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Forbes.com: 4 REITs to Help You 'Sleep Well at Night'

Forbes.com: 4 REITs to Help You 'Sleep Well at Night'

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By    |   Thursday, 23 February 2017 09:27 AM

Forbes.com recently offered some sage advice on finding near-perfect real-estate investment trusts (REIT) which will put your financial fears at such ease you’ll sleep well at night.

Brad Thomas, editor of Forbes Real Estate Investor, explained that “finding attractive dividend-paying REITs is only one piece of the puzzle, buying them is another.”

“The prospective blue chip REIT must have an earnings stream that is reliable and that can be relied upon over series of years, that’s simply why I call it ‘sleeping well at night,’” he explained on Forbes.com.

“Most importantly, the REIT must have a growing dividend stream, not just a one-hit wonder , but a dividend stalwart, recognized for a long history of dividend growth through multiple economic cycles,” he said.

He offered 4 REITs:

  • Simon Property Group (SPG) has a market capitalization of around $57 billion and the company owns or has an interest in 227 properties comprising 189 million square feet in North America, Asia, and Europe, he said. “SPG is a blue chip REIT based on all metrics: balance sheet (rated A), dividend growth (average 10% growth over 4 years), and payout ratio (62%). Over the last year or so, shares in SPG and the other Mall REITs have pulled back considerably due to store closures and e-commerce fears (SPG has returned -2.7% since Dec. 31, 2015).”
  • Ventas, Inc. (VTR) is also a large cap REIT that owns 1,270 properties that consist of 42% Triple Net, 30% SHOP (based on revenue), 25% office, and 3% in loans, he said. “VTR consider itself the “premier provider of capital to leading healthcare and senior living companies and university-based research institutions.” VTR “has made great strides in enhancing its balance sheet and financial strength. In 2016 the company issued around $1.3 billion in equity over the course of the year at an average gross price of approximately $70 per share,” he said.
  • LTC Properties (LTC) is a healthcare REIT that invests primarily in senior housing and long-term healthcare property types, including skilled nursing properties (55.3%), assisted living properties (40.3%), independent living properties, he said. “LTC has always maintained a very stable balance sheet, and although the company has no agency rating, I consider the leverage metrics comparable to BBB-rated REITs. The low leverage and well-laddered maturities provide me with comfort that rising rates will not impact profitability,” he said, noting he own shares in SPG, VTR, and LTC.
  • PS Business Parks (PSB) owns, operates, acquires and develops commercial properties, primarily multi-tenant flex, office and industrial parks, he said. The company owns 14.6 million square feet of flex space (defines "flex" space as buildings that are configured with a combination of warehouse and office space and can be designed to fit a wide variety of uses).

Meanwhile, the most worrisome area of the REIT market consists of shopping malls, because of the difficulties faced by retailers this year. 

“All signs point to things getting worse for this group of companies,” Bloomberg News reports. “Shares in North American REITs with a large portion of their investment concentrated in malls are now down 10 percent in the past year, compared with a 6 percent rise across all REITs.”

Retailers are facing a broad slowdown in sales at brick-and-mortar stores.

“Retail traffic across all types of retail real estate — including malls, strip centers, and other shopping areas — has been posting monthly declines of as much as 18 percent in the U.S. and Canada from the year before, according to analysis firm Prodco. Traffic to luxury retailers has fared even worse,” Bloomberg reports.

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Forbes.com recently offered some sage advice on finding near-perfect real-estate investment trusts (REIT) which will put your financial fears at such ease you'll sleep well at night.
Forbes.com, REITs, Invest, Sleep
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2017-27-23
Thursday, 23 February 2017 09:27 AM
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