George,
I love LXP at these levels and bought a decent amount around 14-5/16.
Fed Ex isn't resigning the lease that expires 1/98, which will hold the stock down short term. Lots of selling going on, but it will likely dry up within a week, unless the market tanks. They have had 2 secondaries in the last 6 months with maybe 70% more shares than before. When all this money is put back to work, the dilutive effect will be gone. I'm impressed with the past performance of the management in running the properties, and will get a chance to see how well they invest the money from the new shares. Almost all the REIT's that have been growing FFO by 20% or more have had a lot of secondaries/mergers. The rest have been in new construction also, and turned the negative cash flows of empty land into real value. At 10 x FFO, it's hard to see much more downside.
I agree about PPS, and sold out most of my position. PAG looks like it should be valued 22-1/2 to 24-1/2 to me, with lots of upside potential.
The REIT market should become stronger the longer this market runs, because treasuries and utilities are approaching lofty levels which will get a lot of yield chasers out of them and into something else. REIT's have generally trailed utilities by 4-6 months. This year the lag looks to be closer to 4-6 weeks. If so, the REIT's may start exploding to the upside again in the next 4 weeks, since the $UTIL hit a low of 231 on 10/28 and is above 256 just 4 weeks later. If Utilities are looking this much better, then REIT's should have their day also. According to #'s out of Barrons, The Dow Jones Utilities
ended the Sept 30, 1993 quarter at 249.80 with 12 month earnings of 16.64 and dividend of 13.24. The Dow Utilities finished the week of 11/14/97 at 245.60 with 12 month earnings of 14.76 and 10.52 in dividends. You will be hard pressed to find 15 REIT's out 200 that have dropped earnings by 10% and dividends by 20% in that same time frame of 4 years. The DOW Utilities were at 196.95 on Sept 30 1987 before the crash with 18.12 in earnings and 15.94 in dividends. Why people want Utilites instead of REIT's for yield amuses me since there is very little appreciation going on. I understand real estate can and will go down in value every so often, but we just had the real estate crash 10 years ago and prices are very stable and starting to climb. In a severe recession, the real estate values won't back off too much and then utilites would also be a decent investment. If people are scared of a severe recession, why is the stock market trading around a P/E of 23 in general at the end of a business cycle with profit margins near 9% and a 1.7% dividend on S&P 500 type stocks. When people will realize this and put their money in real estate at a faster clip is unknown to me. I just feel that real estate has been at least as good an investment as the stock market over many years and with small appreciation in the last 10 years while the stock market climbed over 4 times it's value, the tide will swing back to real estate for the next cycle. It's better to be a little too soon than too late in switching over to real estate for a decent amount of one's portfolio. In addition, the real estate consolidators are doing a good job of adding 3-10% to the natural growth of real estate cash flow (3-8%) by finding values, making values by leasing well, and cost cutting by reducing overheads, borrowing cheaper, etc. A property with rents of 500 per month in 1987 is probably leasing for 550-750 now depending on the type and location. If the interest was costing 400 per month back then, it would be 375 or so by now if it was never refinanced. With lower interest rates now, this same loan may only cost 275-325 a month per unit. It's obvious how much the cash flows could be up with only 2-3% rent increases just due to the financing savings. enough rambling.
Alan,
MRY was trading around 21 and low change a few weeks ago. That was only 10 tims FFO, which is what REIT's that are stuck in the mud trade at. MRY had 4% revpar growth and someone got excited at the apparent value underneath the seeming flat .51 vs .51 FFO quarter. Apparently .05 was from non-core (investing) activities in 1996. I think MRY is a good company and if this breakout holds, 23 should be it's low and somewhere around 25 the high end of it's range for a while.
Double digit growth REIT's trading within 1-4% of their lows with 6-12% upside potential in a dividend cycle include: BED; PP; FCH; BOY; GTA; AGT; CRE; CCG; EQR: KPA; MRR, KE
I own BED, PP, FCH, GTA, CRE, EQR, MRR. I bought BED, PP and MRR at these levels in the last week or so.
I also like CLP; PAG; AML; CBL; JDN; SKT; LXP; SIZ: TOW at these levels. I own PAG, CBL, LXP, SKT, SIZ, TOW. I bought PAG & LXP this week.
HFD is reaching extremely oversold conditions, but may have a little more to go. Lower quality, so be careful. I only trade it and it's best to wait for the dividend announcement, since I don't know how they can support it without huge FFO growth. Still, I have made 10% in 2 weeks by buying when the seller is gone.
I also like GVE: HRE: RPT(below 18-3/4):, but these have micro floats, must use limits to buy and sell and are not for everyone. These occassionally trade with FFO multiples below their FFO growth rate, which is unusual for REIT's with only 10 FFO multiples. I own GVE & HRE. I bought GVE this week and may buy more of HRE.
Some ex-dividend dates (back up 3 days from these) are:
CWN,PEI,SIZ-11/28, MRR,WRI-12/1, USV-12/5, BRE-12/8, EOP-12/10, JPR-12/12, DDR,EQR,PSA,SEA-12/15,
regards,
Richard |
