GOV has outside manager of RMR, which is well-known for managing its REITs in self-serving ways, such as increasing RMR's Assets under management when the expansion of assets does not benefit existing shareholders of the REIT. All REITs operated by RMR have an "RMR discount" in their price, which is to say they trade at lower metrics than other REITs. The discount is around 20-25%.
At its current price GOV is probably fairly valued, all things considered.
I do not buy into the government buildings idea that much. Sure there is less risk of default in lease payment, but as to lease renewal (which is the much bigger matter), I do not know. Also, if these are uniquely government buildings, leasing out to new tenants would be more difficult. If they are not uniquely government buildings, then over time the REIT will have a decreased level of government tenants, so the premise of concentrating in government tenants will fade.
It is a nice dividend yield. That is what lures one into owning GOV or the other REITs managed by RMR (SIR, SNH, HPT). Of all these I would rate them in order of preference: SIR, SNH, GOV, HPT. |
