q4 only), $ 1.50 1.86 2.13 2.17
Alternate FFO per share (Core), $ 6.68 7.44 8.09
AFFO per share, $ 5.65 6.41 7.18 7.73
Revenues – Total, in percent 6.5 5.2 7.6 10.8
Revenues – Same Store, in percent 4.6 4.9 5.3 5.4
NOI – Same Store, in percent 6.6 7.9 8.2 6.7
Year-end Occupancy – Same Store, in percent 89.6 91.4 91.8 92.5
Share Price on 31 December, $ 134.46 144.96 150.52 184.85 200.24
P/FFO on 31 December 23.7 23.0 20.0 23.2 23.1
 *2015 Projection

Next week I’ll post the closing remarks for the self-storage REIT sector.


Written by Heli Brecailo

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.​

Does CubeSmart suffer from middle child syndrome with reason? (Series 4 of 5)

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As a middle child, it can often be difficult to get attention, especially as the third in a family of four children. The first typically gets more attention as there were not any siblings around vying for attention and the last gets coddling.

Does it get better if it changes its name to a tricky one?

That’s how I feel about CubeSmart (NYSE:CUBE). As of March 31, 2015, the Company’s market capitalization is US$3.9 billion. This is slightly higher than Sovran Self Storage, but not as high as Extra Space’s and Public Storage’s. However, that doesn’t mean CubeSmart’s not a quality company. It is a solid company that has strategically grown, which is ideal for a dividend growth investor.

Previously known as U-Store-It Trust, it changed its name to CubeSmart in 2011 to enjoy the branding benefits of joining the “big names” club, especially in a highly fragmented industry where customer service is a big differentiator. Furthermore, it takes pride for having re-positioned the portfolio, moving away from slow growth and less population, into high growth and more populated core markets such as New York, Washington DC, and Philadelphia. The result is a high quality, urban-oriented portfolio, which tends towards millennials who live in tight blocks and boomers who downsize to smaller homes.

As the portfolio changed, average occupancy increased from mid-seventy to ninety percent. Currently it is at an all-time high. Additionally, it has positioned itself in the highest income household neighborhoods versus its peers.

Since 2011, CubeSmart has checked all the following boxes:

  • 2-digit total revenue growth
  • 2-digit FFO growth rate
  • 2-digit dividend growth
  • Conservative dividend payout ratio
  • 6 percent average same store revenue growth
  • 8 percent average net operating income growth

2015 Projected Growth Rates 

  • 7 percent net operating income growth
  • 6 percent same store revenue growth
  • 4 percent FFO growth
  • 6 percent dividend

CubeSmart’s debt profile has improved over time and is currently on par with its peers. Nonetheless, the average interest rate of 4.0 percent is relatively high; Sovran’s is 3.7 and Extra Storage’s is 3.4 percent. Public Storage’s debt is less than one percent of its total market capitalization. The average maturity is six years. Most debt is fixed-rate and unsecured. The Company has mid-tier, investment-grade credit ratings from both Standard & Poor’s and Moody’s.

Although CubeSmart has seen capitalization rates of quality acquisitions decrease to approximately five percent, it has kept a good pace of acquisitions. Over the last three years, it has added 3.9, 1.5, and 2.6 million square feet to existing properties (2014, 2013 and 2012 respectively). As of December 31, 2014, the 421 owned self-storage facilities encompassed an aggregate of approximately 28.6 million rentable square feet.

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Valuation wise, price-to-FFO is on par with the last four year’s year-end price-to-FFO mean, as well as the sector’s mean. The dividend yield is acceptable at 2.8 percent.

The Company will release Q1 2015 financials after the market close on Thursday, April 30, 2015.

Takeaway

Although I like the growth story, there doesn’t seem to be much appreciation upside and the dividend yield is just okay. The middle child will have to do more to excel.

Summary

2011 2012 2013 2014 2015P*
Dividends declared per common share, $ 0.29 0.35 0.46 0.55 0.64
Q4 Dividend, $ 0.08 0.11 0.13 0.16
Dividend payout ratio, in percent 45 47 51 51
Dividend yield, in percent 2.7 2.4 2.9 2.5
FFO per share, $ 0.56 0.71 0.87 1.03 1.17
FFO per share (Q4 only), $ 0.09 0.21 0.21 0.26
AFFO per share, $ 0.65 0.74 0.91 1.08
Debt to total capitalization, in percent 37.3 33.3 32.8 23.8
Revenues – Total, $ 000s 227,245 266,322 318,395 376,963
Revenues – Same Store, in percent 3.6 3.8 7.4 7.2 5.5
NOI – Same Store, in percent 5.7 6.0 9.3 9.6 6.5
Year End Occupancy – Same Store, in percent 79.1 85.1 88.8 90.0
Share Price on 31 December, $ 10.64 14.57 15.94 22.07 23.12
P/FFO on 31 December 19.0 20.5 18.3 21.4 19.8
 *2015P=2015 Projection

Written by Heli Brecailo

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.​

U.S. REIT – Worst Performing Stocks By Sector This Week

Here is a look at the worst and best performing stocks by sector from the last five trading sessions. Note that the list includes all equity REIT stocks, which have been ranked by sector and share price percent change, from lowest to highest.

  • Total 169 Equity REITs
  • Share Price Percent Change – 17 April 2015 vs. 10 April 2015
  • Price-to-FFO, Dividend Yield – As of 17 April 2015
  • Sector’s Price-to-FFO – Median Price-to-FFO by sector
  • FFO in accordance with NAREIT definition from last available quarter (Mostly Q4-2014).
  • Some companies have not published FFO (That explains blank spaces).
WANT TO PLAY WITH THIS RANKING? DOWNLOAD THE EXCEL FILE!
Property Sector Company Ticker Share price percent change Price-to-FFO Sector’s Price-to-FFO Div. Yield
Diversified – Data Center CoreSite Realty Corporation COR (4.1) 19.9 17.1 3.5
Diversified – Data Center CyrusOne, Inc. CONE (2.2) 28.6 17.1 4.1
Diversified – Data Center Equinix, Inc. EQIX (1.5) 2.9
Diversified – Data Center Digital Realty Trust, Inc. DLR 0.1 11.7 17.1 5.2
Diversified – Data Center DuPont Fabros Technology, Inc. DFT 0.2 14.0 17.1 5.2
Diversified – Data Center QTS Realty Trust, Inc. Class A QTS 1.0 17.1 17.1 3.5
Self Storage CubeSmart CUBE (2.8) 21.9 21.9 2.8
Self Storage Sovran Self Storage, Inc. SSS (2.5) 20.7 21.9 3.3
Self Storage Extra Space Storage Inc. EXR (1.9) 26.5 21.9 2.9
Self Storage Public Storage PSA (1.9) 21.9 21.9 2.9
Retail WP GLIMCHER, Inc WPG (3.6) 8.4 18.5 2.8
Retail Retail Properties of America, Inc. Class A RPAI (3.5) 14.7 18.5 4.3
Retail American Realty Capital Properties, Inc. Class A ARCP (3.4)
Retail Acadia Realty Trust AKR (3.0) 27.1 18.5 3.0
Retail Cedar Realty Trust, Inc. CDR (2.9) 15.3 18.5 2.7
Retail Urstadt Biddle Properties Inc. Class A UBA (2.9) 22.0 18.5 4.8
Retail Pennsylvania Real Estate Investment Trust PEI (2.8) 9.1 18.5 3.9
Retail DDR Corp. DDR (2.6) 20.3 18.5 3.9
Retail Agree Realty Corporation ADC (2.5) 14.0 18.5 5.7
Retail STORE Capital Corporation STOR (2.4) 17.8 18.5 4.4
Retail Federal Realty Investment Trust FRT (2.4) 30.8 18.5 2.5
Retail Kimco Realty Corporation KIM (2.4) 16.6 18.5 3.8
Retail Weingarten Realty Investors WRI (2.3) 16.7 18.5 4.1
Retail Taubman Centers, Inc. TCO (1.8) 34.1 18.5 3.1
Retail Urban Edge Properties UE (1.8) 3.4
Retail Brixmor Property Group, Inc. BRX (1.7) 14.4 18.5 3.6
Retail Kite Realty Group Trust KRG (1.7) 13.7 18.5 4.0
Retail Simon Property Group, Inc. SPG (1.6) 19.1 18.5 3.0
Retail Regency Centers Corporation REG (1.6) 20.9 18.5 3.0
Retail Equity One, Inc. EQY (1.5) 25.7 18.5 3.4
Retail Retail Opportunity Investments Corp. ROIC (1.5) 20.8 18.5 3.9
Retail Rouse Properties, Inc. RSE (1.4) 12.6 18.5 4.0
Retail Getty Realty Corp. GTY (1.1) 11.5 18.5 5.0
Retail Ramco-Gershenson Properties Trust RPT (1.1) 90.7 18.5 4.4
Retail General Growth Properties, Inc. GGP (0.9) 18.8 18.5 2.4
Retail Tanger Factory Outlet Centers, Inc. SKT (0.7) 21.5 18.5 3.3
Retail Saul Centers, Inc. BFS (0.7) 21.5 18.5 3.2
Retail Inland Real Estate Corporation IRC (0.6) 10.5 18.5 5.4
Retail Realty Income Corporation O (0.5) 19.2 18.5 4.6
Retail CBL & Associates Properties, Inc. CBL (0.5) 5.8 18.5 5.6
Retail Spirit Realty Capital, Inc. SRC (0.3) 14.8 18.5 5.8
Retail Excel Trust, Inc EXL 0.1 26.4 18.5 4.5
Retail National Retail Properties, Inc. NNN 0.3 18.2 18.5 4.1
Retail Macerich Company MAC 1.4 20.8 18.5 3.2
Health Care Sabra Health Care REIT, Inc. SBRA (3.6) 14.2 17.3 5.1
Health Care Omega Healthcare Investors, Inc. OHI (2.7) 13.9 17.3 5.7
Health Care National Health Investors, Inc. NHI (2.7) 15.9 17.3 5.0
Health Care Universal Health Realty Income Trust UHT (2.1) 18.0 17.3 4.8
Health Care Physicians Realty Trust DOC (2.1) 22.6 17.3 5.2
Health Care Healthcare Realty Trust Incorporated HR (1.9) 17.3 17.3 4.6
Health Care Ventas, Inc. VTR (1.5) 15.7 17.3 3.2
Health Care Healthcare Trust of America, Inc. Class A HTA (1.4) 20.2 17.3 4.3
Health Care New Senior Investment Group Inc SNR (1.4) 17.8 17.3 5.6
Health Care LTC Properties, Inc. LTC (1.3) 17.4 17.3 4.6
Health Care Health Care REIT, Inc. HCN (1.2) 21.9 17.3 4.4
Health Care Medical Properties Trust, Inc. MPW (1.1) 24.6 17.3 6.0
Health Care CareTrust REIT Inc CTRE (0.5) 14.0 17.3 4.8
Health Care Senior Housing Properties Trust SNH 0.2 11.2 17.3 7.3
Health Care HCP, Inc. HCP 1.4 15.4 17.3 5.2
Industrial/Office Empire State Realty Trust, Inc. Class A ESRT (3.4) 20.4 16.0 1.9
Industrial/Office Monmouth Real Estate Investment Corporation Class A MNR (3.2) 18.7 16.0 5.7
Industrial/Office Douglas Emmett, Inc DEI (3.2) 18.5 16.0 2.9
Industrial/Office Rexford Industrial Realty, Inc. REXR (2.8) 20.3 16.0 3.1
Industrial/Office Kilroy Realty Corporation KRC (2.6) 23.4 16.0 1.9
Industrial/Office Alexandria Real Estate Equities, Inc. ARE (2.2) 27.0 16.0 3.2
Industrial/Office Mack-Cali Realty Corporation CLI (2.1) 13.5 16.0 3.3
Industrial/Office Terreno Realty Corporation TRNO (2.1) 27.9 16.0 2.9
Industrial/Office New York REIT, Inc. NYRT (2.0) 10.9 16.0 4.6
Industrial/Office Hudson Pacific Properties, Inc. HPP (2.0) 32.6 16.0 1.6
Industrial/Office DCT Industrial Trust Inc. DCT (1.9) 18.0 16.0 3.4
Industrial/Office Corporate Office Properties Trust OFC (1.8) 20.9 16.0 3.9
Industrial/Office Brandywine Realty Trust BDN (1.6) 12.5 16.0 4.0
Industrial/Office PS Business Parks, Inc. PSB (1.6) 17.4 16.0 2.5
Industrial/Office Easterly Government Properties, Inc. DEA (1.4)
Industrial/Office Parkway Properties, Inc. PKY (1.3) 13.6 16.0 4.4
Industrial/Office Highwoods Properties, Inc. HIW (1.2) 15.1 16.0 3.8
Industrial/Office BioMed Realty Trust, Inc. BMR (1.1) 15.0 16.0 5.0
Industrial/Office City Office REIT, Inc. CIO (1.1) 18.2 16.0 7.2
Industrial/Office Liberty Property Trust LPT (1.0) 13.1 16.0 5.4
Industrial/Office First Industrial Realty Trust, Inc. FR (1.0) 15.7 16.0 2.5
Industrial/Office Equity Commonwealth EQC (1.0) 13.8 16.0
Industrial/Office SL Green Realty Corp. SLG (0.9) 22.1 16.0 1.9
Industrial/Office STAG Industrial, Inc. STAG (0.9) 16.3 16.0 6.1
Industrial/Office First Potomac Realty Trust FPO (0.9) 10.4 16.0 5.3
Industrial/Office Boston Properties, Inc. BXP (0.7) 27.1 16.0 1.9
Industrial/Office Government Properties Income Trust GOV (0.7) 10.0 16.0 7.7
Industrial/Office Franklin Street Properties Corp. FSP (0.4) 11.6 16.0 6.1
Industrial/Office Duke Realty Corporation DRE (0.3) 25.6 16.0 3.3
Industrial/Office EastGroup Properties, Inc. EGP (0.1) 16.5 16.0 3.8
Industrial/Office Gladstone Commercial Corporation GOOD 7.1 16.0 8.1
Industrial/Office Piedmont Office Realty Trust, Inc. Class A PDM 0.1 11.4 16.0 4.6
Industrial/Office Chambers Street Properties CSG 0.1 13.9 16.0 6.5
Industrial/Office Columbia Property Trust, Inc. CXP 0.4 13.6 16.0 4.5
Industrial/Office Paramount Group, Inc. PGRE 0.5 12.0 16.0 2.0
Industrial/Office Prologis, Inc. PLD 0.9 21.0 16.0 3.4
Industrial/Office Cousins Properties Incorporated CUZ 1.0 10.6 16.0 3.1
Lodging/Resorts Summit Hotel Properties, Inc., INN (3.6) 17.1 16.1 3.6
Lodging/Resorts Xenia Hotels & Resorts, Inc. XHR (3.2) 4.2
Lodging/Resorts Ryman Hospitality Properties, Inc. RHP (2.3) 8.4 16.1 4.4
Lodging/Resorts Strategic Hotels & Resorts, Inc. BEE (2.1) 21.3 16.1
Lodging/Resorts Ashford Hospitality Prime, Inc. AHP (2.0) 18.9 16.1 1.3
Lodging/Resorts Chatham Lodging Trust CLDT (1.8) 31.4 16.1 4.2
Lodging/Resorts Ashford Hospitality Trust, Inc. AHT (1.5) 14.8 16.1 5.1
Lodging/Resorts LaSalle Hotel Properties LHO (1.4) 16.1 16.1 4.0
Lodging/Resorts Hersha Hospitality Trust Class A HT (1.4) 13.3 16.1 4.4
Lodging/Resorts RLJ Lodging Trust RLJ (0.9) 14.5 16.1 4.3
Lodging/Resorts Chesapeake Lodging Trust CHSP (0.9) 20.8 16.1 4.4
Lodging/Resorts DiamondRock Hospitality Company DRH (0.8) 18.2 16.1 3.6
Lodging/Resorts Sotherly Hotels Inc. SOHO (0.7) 10.5 16.1 3.7
Lodging/Resorts Pebblebrook Hotel Trust PEB (0.6) 25.9 16.1 2.8
Lodging/Resorts Hospitality Properties Trust HPT (0.5) 9.1 16.1 6.2
Lodging/Resorts FelCor Lodging Trust Incorporated FCH (0.4) 25.6 16.1 1.4
Lodging/Resorts Sunstone Hotel Investors, Inc. SHO (0.4) 15.6 16.1 1.2
Lodging/Resorts Host Hotels & Resorts, Inc. HST 3.4 12.9 16.1 3.9
Residential Campus Crest Communities, Inc. CCG (5.4)
Residential UMH Properties, Inc. UMH (2.6) 15.9 19.0 7.1
Residential Trade Street Residential, Inc. TSRE (2.5) 35.0 19.0 5.4
Residential Independence Realty Trust, Inc. IRT (1.8) 16.8 19.0 7.7
Residential American Campus Communities, Inc. ACC (1.8) 14.1 19.0 3.7
Residential UDR, Inc. UDR (1.2) 20.4 19.0 3.4
Residential Home Properties, Inc. HME (1.1) 14.4 19.0 4.5
Residential Apartment Investment and Management Company Class A AIV (1.0) 17.3 19.0 3.0
Residential Post Properties, Inc. PPS (0.9) 19.0 19.0 2.9
Residential Mid-America Apartment Communities, Inc. MAA (0.9) 13.9 19.0 4.1
Residential Equity LifeStyle Properties, Inc. ELS (0.9) 19.8 19.0 2.9
Residential Camden Property Trust CPT (0.9) 19.2 19.0 3.7
Residential Sun Communities, Inc. SUI (0.8) 31.4 19.0 4.1
Residential Associated Estates Realty Corporation AEC (0.7) 18.3 19.0 3.5
Residential Education Realty Trust, Inc. EDR (0.4) 16.5 19.0 4.2
Residential Equity Residential EQR (0.4) 21.6 19.0 2.9
Residential Preferred Apartment Communities, Inc. APTS (0.2) 11.1 19.0 6.3
Residential AvalonBay Communities, Inc. AVB 23.9 19.0 3.0
Residential Monogram Residential Trust Inc MORE 0.1 39.2 19.0 3.2
Residential Essex Property Trust, Inc. ESS 0.1 24.3 19.0 2.6
Residential Bluerock Residential Growth REIT, Inc. Class A BRG 0.7 8.5
Diversified Alexander’s, Inc. ALX (3.1) 21.9 17.1 3.2
Diversified OUTFRONT Media Inc. OUT (2.5) 12.7 17.1 4.7
Diversified Corrections Corporation of America CXW (2.4) 14.6 17.1 5.5
Diversified GEO Group Inc GEO (2.3) 15.0 17.1 5.9
Diversified W.P. Carey Inc. WPC (2.2) 16.5 17.1 5.8
Diversified American Assets Trust, Inc. AAT (2.2) 24.5 17.1 2.3
Diversified Investors Real Estate Trust IRET (1.9) 10.6 17.1 7.2
Diversified Whitestone REIT WSR (1.8) 17.6 17.1 7.4
Diversified Lexington Realty Trust LXP (1.8) 9.5 17.1 7.2
Diversified Armada Hoffler Properties, Inc. AHH (1.7) 12.9 17.1 6.6
Diversified Select Income REIT SIR (1.7) 9.5 17.1 8.3
Diversified Silver Bay Realty Trust Corp. SBY (1.1) 32.8 17.1 2.3
Diversified American Homes 4 Rent Class A AMH (0.9) 38.8 17.1 1.2
Diversified One Liberty Properties, Inc. OLP (0.8) 17.7 17.1 6.7
Diversified Iron Mountain, Inc. IRM (0.8) 32.9 17.1 5.2
Diversified Starwood Waypoint Residential Trust SWAY (0.7) 23.9 17.1 2.2
Diversified Gaming and Leisure Properties, Inc. WI GLPI (0.6) 16.0 17.1 6.0
Diversified Lamar Advertising Company Class A LAMR (0.6) 10.4 17.1 4.6
Diversified Vornado Realty Trust VNO (0.4) 21.9 17.1 2.4
Diversified Gramercy Property Trust Inc. GPT (0.3) 35.1 17.1 2.9
Diversified Washington Real Estate Investment Trust WRE 0.2 16.3 17.1 4.6
Diversified Winthrop Realty Trust FUR 0.2 4.0
Diversified Gladstone Land Corp. LAND 0.3 32.4 17.1 3.9
Diversified American Residential Properties, Inc. ARPI 0.8 116.6 17.1
Diversified EPR Properties EPR 1.0 13.4 17.1 6.1
Diversified NorthStar Realty Finance Corp. NRF 1.0 8.6
Timber Potlatch Corporation PCH (2.7) 19.4 27.1 3.9
Timber Weyerhaeuser Company WY (2.2) 25.4 27.1 3.7
Timber Plum Creek Timber Company, Inc. PCL (0.8) 27.1 27.1 4.2
Timber Rayonier Inc. RYN 94.1 27.1 3.8
Timber CatchMark Timber Trust, Inc. Class A CTT 0.9 57.3 27.1 4.4
Infrastructure CorEnergy Infrastructure Trust, Inc. CORR 0.7 21.8 21.8 7.5
Infrastructure American Tower Corporation AMT 1.1 24.0 21.8 1.7
Infrastructure Crown Castle International Corp CCI 1.4 18.3 21.8 3.8

Notes from the author

This is not a recommendation to buy or sell stocks. The highest-yield stocks are not necessarily the best choice for your portfolio. The purpose of this ranking is to shorten your stock analysis by enabling comparison of stock and sector performance. This is a snapshot of information available on 17 April 2015. Please perform your own due diligence before acting. The equity REITs are constituent companies of the FTSE NAREIT All REITs Index as of 31 March 2015. Companies whose equity market capitalization is lower than $100 million have been disregarded.Button



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Written by Heli Brecailo 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.​

U.S. – Top Yield Equity REITs – Find Price-To-FFO

Dividend yield is one of the main reasons why investors buy REIT stocks. Do not fall into the trap that higher yield means better stock. Funds from operations (FFO) is an important metric that measures cash generation. For REITs, FFO is a better indicator of performance than earnings.

Equity REITs Ranked by Dividend Yield

Total 169 Equity REITs

Share Price, Price-to-FFO, Dividend Yield – As of 10 April 2015

Sector’s Price-to-FFO – Median Price-to-FFO by sector

FFO in accordance with NAREIT definition from last available quarter (Mostly Q4-2014).

Some companies have not published FFO (That explains blank spaces).

# COMPANY TICKER PROPERTY SECTOR SHARE PRICE PRICE-TO-FFO SECTOR’S PRICE-TO-FFO DIV. YIELD
1 NorthStar Realty Finance Corp. NRF Diversified 18.31 8.7
2 Bluerock Residential Growth REIT, Inc. Class A BRG Residential 13.4 8.7
3 Gladstone Commercial Corporation GOOD Industrial/Office 18.5 7.1 16.1 8.1
4 Select Income REIT SIR Diversified 24.44 9.7 16.9 7.9
5 Government Properties Income Trust GOV Industrial/Office 22.49 10.0 16.1 7.6
6 Independence Realty Trust, Inc. IRT Residential 9.55 17.1 19.1 7.5
7 CorEnergy Infrastructure Trust, Inc. CORR Infrastructure 6.92 21.6 21.6 7.5
8 Senior Housing Properties Trust SNH Health Care 21.45 11.2 17.6 7.3
9 Whitestone REIT WSR Diversified 15.76 17.9 16.9 7.2
10 Investors Real Estate Trust IRET Diversified 7.33 10.8 16.9 7.1
11 City Office REIT, Inc. CIO Industrial/Office 13.27 18.4 16.1 7.1
12 Lexington Realty Trust LXP Diversified 9.68 9.7 16.9 7.0
13 UMH Properties, Inc. UMH Residential 10.44 16.3 19.1 6.9
14 One Liberty Properties, Inc. OLP Diversified 23.55 17.8 16.9 6.6
15 Chambers Street Properties CSG Industrial/Office 7.79 13.9 16.1 6.5
16 Armada Hoffler Properties, Inc. AHH Diversified 10.52 13.2 16.9 6.5
17 Preferred Apartment Communities, Inc. APTS Residential 11.14 11.1 19.1 6.3
18 EPR Properties EPR Diversified 58.5 13.3 16.9 6.2
19 Hospitality Properties Trust HPT Lodging/Resorts 31.97 9.2 16.3 6.1
20 Franklin Street Properties Corp. FSP Industrial/Office 12.55 11.6 16.1 6.1
21 STAG Industrial, Inc. STAG Industrial/Office 22.33 16.4 16.1 6.0
22 Gaming and Leisure Properties, Inc. WI GLPI Diversified 36.7 16.1 16.9 5.9
23 Medical Properties Trust, Inc. MPW Health Care 14.93 24.9 17.6 5.9
24 GEO Group Inc GEO Diversified 43.07 15.4 16.9 5.8
25 Spirit Realty Capital, Inc. SRC Retail 11.84 14.8 18.6 5.7
26 W.P. Carey Inc. WPC Diversified 66.92 16.9 16.9 5.7
27 Omega Healthcare Investors, Inc. OHI Health Care 38.86 14.3 17.6 5.6
28 CBL & Associates Properties, Inc. CBL Retail 19.1 5.8 18.6 5.5
29 Monmouth Real Estate Investment Corporation Class A MNR Industrial/Office 10.83 19.3 16.1 5.5
30 New Senior Investment Group Inc SNR Health Care 16.62 18.1 17.6 5.5
31 Agree Realty Corporation ADC Retail 32.65 14.3 18.6 5.5
32 Inland Real Estate Corporation IRC Retail 10.57 10.6 18.6 5.4
33 Corrections Corporation of America CXW Diversified 40.08 15.0 16.9 5.4
34 Liberty Property Trust LPT Industrial/Office 35.41 13.2 16.1 5.4
35 HCP, Inc. HCP Health Care 42.64 15.2 17.6 5.3
36 Trade Street Residential, Inc. TSRE Residential 7.18 35.9 19.1 5.3
37 First Potomac Realty Trust FPO Industrial/Office 11.34 10.5 16.1 5.3
38 Digital Realty Trust, Inc. DLR Diversified 65.22 11.6 16.9 5.2
39 DuPont Fabros Technology, Inc. DFT Diversified 32.43 14.0 16.9 5.2
40 Physicians Realty Trust DOC Health Care 17.53 23.1 17.6 5.1
41 Iron Mountain, Inc. IRM Diversified 37.17 33.2 16.9 5.1
42 Ashford Hospitality Trust, Inc. AHT Lodging/Resorts 9.59 15.0 16.3 5.0
43 Getty Realty Corp. GTY Retail 17.72 11.7 18.6 5.0
44 Sabra Health Care REIT, Inc. SBRA Health Care 31.78 14.7 17.6 4.9
45 BioMed Realty Trust, Inc. BMR Industrial/Office 21.24 15.2 16.1 4.9
46 National Health Investors, Inc. NHI Health Care 69.8 16.3 17.6 4.9
47 CareTrust REIT Inc CTRE Health Care 13.47 14.0 17.6 4.8
48 Universal Health Realty Income Trust UHT Health Care 53.81 18.4 17.6 4.7
49 Urstadt Biddle Properties Inc. Class A UBA Retail 21.76 22.7 18.6 4.7
50 Piedmont Office Realty Trust, Inc. Class A PDM Industrial/Office 18.25 11.4 16.1 4.6
51 Washington Real Estate Investment Trust WRE Diversified 26.11 16.3 16.9 4.6
52 Realty Income Corporation O Retail 49.51 19.3 18.6 4.6
53 OUTFRONT Media Inc. OUT Diversified 29.63 13.0 16.9 4.6
54 Excel Trust, Inc EXL Retail 15.82 26.4 18.6 4.6
55 Lamar Advertising Company Class A LAMR Diversified 60 10.5 16.9 4.5
56 LTC Properties, Inc. LTC Health Care 45.21 17.7 17.6 4.5
57 Columbia Property Trust, Inc. CXP Industrial/Office 26.62 13.6 16.1 4.5
58 Home Properties, Inc. HME Residential 67.68 14.6 19.1 4.5
59 New York REIT, Inc. NYRT Industrial/Office 10.27 11.2 16.1 4.5
60 Healthcare Realty Trust Incorporated HR Health Care 26.82 17.6 17.6 4.5
61 CatchMark Timber Trust, Inc. Class A CTT Timber 11.36 56.8 27.3 4.4
62 Chesapeake Lodging Trust CHSP Lodging/Resorts 31.88 21.0 16.3 4.4
63 Parkway Properties, Inc. PKY Industrial/Office 17.1 13.8 16.1 4.4
64 Ramco-Gershenson Properties Trust RPT Retail 18.34 91.7 18.6 4.4
65 Health Care REIT, Inc. HCN Health Care 76.19 22.1 17.6 4.3
66 Hersha Hospitality Trust Class A HT Lodging/Resorts 6.48 13.5 16.3 4.3
67 Ryman Hospitality Properties, Inc. RHP Lodging/Resorts 60.52 8.6 16.3 4.3
68 Healthcare Trust of America, Inc. Class A HTA Health Care 27.08 20.5 17.6 4.3
69 STORE Capital Corporation STOR Retail 23.36 18.3 18.6 4.3
70 RLJ Lodging Trust RLJ Lodging/Resorts 30.93 14.6 16.3 4.3
71 Retail Properties of America, Inc. Class A RPAI Retail 15.85 15.2 18.6 4.2
72 Education Realty Trust, Inc. EDR Residential 34.48 16.6 19.1 4.2
73 National Retail Properties, Inc. NNN Retail 40.68 18.2 18.6 4.1
74 Plum Creek Timber Company, Inc. PCL Timber 42.63 27.3 27.3 4.1
75 Sun Communities, Inc. SUI Residential 63.28 31.6 19.1 4.1
76 Chatham Lodging Trust CLDT Lodging/Resorts 29.4 32.0 16.3 4.1
77 Mid-America Apartment Communities, Inc. MAA Residential 75.67 14.0 19.1 4.1
78 Xenia Hotels & Resorts, Inc. XHR Lodging/Resorts 22.84 4.0
79 Host Hotels & Resorts, Inc. HST Lodging/Resorts 19.93 12.5 16.3 4.0
80 Winthrop Realty Trust FUR Diversified 16.24 4.0
81 CyrusOne, Inc. CONE Diversified 31.62 29.3 16.9 4.0
82 LaSalle Hotel Properties LHO Lodging/Resorts 37.83 16.3 16.3 4.0
83 Weingarten Realty Investors WRI Retail 34.86 17.1 18.6 4.0
84 Brandywine Realty Trust BDN Industrial/Office 15.21 12.7 16.1 3.9
85 Rouse Properties, Inc. RSE Retail 18.36 12.8 18.6 3.9
86 Kite Realty Group Trust KRG Retail 27.87 13.9 18.6 3.9
87 Crown Castle International Corp CCI Infrastructure 84.69 18.1 21.6 3.9
88 Retail Opportunity Investments Corp. ROIC Retail 17.71 21.1 18.6 3.8
89 Potlatch Corporation PCH Timber 39.14 20.0 27.3 3.8
90 Corporate Office Properties Trust OFC Industrial/Office 28.92 21.3 16.1 3.8
91 Pennsylvania Real Estate Investment Trust PEI Retail 22.12 9.4 18.6 3.8
92 Rayonier Inc. RYN Timber 26.35 94.1 27.3 3.8
93 EastGroup Properties, Inc. EGP Industrial/Office 60.13 16.5 16.1 3.8
94 DDR Corp. DDR Retail 18.3 20.8 18.6 3.8
95 Highwoods Properties, Inc. HIW Industrial/Office 45.32 15.3 16.1 3.8
96 Kimco Realty Corporation KIM Retail 25.91 17.0 18.6 3.7
97 Sotherly Hotels Inc. SOHO Lodging/Resorts 7.63 10.6 16.3 3.7
98 Camden Property Trust CPT Residential 76.63 19.4 19.1 3.7
99 American Campus Communities, Inc. ACC Residential 41.83 14.3 19.1 3.6
100 Weyerhaeuser Company WY Timber 32.25 26.0 27.3 3.6
101 DiamondRock Hospitality Company DRH Lodging/Resorts 13.95 18.4 16.3 3.6
102 Brixmor Property Group, Inc. BRX Retail 25.22 14.7 18.6 3.6
103 QTS Realty Trust, Inc. Class A QTS Diversified 36.5 16.9 16.9 3.5
104 Summit Hotel Properties, Inc., INN Lodging/Resorts 13.52 17.8 16.3 3.5
105 Gladstone Land Corp. LAND Diversified 12.16 32.3 16.9 3.5
106 Associated Estates Realty Corporation AEC Residential 24.37 18.5 19.1 3.4
107 Prologis, Inc. PLD Industrial/Office 42.49 20.8 16.1 3.4
108 Equity One, Inc. EQY Retail 26.09 26.1 18.6 3.4
109 UDR, Inc. UDR Residential 32.99 20.6 19.1 3.4
110 Urban Edge Properties UE Retail 23.99 3.3
111 CoreSite Realty Corporation COR Diversified 50.52 20.7 16.9 3.3
112 DCT Industrial Trust Inc. DCT Industrial/Office 33.76 18.3 16.1 3.3
113 Duke Realty Corporation DRE Industrial/Office 20.54 25.7 16.1 3.3
114 Tanger Factory Outlet Centers, Inc. SKT Retail 34.73 21.7 18.6 3.3
115 Sovran Self Storage, Inc. SSS Self Storage 91.95 21.3 22.4 3.3
116 Saul Centers, Inc. BFS Retail 53.79 21.7 18.6 3.2
117 Mack-Cali Realty Corporation CLI Industrial/Office 18.77 13.8 16.1 3.2
118 Macerich Company MAC Retail 81.35 20.5 18.6 3.2
119 Monogram Residential Trust Inc MORE Residential 9.4 39.2 19.1 3.2
120 Cousins Properties Incorporated CUZ Industrial/Office 10.1 10.5 16.1 3.2
121 Ventas, Inc. VTR Health Care 74.05 16.0 17.6 3.1
122 Alexandria Real Estate Equities, Inc. ARE Industrial/Office 95.01 27.6 16.1 3.1
123 Alexander’s, Inc. ALX Diversified 451.98 22.6 16.9 3.1
124 Rexford Industrial Realty, Inc. REXR Industrial/Office 15.91 20.9 16.1 3.0
125 Taubman Centers, Inc. TCO Retail 74.93 34.7 18.6 3.0
126 AvalonBay Communities, Inc. AVB Residential 168.31 23.9 19.1 3.0
127 Apartment Investment and Management Company Class A AIV Residential 37.83 17.5 19.1 3.0
128 Simon Property Group, Inc. SPG Retail 191.27 19.4 18.6 2.9
129 Regency Centers Corporation REG Retail 66.35 21.3 18.6 2.9
130 Equity Residential EQR Residential 75.62 21.7 19.1 2.9
131 Public Storage PSA Self Storage 193.69 22.3 22.4 2.9
132 Acadia Realty Trust AKR Retail 33.47 27.9 18.6 2.9
133 Post Properties, Inc. PPS Residential 55.87 19.1 19.1 2.9
134 Gramercy Property Trust Inc. GPT Diversified 28.14 35.2 16.9 2.8
135 Equity LifeStyle Properties, Inc. ELS Residential 52.89 20.0 19.1 2.8
136 Equinix, Inc. EQIX Diversified 239.65 2.8
137 Douglas Emmett, Inc DEI Industrial/Office 29.85 19.1 16.1 2.8
138 Terreno Realty Corporation TRNO Industrial/Office 22.76 28.5 16.1 2.8
139 Extra Space Storage Inc. EXR Self Storage 67.08 27.0 22.4 2.8
140 Pebblebrook Hotel Trust PEB Lodging/Resorts 44.78 26.0 16.3 2.8
141 WP GLIMCHER, Inc WPG Retail 16.01 8.7 18.6 2.7
142 CubeSmart CUBE Self Storage 23.41 22.5 22.4 2.7
143 Cedar Realty Trust, Inc. CDR Retail 7.54 15.7 18.6 2.7
144 Essex Property Trust, Inc. ESS Residential 222.19 24.3 19.1 2.6
145 First Industrial Realty Trust, Inc. FR Industrial/Office 20.25 15.8 16.1 2.5
146 PS Business Parks, Inc. PSB Industrial/Office 80.81 17.7 16.1 2.5
147 Federal Realty Investment Trust FRT Retail 142.42 31.5 18.6 2.4
148 General Growth Properties, Inc. GGP Retail 28.81 19.0 18.6 2.4
149 Vornado Realty Trust VNO Diversified 107.42 22.0 16.9 2.3
150 Silver Bay Realty Trust Corp. SBY Diversified 15.91 33.1 16.9 2.3
151 American Assets Trust, Inc. AAT Diversified 42.1 25.1 16.9 2.2
152 Starwood Waypoint Residential Trust SWAY Diversified 25.98 24.1 16.9 2.2
153 Paramount Group, Inc. PGRE Industrial/Office 18.67 12.0 16.1 2.0
154 Boston Properties, Inc. BXP Industrial/Office 137.58 27.3 16.1 1.9
155 SL Green Realty Corp. SLG Industrial/Office 127.85 22.4 16.1 1.9
156 Kilroy Realty Corporation KRC Industrial/Office 75.06 24.1 16.1 1.9
157 Empire State Realty Trust, Inc. Class A ESRT Industrial/Office 18.59 21.1 16.1 1.8
158 American Tower Corporation AMT Infrastructure 95.07 23.8 21.6 1.8
159 Hudson Pacific Properties, Inc. HPP Industrial/Office 31.97 33.3 16.1 1.6
160 FelCor Lodging Trust Incorporated FCH Lodging/Resorts 11.33 25.8 16.3 1.4
161 Ashford Hospitality Prime, Inc. AHP Lodging/Resorts 16.2 19.3 16.3 1.2
162 Sunstone Hotel Investors, Inc. SHO Lodging/Resorts 16.31 15.7 16.3 1.2
163 American Homes 4 Rent Class A AMH Diversified 17.23 39.2 16.9 1.2
164 American Residential Properties, Inc. ARPI Diversified 18.5 115.6 16.9
165 Easterly Government Properties, Inc. DEA Industrial/Office 16.22
166 Equity Commonwealth EQC Industrial/Office 26.2 13.9 16.1
167 Strategic Hotels & Resorts, Inc. BEE Lodging/Resorts 12.2 21.8 16.3
168 Campus Crest Communities, Inc. CCG Residential 6.85
169 American Realty Capital Properties, Inc. Class A ARCP Retail 9.73

Notes from the author

This is not a recommendation to buy or sell stocks. The highest-yield stocks are not necessarily the best choice for your portfolio. The purpose of this ranking is to shorten your stock analysis by enabling comparison of stock and sector performance. This is a snapshot of information available on 10 April 2015. Please perform your own due diligence before acting. The equity REITs are constituent companies of the FTSE NAREIT All REITs Index as of 31 March 2015. Companies whose equity market capitalization is lower than $100 million have been disregarded.Button



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Written by Heli Brecailo 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.​

How did these U. S. REIT stocks manage so well in Q1-15?

Stokado_Self_Storage1

Yes, you can cry over spilled milk. You should know that, on the whole, REITs did quite well during the first quarter of 2015; what you probably don’t know is that a smaller subset — the self-storage REITs — did even better still, generating a return of 8.8 percent, as opposed to the total returns of several indicators, including:

• S & P 500 — 0.95 percent

• MSCI US REIT — 4.8 percent

• FTSE NAREIT All REITs Index — 4.0 percent

Self-storage has developed into a niche market within the realm of commercial real estate. Its market concentration is low, with only thirteen percent of the facilities controlled by the top ten players and the remainder managed by numerous small businesses.

Self-Storage REITs

The FTSE NAREIT All REITs Index includes four self-storage REITs: Sovran Self Storage, Inc. (NYSE:SSS), Public Storage (NYSE:PSA), Extra Space Storage Inc. (NYSE:EXR), and CubeSmart (NYSE:CUBE).

The four companies share many consecutive years of strong operational performance. As a result of a combination of steady same-store growth and store expansion, their overall revenues have grown by two digits, and net operational income has grown slightly higher than revenues, a sign of how strong their operational efficiency is.

On the cash flow front, funds from operations (FFO) and cash dividends have increased over time and, according to the guidance of management, it is unlikely they will stop in 2015. Last but not least, expansion has been carried out wisely and a healthy debt profile maintained — the company has held its debt-to-enterprise level within reasonable bounds.

Demand drivers

On the macro level, as long as U.S. demographics and the current state of the economy help increase the number of personal possessions which thus need to be stored outside the owner’s residence, self-storage will be in demand. Some believe baby boomers will strengthen this trend by moving into smaller houses. As a result, future growth prospects look positive.

Since convenience is an important reason for choosing a facility (those near home or office are preferred), other drivers of demand have been associated with local market conditions like population growth and average household size and income. Competition and excess supply can also affect occupancy levels and rental rates.

Mixture of self-storage and U-Haul with an office feel

The self-storage concept has quickly evolved into a combination of self-storage and U-Haul with an office “feel.” Operators have begun focusing on generating income by offering additional services like truck rentals, moving and packing supplies, and tenant insurance. To further meet customer expectations, they have adopted innovative products and services, including online and automated kiosk rentals, climate-controlled and wine storage, 24-hour accessibility, customer service call center access and after-hours storage. Self-storage has changed radically.

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Click here to check out self-storage performance in the first quarter of 2015.


Written by Heli Brecailo

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.​

When the fundamentals aren’t being discussed

Release Date: 04 April 2015 (Extra Edition)

Last week, I posted a ranking of the US top-yield equity REITs. NorthStar Realty Finance Corp (NYSE: NRF) topped the list, sporting an 8.8 percent dividend yield. This week the stock is up slightly (0.7 percent), but the dividend yield continues to be attractive. As such, the stock is worth exploring in a little more detail. However, a look at NorthStar’s recent press releases shows that property fundamentals have not been the main point of discussion.

Background

NorthStar Realty is a Maryland-based diversified portfolio REIT in the commercial real estate realm, allocated largely in the health care and hotel sectors (65 percent of the 31 December 2014 portfolio). Its European assets will likely be spun out into a new NYSE publicly-traded company called NorthStar Realty Europe (NRE) by the second half of 2015. Over the past five weeks, NorthStar has raised US$ 353 million in common equity to buy properties in Europe, including the recently-closed acquisition of a €1.1 billion pan-European office portfolio.

Although it went public in October of 2004 as a mortgage REIT, NorthStar recently flipped into an equity REIT. It still has a debt component, but this is a minor portion of the portfolio (6.6 percent of its portfolio).

This past June NorthStar segregated its management off into NorthStar Asset Management Group Inc. (NYSE: NSAM), and since then both companies have been trading separately. NSAM acts as a brokerage firm for four non-traded REITs.

“Tension” between traded and non-traded

Conflict of interest has been the “elephant in the room” for this REIT. NSAM manages several funds, and there are questions about how management will deal with competing interests between different funds’ shareholders.

For instance, one question is whether NSAM will be able to fairly oversee both a traded fund (NRF) and non-traded funds, which have different asset management fee levels (management, acquisition, disposition and incentive fees). Remember that NSAM manages a pipeline of potential acquisitions and so must choose which fund gets to pick the best deals. This concern was also raised when the company decided to use NRF’s common equity offering proceeds to promote NorthStar Realty Europe’s growth and consequently spin it off. Although management argues that the spin-off unlocks value (as they discussed in their 6 March 2015 presentation, “Immediate value to NRF”), it still isn’t clear what’s in it for NRF.

This is a cloud hanging over NRF that could potentially harm stock performance in the long run. In my experience, concerns over conflict of interest have always driven share prices to discount territory that never realizes full value.

European arm

NorthStar’s European assets are valued at approximately $2.0 billion, and the real estate portfolio is comprised of 50 properties with five million square feet in prime locations, mainly in the United Kingdom, Germany, and France.

There are a number of positive points for NorthStar Realty Europe as part of an investment strategy. European real estate valuations haven’t recovered since the Great Recession. Cap rates relative to long-term interest rates have reached an all-time high. Upside on property value as appreciation of European REITs has historically signaled future appreciation of properties. And, of course, property diversification by country and type is almost always a valuable strategy.

Short interest spike

This March, short interest in NorthStar Realty rose more than 1,000 percent to 57,093,856 shares. About 19.2 percent of the company’s shares are now short.

Takeaway

Recent news associated with changes in management arrangements and the European spin-off has put NRF’s fundamentals on the back burner. I’m hoping that NSAM will refocus its energies on what matters. By the way, NorthStar is one of the few REITs (perhaps the only one) that does not disclose the operational metrics AFFO/FFO in its 10-K report.

Source: NorthStar Realty website, WSJ


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Written by Heli Brecailo

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.​