It might be time to look at discounted cumulative preferreds especially companies in the REIT sector. If the underlining REIT is solid w/ not too much debt and their preferred(s) do not make up a large percentage of (1) the total debt and/or total market cap; If there is a reasonable discount to PAR $25 (say 20%); it might be better to own the preferreed or some combination of common shares & the preferred.
Many of the REITs I have been holding have performed extremely well from Buys in 2023 generating close to a 30% CAGR and for those it might be better to move some of those proceeds into their cumulative preferred if available.
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Some REITs continue to show good FFO w/ positive guidance but continue to sell well below their 5 year mean price. Market appears to be discounting something, so holding a basket of preferrds and common may be a good way to capture yield and hold common w/ a potential large CAGR if/when FFOs do surprise to the upside.
One of these REITs came to my attention: Saul Centers (BFS)
I have been building a large common share position which currently yield around 7%. It is selling significantly below it's 5 year mean price perhaps do to a project, their Twinbrook Quarter mixed use development. Phase 1 estimated at $279 million
Twinbrook Quarter Phase I includes 452 residential units and about 100,000 square feet of retail (including a Wegmans supermarket) and started leasing residential units in October 2024, with retail opening during 2025–2026.
Project Description and Capital Investment- Twinbrook Quarter is an 18-acre site featuring a mix of residential and retail components designed to create a vibrant live/work/play environment.
- Phase I includes 452 apartment units in "The Milton at Twinbrook Quarter," an 80,000 square foot Wegmans supermarket, and about 25,000 square feet of additional small retail shop space.
- Occupancy and Leasing
- As of May 2025, out of the 452 residential units, 274 have been leased and occupied, indicating ongoing leasing activity but not yet full stabilizationThe retail portion, including the Wegmans anchor and smaller retail shops, was scheduled to open throughout 2025 as tenants completed their buildouts, with Wegmans and Terra Gaucha noted as major tenants.
- Retail leases are typically structured as triple net (NNN) leases, which is common for retail properties to have tenants responsible for their pro-rata share of property taxes, insurance, and maintenance.
- Tenant rents are generally set at market rates with escalation clauses, reflecting a typical leasing strategy to ensure rent growth over time, although specific escalation details for this project were not disclosed.
Project may/could be valued over $1.2 Billion in 25-30 years.
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As a result The BFS-D looks quite attractive selling at a 15% discount to PAR. ( follow link to QuantumOnline)
Saul Centers, 6.125% Dep Shares Series D Cumulative Redeemable Preferred Stock
Ticker Symbol: BFS-D CUSIP: 804395804 Previous CUSIP: Exchange: NYSE |
I am looking for the common shares to eventually achieve a > 30% CAGR but a more conservative play could be holding the BFS-D yielding 7.2% (discount to $25 PAR at 6.235%) PLUS if called at PAR a 15% gain.
I will be looking to add some of these BFS-D if I can get at/near $21.25/share to my already oversized position in the BFS common shares. |
