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Strategies & Market Trends : Value Investing
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To: Grommit who wrote (27429)7/24/2007 11:33:11 PM
From: Spekulatius  Read Replies (2) of 78627
 
regarding REIT's

Grommit this is a nice list you assembled. i have been adding recently to my REIT holdings. i have tried to work on you approach of looking at FFO/price ratio and also look at net rent / EV as a valuation metric when i compare similar REIT's. this way i can account for leverage, which makes highly leveraged REIT's appear cheaper in terms of FFO/price. At this point with interest rates rising, i prefer low leverage, which is one of the reasons I choose SNH even though is does not appear to be the cheapest in terms of FFO/price.

This also lead me to prefer CLI to BDN per the following calculation:

CLI: 41$/share x89M shares +2200M$ (net debt) -700M$ (current assets)= 4.821B$
4.821B$/140M$ rent x4 = 8.6 (EV/net rent annualized)

BDN: 27$/share x89M$ + 3500M$ -700M$ (current assets)= 5.183B$
5.183B$/138M$ x4= 9.39 (EV/net rent annualized)

For rent i took the net rent (wo pass through items) from the last quarter and multiplied it by 4 for the annualized number. So by that calculation CLI is almost 9% cheaper than BDN, although the FFO/price ratio looks about 105 lower for BDN. Also CLI appears to have the better LT track record. Anyways that calculation is just to illustrate how to look at REIT valuations in general and CLI and BDN are nice examples because their are similar in their location and size (note that the revenue numbers are almost identical). This is also what a private equity manager may look at if they are smart <g>.
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