Specialty REITs
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AMT $261
CORE $166 |
Penn member American Tower to buy data center REIT CoreSite Realty in $10 billion deal
(15 Nov 2021) We purchased specialty REIT American Tower Corp (AMT $261), owner and operator of over 185,000 cell towers around the world, back in March of this year. The addition took advantage of two of our favorite themes: real estate and 5G technology. After hitting our initial target price within eight months, the company made a move we fully embrace: it will acquire data center REIT CoreSite Realty for $170 per share in cash—roughly $8.3 billion—plus the assumption of its $2 billion or so of debt. We believe it was a smart move by a skilled management team, led by AMT CEO Tom Bartlett. With the bolt-on acquisition of CoreSite, AMT will add data and cloud management capabilities to its offering mix, fully complimenting its wireless communications business. We suddenly find ourselves with two of our favorite growth drivers in the REIT world—5G towers and data centers—morphed into one position within the Penn Global Leaders Club. Furthermore, the company's reach is truly global, with 75,000 towers in Asia/Pacific, 43,000 in North America, 42,000 in Latin America, 20,000 in Africa, and 5,000 in Europe. For its part, CoreSite operates 24 data centers in major urban hubs such as Boston, New York, Miami, Chicago, and Los Angeles. AMT shares are down about 4% on the news, as is typical for an acquiring company immediately after a deal has been announced. For investors who have missed the run-up to this point, we believe the shares remain in an attractive buy range. REITs are an important part of a portfolio, but we are highly concerned about the rapidly-changing landscape for retail and office REITs. Data centers and towers, as mentioned, will be two of the strongest growth drivers for the industry going forward. |
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CCI
AMT |
Short on REITs but worried about tenants? Consider this specialty
(05 May 2020) Real estate investment trusts (REITs) can offer a dynamic range of investment options, but investors can get burned if they don't do their homework. For example, retail REITs who own B- and C-level malls were getting hammered leading into the pandemic; now they are getting crushed. Office space REITs must contend with tenants not paying their monthly leases or going out of business during the lockdown. There is one niche specialty in the REIT world, however, that many investors fail to consider: cell tower owners. Take $67 billion REIT Crown Castle International (CCI $114-$158-$169), for example. The company owns and leases roughly 40,000 cell towers in the United States: cell towers which will be rife with 5G antennas over the coming few years. Did we mention that the company also owns over 80,000 route miles of fiber-optic cables? The kind of high-speed lines which allow hundreds of millions of Americans to attend classes online and take part in Zoom (ZM) videoconferencing calls. With its p/e ratio of 80, CCI may seem expensive, but its 11.33% YTD performance has put the major indices to shame, and we expect the company's rock-solid growth to continue into the future. Looking for a cell tower REIT with a lower multiple? Consider American Tower Corp (AMT $240) with its 57 multiple. These real estate entities will play a major role in America's 5G build-out. |