Real Estate Investment Trusts
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The Changing Landscape for REITs
Real estate investment trusts can be dynamic, wealth-building, income-producing vehicles, but beware of the seismic shift about to take place. |
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BX
GPT |
Blackstone Group to buy Gramercy Property Trust for $7.6 billion
(07 May 2018) Penn Strategic Income Portfolio member Blackstone Group (BX $29-$32-$38) has agreed to purchase warehouse REIT Gramercy Properties Trust (GPT) for $27.50 per share, or around $7.6 billion. The warehouse REIT niche has been a fascinating one to watch, as companies like Amazon, UPS, and FedEx continue to build enormous holding spaces throughout the country at breakneck speeds. These structures can be seen dotting the landscape along many US highways, often between fields of corn and wheat. GPT's share price immediately shot up 15%—to the asking price—as the news broke. Blackstone, which has a current dividend yield of 6.85%, is flat for the year. |
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Retail
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Mall vacancies hit six-year high
(02 Apr 2018) Our mantra over the past year has been that the death of the retail mall has been greatly exaggerated by the press; unfortunately, news like this continues to give ammo to those who would disagree with that claim. According to commercial real estate data miner Reis, Inc., empty space in shopping centers just hit a six-year high, with the vacancy rate among major US malls hitting 8.4%. In their 02 Apr report, the firm also pointed out that the 712,000 square feet of new space completed in the first quarter was well below average, even accounting for the typical first-quarter slowdown in construction. Nearly all major retail REITs are already down double-digits thus far in 2018. |
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WFGPY
UNBLF |
Class A mall operator Westfield agrees to be acquired by European rival
(12 Dec 2017) Westfield Corp. (WFGPY $12-$13-$14), which owns and operates high-end, Class A malls across America, has agreed to be acquired by European mall giant Unibail-Rodamco (UNBLF $221-$265-$265) in a $15 billion deal. This merger comes on the heels of Brookfield Asset Management's (BAM) purchase of the shares it didn't already own of another Class A operator, General Growth Properties (GGP). This is an interesting development, as the Class A malls have performed quite well during the Age of Amazon, while their Class B and C brethren continue to face real threats to their very existence. Look for continued consolidation in this space. Penn owns four REITs within the Penn Strategic Income Portfolio. |
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BAM
GGP |
Brookfield Asset Management bids to buy remainder of General Growth Properties
(13 Nov 2017) Brookfield Asset Management (BAM $32-$42-$43) is a $40 billion alternative asset management company with investments in real estate, infrastructure, renewable energy (think wind farms), and private equity. General Growth Properties (GGP $19-$22-$27) is well known to Penn clients, as we have held the $20 billion retail REIT in at least two Penn strategies at various times. It appears that our GGP trading days may be over, as the Toronto-based BAM has offered $23 per share to buy the remaining stake of the Class A mall operator. Earlier this year, BAM exercised all of its outstanding warrants in GGP, raising its ownership to 34%. |
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CBL
WPG SPG GGP |
Retail REITs. 25% of malls to close within five years? According to a new research report from Credit Suisse, a full 25% of enclosed shopping malls in the US will be closed by the year 2022. That means roughly 250 of the country's 1,000 or so malls will be shuttered. We don't know if we are buying that. Yes, e-commerce giant Amazon is decimating weaker players like Sears and JC Penney (who also happen to be big mall anchors), but that doesn't mean there is a fatal flaw in the indoor mall concept. While we are steering clear of retail REITs controlling a lot of Class B and Class C malls—like CBL & Associates Properties (CBL $7-$8-$14) and Washington Prime Group (WPG also $7-$8-$14)—the industry leaders controlling the stronger Class A malls should be just fine. Included in that group are companies like Simon Property Group (SPG $152-$155-$229) and GGP (formerly General Growth Properties, symbol GGP $21-$23-$32). The strong players are already figuring out ways to attract new visitors to their locations, making the malls "experience destinations." As traffic picks up, investors may look back on how beaten down these stocks were and kick themselves for buying all of the media hype about the "death of the American mall."
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Investing in REITs
Shrouded in mystery, these misunderstood creatures might just be waiting to lay your portfolio’s golden eggs
(31 Mar 16) If you want to make a would-be investor tune out of a conversation on finance, start throwing acronyms around. After all, it took Americans decades to get used to the concept of an open-ended mutual fund, then some bizarre offshoots called UITs and ETFs came along. Or try this one on for size: how about investing in an industry that has an odd acronym as its very name—the “REIT.” Telling Joe and Martha Saver what this stands for—real estate investment trust—only makes matter worse. For some reason the word “trust” makes many people think of polo ponies and powder blue seersucker suits. That’s too bad, because not only is purchasing a REIT as simple as buying some Apple stock, it might just provide investors with the mother of all income streams.
Before we get ahead of ourselves, let’s be clear that blindly investing in REITs is fraught with danger. Do you think there are any shady characters in real estate? And researching the companies themselves requires a familiarity with terms unique to the industry…read the rest of the story in this Sunday’s Journal of Wealth & Success, Vol. 4, Issue 4.
Shrouded in mystery, these misunderstood creatures might just be waiting to lay your portfolio’s golden eggs
(31 Mar 16) If you want to make a would-be investor tune out of a conversation on finance, start throwing acronyms around. After all, it took Americans decades to get used to the concept of an open-ended mutual fund, then some bizarre offshoots called UITs and ETFs came along. Or try this one on for size: how about investing in an industry that has an odd acronym as its very name—the “REIT.” Telling Joe and Martha Saver what this stands for—real estate investment trust—only makes matter worse. For some reason the word “trust” makes many people think of polo ponies and powder blue seersucker suits. That’s too bad, because not only is purchasing a REIT as simple as buying some Apple stock, it might just provide investors with the mother of all income streams.
Before we get ahead of ourselves, let’s be clear that blindly investing in REITs is fraught with danger. Do you think there are any shady characters in real estate? And researching the companies themselves requires a familiarity with terms unique to the industry…read the rest of the story in this Sunday’s Journal of Wealth & Success, Vol. 4, Issue 4.
The First Healthcare REIT
(30 Mar 16) Don’t miss this week’s edition of the Journal of Wealth & Success when we discuss the opportunities in the real estate investment trust market. Ever wonder what the first real healthcare REIT was? Here’s a hint: it yields 5.1% and is still a leader in the industry, 46 years later. Should you own it in your portfolio? Read the Journal, this Sunday. Not a member? Join Here.
(Reprinted from the Journal of Wealth & Success, Vol. 4, Issue 3, from a larger story on the current housing situation.)
(OK, got it. Take me back to the Penn Wealth Hub!)
(30 Mar 16) Don’t miss this week’s edition of the Journal of Wealth & Success when we discuss the opportunities in the real estate investment trust market. Ever wonder what the first real healthcare REIT was? Here’s a hint: it yields 5.1% and is still a leader in the industry, 46 years later. Should you own it in your portfolio? Read the Journal, this Sunday. Not a member? Join Here.
(Reprinted from the Journal of Wealth & Success, Vol. 4, Issue 3, from a larger story on the current housing situation.)
(OK, got it. Take me back to the Penn Wealth Hub!)