Wednesday, January 21, 2015

Update for Equity REIT Common and Preferred Basket as of 1/21/15

The last update for this basket was in December 2014: Update of Equity REIT Common and Preferred Stock Basket as of 12/26/14

For the reasons discussed in a March 2014 post, I started a tactical allocation shift into REIT common and preferred stocks starting in September 2013. Equity REIT Common and Preferred Stock Table as of 3/5/14 This particular shift started after prices had significantly corrected in the May to September 2013 time frame. Most of my best buys were made in December 2013 that marked the high point in the correction process.

I currently view the valuations for most U.S. REITs to be stretched and unappealing. 

Aggregate P/FFO data can be found in Lazard's monthly Real Estate Report. The aggregate P/FFO has become elevated again.

I am not tracking reinvested dividend in the following table.

This basket did outperform the Vanguard REIT ETF (VNQ) today:
VNQ: 86.59 -0.06 (-0.07%)
Basket: +.65%

Click to Enlarge:

Equity REIT (Common and Preferred) Basket 

I am also summarizing in this update the performance numbers for this basket during 2014. Overall I would have better off owning the low cost Vanguard REIT ETF (VNQ), which has a total return of 30.36% during the year.

I had several securities outperform VNQ during the year, but I also had two clunkers among my U.S. REIT selections and my Canadian REITs had an awful 2014 4th quarter.  

U.S. Equity REITs Common Shares 2014:

I calculated that this basket produced $3,623.05 in dividend income during 2014.

The following percentages are total return number for 2014 calculated by Morningstar.

HCP Inc (HCP)= +27.23% 

The positions in OHI, O, and HCP were acquired in December 2013:

Snapshot at Item # 2 Bought: 100 OHI at $29.85 (12/23/13 Post)

OHI just increased its quarterly dividend again by 1 cent per share. Omega Announces Tenth Consecutive Increase in Common Stock Dividend The new quarterly rate is $.53 per which translates into about a 7.1% yield at a total cost of $29.85.

Realty Income (O) just increased its monthly distribution by 3.0%. The monthly rate is $.189 per share. At that rate, the dividend yield at a constant total average cost per share of $36.96 is about 6.14%.

The IRT lots were acquired during the year at prices lower than the $9.31 closing price on 12/31/13. Bought 50 IRT at $8.17-Roth IRA/Bought: 100 IRT at $8.87 (1/28/14 Post) I also bought 50 IRT shares in a Vanguard IRA at $8.45 in January 2014: IRT

SRC was acquired in February 2014: Item # 1 Bought 100 SRC at $10.7 Roth IRA (2/25/14 Post) SRC closed at $9.83 on 12/31/13.  

For both MPW and EPR, my annualized total returns would be substantially higher than the total return for someone who bought shares on 12/31/13. Bought 30 EPR at $50.72/Bought Roth IRA: 50 MPW at $12.33 (10/14/14 Post)

The current EPR position was acquired in October 2014. EPR closed at $49.16 on 12/31/13.

EPR just increased its monthly dividend rate to $.3025 per share or $3.63 annually. EPR Properties Increases Monthly Dividend Over 6% for Common Shareholders At the new rate, the dividend yield at a total cost of $50.72 is about 7.16%. 

The current MPW position was acquired in October 2014. MPW closed at $12.22 on 12/31/13.  

The following stocks underperformed VNQ During 2014 with positive total returns: 

Chambers Street Properties (CSG)= +11.95%

One of the more recent buys, Bluerock Residential Growth (BRG), recently had a public stock offering: Bluerock Residential Growth REIT (BRG) Announces Closing of Public Offering of Class A Common Stock and Full Exercise of Underwriters' Option BRG also completed it disposition of an apartment complex in Nashville. BRG Completes Sale of 23Hundred@Berry Hill in Nashville for $61.2 Million BRG only had a minority interest in that property, along with two other entities affiliated with its external manager and the developer of that project. I left some comments about the issues raised in the ownership division among three entities controlled by the external manager in a a comment to a Seeking Alpha article. I also have an article. REIT Basket Strategy: Added 100 Bluerock Residential Growth Shares At $12.85-Bluerock Residential Growth REIT, Inc. (NYSEMKT:BRG) | Seeking Alpha

Negative Total Returns: 

Campus Crest Communities Inc (CCG)= -16.1% (long story)

U.S. Equity REIT Preferred Stocks: 

This basket includes some Equity REIT preferred stocks. I sold several issues during 2014, realizing a total share gain of $834.52 plus clipped dividend payments.

I still own the following preferred stocks, with slight unrealized profits in the positions: AMHPRA, CBLPRD, CCGPRA, CORPRA, and FPOPRA.

Bought: 50 FPOPRA at $24.25 (1/6/14 Post)
Bought 50 CORPRA at $23.9 (3/3/14 Post)
Bought 50 CCGPRA at $25.13-Roth IRA (3/24/14 Post)
Bought 50 CBLPRD at $24.6 (9/14/13 Post)(one of the first buys in this basket)

Canadian REITs 2014: 

The had several trading profits in Canadian REITs. The largest was in a 300 unit position in Healthlease which accepted a buyout offer from HCN: Item # 6 SOLD: 300 HLP-UN:CA at C$14.17 (CAD profit=C$1,244.75/USD reportable report at $1,039.15). Since my holding period was just a few months, the total annualized return on this position was superior.

I also generated gains trading Canadian Apartments, Artis and Riocan. Item # 2 Sold on the Toronto Exchange: 200 CAR_UN:CA at C$23.16 (7/12/14 Post)(CAD profit=C$460); Item # 1 SOLD: 300 AX-UN:CA at C$15.71 (9/26/14 Post)(CAD profit=C$367); Item # 7  Sold  100 REI_UN.CA at C$27.04 (7/19/14 Post)(CAD profit=C$101).

2014 Realized Gain in CADs=C$2,172.75 

In the 2014 4th quarter, the remaining Canadian REITs that I owned took a tumble that coincided with the substantial decline in the WTI crude oil price and further weakness in the Canadian currency. Several Canadian REITs hit 52 week lows and/or all time lows during that quarter. The decline in prices occurred even though interest rates were declining some and the yields went over 9% in many cases. Prices started to recover some in late December.

Hopefully, my Canadian REITs will outperform VNQ in the current year based on their higher current yields and more favorable valuations. There are doing little better so far this year.

Main Canadian REIT Positions: Closing Prices as of 12/31/14

12/31/14:   300 units of Cominar (CUF-UN.TO) C$18.61
1/21/15:     $19.55 +0.30 (+1.56%)

12/31/14:   200 units of Dream Office REIT (D-UN.TO) C$25.15
1/21/15:      D-UN.TO: C$27.23 +0.37 (+1.38%)

12/31/14:   500 units of Dream Industrial REIT (DIR-UN.TO) C$8.42
1/21/15:     DIR-UN.TO: C$9.01 +0.04 (+0.45%)

12/31/14:   500 units of  Dream Global REIT (DRG-UN.TO)  C$8.57
1/21/15:     DRG-UN.TO: C$8.87 +0.08 (+0.91%)

12/31/14    500 units of  Northwest Healthcare (NWH-UN.TO) C$9.28
1/21/15:     NWH-UN.TO: C$9.48 +0.20 (+2.16%)

I did argue in my last update that those REITs were undervalued particularly when compared to the distribution yields and P/FFO valuations of U.S. REITs.

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