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Mars Madness Treat: 16 Sweet REITs



There is a reason they call it March Madness.

The annual NCAA Division In Men's Basketball Tournament can be pure madness from any angle you might see it from. Really, it's quite designed to be. Because … well … why not?

A winner-tar-all-elimination competition, March Madness highlights the preparation, skill and supply of the 68 different division colleges in Team 1, all competing over the range of about three weeks for the National Championship Athletic Association (NCAA) championship title.

Therefore, it is called what it is. The activity levels and feelings that are widespread over a short period of time can be quite crazy.

From the players, coaches and other participants' side of the plan, they push potentially – hopefully – double their normal court time. Instead of playing about four games per month, the winners averaged out to two a week.

It is intense enough all in itself. There is no physical downtime for those gentlemen. The light switch must continue.

Come into the game

Then there is the feeling of being in March Madness. It is electric on top of being exhausting. Each of these young men knows they have to be on their A game out there. They know what's at stake.

That makes it even more "angry" for them from start to finish.

For us – the spectators and the sports enthusiasts – we will not even pretend that there is a comparison between being at one of the participating teams and looking at the participating teams. It's obviously not.

While experiencing each physically, mentally and emotionally involved player right there in real time, we relax in our comfortable sofas and La-Z Boy recliners while we call on the TV. Sure, we can feel the pressure to beat our colleagues and buddies to win which collective pot is set aside. But it's really not the same, no matter which diehard fans we might be – and we know it.

We know it, but there is still some press conference in the spectator seats, what about fit in all that increased TV time, create brackets, monitor brackets and (hopefully) bragging about brackets.

Maybe it's not tiring, but it's time consuming. That is for sure.

And yes, there is still electricity going on, we can't do that without feeling.

] The Sweet 16 Field

As you no doubt know now, March is on its way out and Mars Madness continues evenly . So far, we've made it through the first four match-ups, as well as the full first and second rounds to narrow the field from the initial 68 teams to just Sweet 16.

Whether you're rooting for your highly gifted alma mater or Your optional school is more of a Cinderella story, the action only intensifies as the tournament progresses. There have not been any specific uprisings so far, but there have probably been some close, including with the often favored Duke Blue Devils.

USA Today described the blue devils as having just "survived" their last battle against the University of Central Florida, adding in "how even coach Mike Krzyzewski recognized that his team should have lost."

That's what happens when a well-trained team like the UCF plays abruptly and forces the Duke to shoot outside … Sunday's presence showed how the beatable Duke is, and that makes Blue Devils' title chances suddenly feel far more difficult .

Of course, they do not count out of the competition quite simply. Do not count any of the remaining layers. You better think there are still many opportunities left on the track for all 16 of them when they have done so far.

So what will happen and how it will happen is that someone guesses. (Go Tar Heels!)

A competition that really matters

As much as I could go on and on about Mars Madness, this is not a sports column I know. You are here to learn more about a completely different form of playing field. So let's get to it already.

If you followed the REIT version of Mars Madness that I started to set up last month while you compiled this month's letter from the editor, you know I have already published scouting reports on a number of REIT "brackets": [19659025] Healthcare sector REITs

  • Shopping center REITs
  • Nettlease REITs
  • The whole point of all this is to test the various sectors and sub-sectors against each other and see which came out stronger … and which comes out strongest this year.

    It has been a fascinating process that puts it together at the end of my time. And I know from some of your comments that you found it as informative and engaging on you.

    Perhaps it is not "electric" like looking at a fast paced basketball game. But as much as we can love our NCAA favorites, let's look at the facts …

    REIT Rewards can be much more valuable.

    This is the pot that counts.

    So in this article we examined our REIT Lab (with over 150 companies) to choose 16 of our favorite teams (so to speak). Recognizing that many of the more defensive names (ie Realty Income and Store Capital) have become expensive, we decided to include some actionable Buys or Strong Buys in the "Sweet 16" line. So let's have the party started.

    Photo Source

    The Sweet 16 REITs

    American Campus Communities, Inc. (ACC) is it the only listed campus house REIT that is "published". The company's fully integrated, self-governing and self-governing – with expertise in design, finance, development, construction management and operational management of student housing. At the end of 2018, American Campus enjoyed a portfolio of 204 owned and third-party managed properties, with approximately 133,900 beds, the 14th year in the trend with the same growth in rental prices, rental income and NOI. ACC expects to see an acceleration in NOI growth in the same store in 2019 driven by both higher revenue and lower operating growth compared to 2018. The company's debt at corporate value (per fourth quarter) was 34.6%, debt to total asset value was 36, 5% and net debt to interest rate EBITDA was 6.3x. Despite the uncertainty in the macro economy, the fundamentals of the student residence are still healthy, and the stability of the business model will continue to make Student Housing one of the most sought after investments globally. Stocks are trading at $ 46.71 with a dividend of 3.9%.

    We maintain a BUY on ACC.

    Source: Yahoo Finance

    Brookfield Property Partners (BPY) is one of the world's leading commercial real estate companies with about $ 87 billion in total assets. It is run externally by Brookfield Asset Management Inc. (BAM), a leading global alternative manager with over $ 350 billion in management capabilities. BPY owns, operates and develops one of the largest portfolios of office, retail, multifamily, industry, hospitality, triple leasing, self-storage, student housing and manufactured homes. The core portfolio comprises 142 office spaces totaling 96 million square meters in the world's foremost cities; and 124 class A + shopping malls of 121 million square meters in the United States Last year, the office SSNOI (Same-Store Net Operating Income) increased 5.3%, with 94% occupancy, retailing was $ 746 per square meter, up 5.8% from the previous year . BPY's goal is to generate annual return on equity of 12% -15%, based on stable cash flows and valuation. together with an annual distribution growth of 5% -8%. [Note: BPY is an L.P. that uses a K-1 tax form; its 1099 counterpart is Brookfield Property REIT (BPR).]

    Stocks are trading at $ 20.16 with a dividend price of 6.1%.

    We maintain a STRONG BUY on BPY.

    Source: Yahoo Finance

    CyrusOne (CONE) is a high-growth data center REIT that specializes in highly reliable, enterprise-class, carrier-neutral data center capabilities, in more than 45 locations worldwide. The company's mission-critical facilities continue to protect and secure IT infrastructure operations for approximately 1,000 customers – including over 205 Fortune 1000 companies. CONE's strong balance sheet, aided by S & P's credit upgrade in September, provides significant financial flexibility and capacity to fund growth: without short-term debt periods, debt fully unsecured and liquidity of around $ 1.6 billion. In 2019, CyrusOne expects to invest $ 400 million of the capex budget in EU and UK projects, allowing the company to compete with other power plant data players such as Digital Realty (DLR) and Equinix (EQIX). In Q4-18, normalized FFO (funds from operations) per share of 86 cents beat the estimate of 82 cents, while revenue of $ 221.3 million missed the consensus $ 223.5 million. And while 2019 FFO per share guidance fell shortly after the consensus estimate, I am convinced that CyrusOne has set the stage for growth in 2020 and beyond, with overall potential for generating returns in the high double digits. Stocks are now trading at $ 51.70 with a dividend of 3.6%.

    We maintain a STRONG BUY on CONE.

    Source: Yahoo Finance

    Easterly Government Properties (DEA) is an office that REIT buys, develops, and manages class A commercial properties leased to US authorities whose critical missions are not in favor – including the FBI and ICE (Immigration and Customs Enforcement). Easter is the only internally managed REIT government with pure play, benefiting from America's best credit ratings and stable prospects (S & P, Moody's, Fitch, DBRS) and the fact that the US government is the biggest employer in world – and largest office renters in the country. Easterly's 65 properties comprise 5.6 million square meters and are 99% rented. Q4-18 FFO per share (adjusted, fully diluted) was $ 0.29; throughout the year $ 1.03. Up to December 2017, Easterly increased its dividend modestly, but chose to freeze growth in 2018 – probably due to the payout ratio of over 100% AFFO; analysts expect the dividend to continue in 2020. While the increased payout ratio is postponed, I am encouraged by the increased inflation potential, with forecasts of about 5% growth, the company's continued diversification efforts, and knowing senior DEA management owns approx. 14% of shares, which provides a strong adjustment of interest rates with shareholders. Stocks are trading at $ 17.98 with a dividend of 5.8%.

    We maintain a BUY on DEA.

    Source: Yahoo Finance

    Hersha Hospitality Trust (NYSE: HT) sector REIT, which owns and operates high quality upscale, luxury and lifestyle hotels in urban gateway markets and coastal destinations. The company's 48 hotels, a total of 7,644 rooms, are located in New York, Washington, DC, Boston, Philadelphia, South Florida, and West Coast markets. In 2018, net loss on shares – $ 14.2 million or $ 0.38 per diluted joint share – was compared to the $ 75.7 million net income of $ 2017, or $ 1.79 per diluted joint share. The decline in 2018 is mainly due to a decrease in gains on disposals of hotel-active assets. Last year, the company also carried out a recycling campaign for recycling, allocating nearly $ 90 million to repositioning and renovating many of its older hotels to support long-term growth potential – with the vast majority of operationally disruptive projects completed in Q4, the Earnings Potential in the portfolio continues until 2019. The quarterly earnings per available room (RevPAR) of 37 comparable hotels increased by 2.8% to $ 189.82, with the average daily rate (ADR) for comparable rates increasing 3.2% to $ 233.21, and the coating down 27 basis points to 81.4%. Stocks are trading at $ 17.26 with a dividend of 6.5%.

    We maintain a BUY on HT.

    Source: Yahoo Finance

    Health Insurance Time for America (HTA) is a leading healthcare service focused on acquiring, owning, and operating high-quality MOBs (medical offices) on the campuses of nationally recognized healthcare. With $ 6.8 billion invested, HTA is the largest MOB owner with the 2018 year-end portfolio of 433 buildings, in 32 states, leasing over 23.1 million square feet. HTA's investments are aimed at building critical masses of 20 to 25 leading gateway markets that generally have leading universities and medical institutions, translating into superior demography, high-quality graduates, intellectual talent, and job growth. Strategic markets HTA invests in supporting a strong, long-term demand for quality medical office space. In 2018, the company reduced its influence and increased liquidity, sold over $ 300 million of non-core assets, using the majority of its capital to repay mortgages, reducing leverage (5.4x net debt to EBITDA), and maintaining over $ 125 million in balance sheet . Over the next three to five years, HTA believes it has a stable and reliable earnings model; And we believe investors can expect total returns in the high double digits over the next twelve months.

    Source: Yahoo Finance

    Iron Mountain (IRM) is a misunderstood "Other" category REIT with a 4.3% dividend.

    We maintain a BUY on HTA. a strategy much larger than just storing boxes. The highly diversified business model accounts for 80% of Storage's profits, 20% from Services – through information processing, digital transformation, secure storage, secure destruction, data centers, shooting services, and art storage and logistics … to over 225,000 customers worldwide. The Iron Mountain core business is Records & Information Management (45% of revenue), along with Secure Shredding (10.1%), Data Management (8.7%) and Data Centers (5.8%). IRM's real estate network comprises more than 90 million square meters, over more than 1,450 facilities, in about 50 countries. Operations drive the value of the company, pass increases to customers and reduce any impact of rising interest rates. Iron Mountain has only 2% customer turnover in a given year – which means that 50% of the boxes stored 15 years ago are still. The company also has a higher influence than most peers: The rent adjusted leverage ratio at the end of 2018 was 5.6x. Also in 2018, Iron Mountain generated 16% AFFO growth, which helped reduce dividends to 78%. We believe that the IRM could generate above average returns in 2019 – in the high double digits.

    Source: Yahoo Finance

    Kimco Realty (KIM) is a REIT I am considering: "dirt cheap." Not bad for one of North America's largest public-owned owners and operators of outdoor malls. The company has 437 properties across 76 million square meters of leasable space, mainly on the 20 largest US markets, providing 80% of the ABR (annual base rent). These markets account for a population growth of 6.3 million within the next five years. The fourth quarter of 2018 and the fourth quarter result were solid, including the 2018 pro rata occupancy rate of 95.8%. In 2018, Kimco completed several development and reconstruction projects, including the first large-scale Signature Series deployment development, and outperformed outline targets. Kimco's balance sheet is in excellent shape and ends in 2018 with a consolidated net debt of remaining EBITDA of 6x. Total consolidated debt stands at $ 4.87 billion (~ $ 605 million lower than 2017), and no debt maturity in 2019. Liquidity is excellent with over $ 2.1 billion in availability from the revolving credit facility and cash on hand. The key "success" elements in the company's business model for the coming years: portfolio quality and location, many sources of untapped value creation embedded in the portfolio, and balance strength and security. Future development will be an important growth driver as current projects are completed, and the pipeline with carefully selected reconstruction opportunities sells out. We expect that Kimco will deliver strong double-digit returns in 2019 and 2020 (so far in 2019, the share has returned ____%). Stocks are trading at $ 18.15 with a dividend of 6.2%.

    We maintain a STRONG BUY on KIM.

    Source: Yahoo Finance

    Kite Realty Group (KRG) is another freight center REIT that should deliver promising alpha. At year-end, the company owned 111 operations and rebuilding neighborhoods and communities in 19 states, a total of about 22.0 million square meters (in addition to a development project of 0.5 million sf under construction), totaling 94.6% occupancy. The largest 25 tenants include TJ Maxx, Publix, Bed Bath & Beyond, and PetSmart, approximately one-third of Kite's total 2018 ABRs, with no single tenants more than 2.6%. Three state locations (Florida, Indiana and Texas) considered just over half of the 2018 ABR – which beat a company high of $ 16.84 per square meter. Kite has a strong investment class with good liquidity and a fragrant maturity – the capacity of credit credit alone could satisfy all debt periods through 2022. And the company has announced plans to sell NOK 350-500 million of non-core business, to improve portfolio quality, reduce influence and Focus on preferred geographic markets. Stocks are trading at $ 15.50 with a dividend of 8.2%.

    We maintain a STRONG BUY on KRG.

    Source: Yahoo Finance

    LTC Properties (LTC) is a healthcare company REIT that invests in retirees (about 48%) and skilled nurses (about 49%), mainly through sales leases, mortgage finance, joint ventures and structured finance solutions, including preferred equity and mellometasin loans. LTC has more than 200 investments in 28 states with 28 partners. Q4-18 FFO was $ 32.1 million, up from $ 30.4 million in Q4-17. (FFO per diluted joint share was $ 0.81 and $ 0.77 for the fourth quarter respectively.) Outside $ 3.1 million in one-off items in 2018, FFO fell $ 1.4 million compared to the fourth quarter of 2017 due to non-payment In December, hiring partner Senior Care, as a result of their Texas bankruptcy filing. Most LTC assets are concentrated in Texas (17.5%), followed by Michigan (14.8%) and Wisconsin (8.6%). I have several concerns – and while the company pays monthly dividends, it did not grow dividends in 2018. And while I was surprised by the Senior Care bankruptcy, I was glad that LTC had the upper hand and set Senior Care by default. I also appreciate that the company maintains leverage – as a must – and as the cycle improves, I believe that LTC investors will be rewarded for the company's rigorous discipline. Stocks are trading at $ 45.52 with a dividend of 5.0% (paid monthly).

    We maintain a BUY on LTC.

    Source: Yahoo Finance

    Mid America (MAA) on offering a high quality apartment living experience to residents of the Sunbelt region of the United States. As an active buyer and developer of apartment communities, the company is currently the largest owner operator of apartments in the country and is an S&P 500 company. The portfolio contains 101,441 apartment units, which include commercial space on some properties, four additional commercial properties and a partial ownership of a multi-family property. The portfolio is focused on the strong growth in the job. The Sunbelt region is diversified across markets, and price points that attract the largest segments in the real markets continue to position MAA for solid performance. The balance is in a strong position and can support the external growth opportunities (over NOK 490 million in combined cash capacity under the credit facility with net debt to remaining EBITDAR od under 5x. After two years of merger activities the MAA platform

    Monmouth Real Estate (MNR) is maintained a purchase at MAA.

    Source: Yahoo Finance

    Monmouth Real Estate (MNR) remains stable and stronger than ever. Stocks are trading at $ 108.49 with a dividend yield of 3.5%. industrial REIT operating a real estate portfolio consisting of 113 industrial properties, representing approximately 21.8 million square feet. The geographically diversified portfolio is from coast to coast over 30 states focusing on large ports, large intermodal ports and major airports. is highly concentrated, with over 59.6% of the annual rent and 48% of the square feet leased to the logistics giant. due to weaker demand (related to FedEx) and pressure on operating margins (by FedEx). Monmouth has newer buildings with 80% of rental income derived from long-term leases to investment class tenants. The company has historically had very high tenant centers, on average about 90%. Thus, the company has also been able to generate highly predictable cash flows that are less affected by tenant transition and maintenance risk. Our expectations suggest that Monmouth can generate significant price increases, FedEx bounces back. Even though the REIT securities portfolio remains uneasy, Monmouth's dividends appear safe (well-covered) and we cannot resist an entry point at today's price point. Stocks are trading at $ 13.09 with a dividend of 5.2%.

    We recently upgraded MNR to STRONG BUY.

    Source: Yahoo Finance

    QTS Realty (QTS) is the most enigmatic and perhaps misunderstood by Five Data Center REITs. This is largely due to the fact that in February 2018, management announced a pivot away from its non-core cloud and managed services to focus on hyperscale (public aid, software, content, social media giants) and enterprise hybrid IT colocation. Analysts and investors began to feel blind and somewhat confused, and QTS shares were hammered. "The company is much" cleaner "today, and we believe the valuation is convincing for either private equity or a consolidator like Digital Realty (DLR) or Equinix (EQIX). Additionally, CyrusOne (CONE) can also make the game (for QTS) , but is less likely, in our opinion, given the recent focus internationally. Shareholders can expect the digitized dividend to rise in the future. There is plenty of room for price increases through several extensions for QTS shares in 2019 if management continues to deliver solid orders and adjusted EBITDA Stocks are trading at $ 44.25 with a dividend of 4.0%.

    We maintain a STRONG BUY on QTS.

    Source: Yahoo Finance

    Tanger Outlets (SKT) is a shopping center REIT, which owns a portfolio of 44 outlets with 15.3 million square meters of gross leasable area in the US and Canada, focusing on living space for branded retailers: food and services are a reflection. To do with the brand it has been doing for over 26 years, which has created the name "TangerOutlets®" as a source of popular labels at bargain prices. Although Tangier was recently downgraded by S & P to BBB from BBB +, the company has sufficient cash flow in 2019 to reduce debt. The dividend is well covered (has increased annually for 26 years) so investors can get paid to wait for Tanger to exchange its centers with retailers who thrive in an omni channel environment. Since free cash flow is likely to remain over $ 100 million / year, the balance is conservatively delivered, the company has the financial strength to wait for lease payments and store closures for the next one to two years, or until the tenant mix is ​​optimized. Stocks are now trading at $ 20.53 with a dividend of 6.8%.

    We maintain a STRONG BUY on SKT.

    Source: Yahoo Finance

    Simon Property (SPG) is a best-in-class shopping mall REIT that owns full or partial efforts in 235 Class A malls in North America, Europe and Asia, as for together have over 190 million square meters of retail space. About 80% of REIT's net operating revenues come from its traditional US shopping malls, which are highly diversified, but almost all reside in dense, thriving, and prosperous cities, mainly in Florida, California, and Texas. 20% of its NOI is from its super premium Mills locations and international properties, giving US investors some nice but safe foreign diversification. Simon's capital cost is only 3.5% (capped by one of only 2 "A" credit ratings) that allows the company to borrow huge amounts of money at very low interest rates. In addition, the company has access to revolving credit facilities with over $ 7 billion in residual liquidity in case it will hit short-term credit markets to fund growth. Not that Simon himself needs it, since it generates $ 1.35 billion in annual price-adjusted adjusted funds from operations (operating cash flow minus maintenance costs). Simon's shares trade at $ 177.98 with a dividend of 4.6%.

    We maintain a strong purchase on the SPG.

    Source: Yahoo Finance

    VICI Properties (VICI) is a casino REIT that raised around $ 1.4 billion (one of the largest IPOs in 2018 and one of the largest REIT IPOs ever) by spinoff from Caesars Entertainment Operating Co., a subsidiary of gaming giant Caesars Entertainment (CZR), which originated from Chapter 11 Bankruptcy Protection in October 2017 VICI is one of the country's largest game owners, hospitality and entertainment destinations with a geographically diverse portfolio that includes 21 gaming features including the world-famous Caesars Palace and four golf courses. The properties are rented to Caesars Entertainment and operate under leading brands such as Caesars, Horseshoe, Harrah, and Bally's. Overall, the properties have approximately 39 million square feet of space, 15,000 hotel rooms and more than 150 restaurants, bars and nightclubs. The company increased its annual dividend in June 2018 by 9.5% to $ 1.15 per share after just two-quarters of the dividend payment and ended the year with about $ 1.1 billion in cash in short-term investments, providing good liquidity for future growth. VICI trades at $ 21.91 with a dividend of 5.2%.

    We maintain a GREAT PURCHASE on VICI.

    Source: Yahoo Finance

    Finally: As many of you know, I gave up my shoes for a laptop computer many years ago, so now I call the play-by-play commentary for the REIT sector. Due to experience (25+ years in real estate) and passion for the game (helping investors), I have helped thousands of investors globally in choosing sound REIT securities. In the words of Jerry Maguire (played by Tom Cruise), "help me help you."

    Sweet 16 REIT Roster

    Author's Note: Brad Thomas is a Wall Street writer, meaning he is not always right with his predictions or recommendations. It also applies to his grammar. Please excuse any keys, and be sure he will do his best to correct any errors if overlooked.

    Finally, this article is free and the only purpose of writing it is to help with research while providing a forum for second level thinking.

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