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This Lodging Stock is a Stable Growth and Income Play

RLJ Lodging Trust (RLJ) is a self-advised, publicly traded real estate investment trust focused on acquiring premium-branded, focused-service and compact full-service hotels.  The Company’s portfolio consists of 145 hotels in 21 states and theDistrict of Columbia, with a total of more than 21,600 rooms.  RLJ is a great growth and income stock as it is projected to increase EPS by 19% in 2013 while paying a steady 3.6% dividend yield.

The Company recently announced that it acquired the historicHumble Oil Buildingcomplex in downtownHouston, for a purchase price of$79.5 million, or approximately$151,000per key based on a combined forward room count of 528 keys.

The Humble Oil Buildingis a three-tower complex that occupies an entire city block in downtownHouston. The complex consists of an 82-unit apartment tower that will be converted to a 166-room SpringHill Suites and two existing hotels, the existing 191-roomCourtyard Houston Downtown Convention Center(“the Courtyard”) and the 171-roomResidence Inn Houston Downtown Convention Center(“the Residence Inn”). The purchase price represents a forward capitalization rate of approximately 10.1% for the Courtyard and 9.5% for theResidence Innbased on each hotel’s projected 2013 net operating income and applicable purchase price allocation. The Company purchased this portfolio of assets with its revolving credit facility.

“Our ability to execute this off-market transaction required the expertise, experience, and relationships that are unique to RLJ,” commentedThomas J. Baltimore, Jr., President and Chief Executive Officer. “Acquiring theHumble Oil Buildingcomplex represents a value-add opportunity. Both existing hotels have notable upside potential and our extensive experience managing complex renovations will enable us to deliver another conversion property that will help drive economies of scale.”

Adjusted FFO for the three months ended December 31, 2012, increased $13.4 million to $50.7 million, representing a 35.9% increase over the comparable period in 2011. For the twelve months ended December 31, 2012, Adjusted FFO increased $43.5 million to $185.6 million, representing a 30.6% increase over the comparable period in 2011. Adjusted FFO per diluted share and unit for the three and twelve months ended December 31, 2012, was $0.48 and $1.74, respectively, based on the Company’s diluted weighted-average shares and units outstanding of 106.8 million and 106.6 million for each period, respectively.

Net income attributable to common shareholders for the three months ended December 31, 2012, was $13.7 million, compared to a loss of $1.3 million in the comparable period in 2011. For the twelve months ended December 31, 2012, net income attributable to common shareholders was$41.3 million, compared to$11.3 million for the comparable period in 2011.

First Call consensus has the company producing $2.08 in EPS in 2013 which is a 19% increase from the prior year.  EPS are projected to be $2.34 in 2014 which is a nice 12% increase from 2013.  First Call Analyst currently have a buy rating with a 2.0 rating.  RLJ has an equity summary score of 7.2 out of 10 for a Bullish outlook.  The stock is currently trading near $22.50, 10.8 times 2013 EPS and 9.6 times 2014 EPS.

Health Care REIT Posts Stronger Rental Income

Health Care REIT Inc.’s (HCN) fourth-quarter earnings more than doubled as the company saw stronger rental income and resident fees and posted a significantly higher gain on sales of properties.  HCN will benefit from an aging Baby Boomer generation’s growing demand for assisted and independent living facilities in the coming years. With a significant presence in these property types, Health Care REIT is in a relatively strong position than most of its competitors.

Health Care REIT also announced 2013 dividend payment rate of $3.06per share, representing a 3.4% increase above 2012 payments.   The dividend payout is a current dividend yield of 4.84%. The latest cash dividend was the company’s 167th consecutive quarterly dividend payment.

With strong quarterly results, Health Care REIT is well poised to maintain its growth curves and simultaneously benefit the shareholders with steadily rising dividends.

In the fourth quarter, the company acquired 11 properties with Belmont Village for $530 million, 11 properties with Brookdale Senior Living Inc. (BKD) for $271 million, and five properties with Sunrise Senior Living for $265 million.

According to the U.S. Census Bureau, the elderly population (aged 65 and older) is expected to jump 36% from 2010 to 2020 to 54.8 million people. The latest acquisition by Health Care REIT, therefore, reinforces the buzz in the healthcare REIT industry, spurred by an aging Baby Boomer generation’s increased demand for assisted and independent living facilities.

Health Care REIT reported a profit of $107.2 million, up from $44.5 million a year earlier.  On a per-share basis, earnings improved to $0.35 from $0.15. Excluding gains on properties and other items, funds from operations fell to $0.85 cents from $0.91 cents.

Revenue jumped 30% to $500.7 million. Analysts polled by Thomson Reuters had forecast earnings of $0.28 cents, FFO of $0.84 cents and revenue of $498 million.

Rental income, the biggest top-line contributor, rose 20%.  Resident fees and service revenue jumped 46%.

The latest period included a $54.5 million gain on property sales, compared with a $4.6 million gain a year earlier.

The senior housing- and health-care-focused real-estate investment trust expects 2013 FFO of$3.70 to $3.80 a share.

The shares of Health Care REIT currently trade at 16x the Consensus Estimate for 2013 FFO, a 4.6% premium to the industry average. On a price-to-book basis, Health Care REIT shares trade at 1.6x, a 15.8% discount to the industry average. On a price-to-book basis, the valuation looks fairly valued.

Bottom Line: Health Care REIT (HCN) is a stable, growing dividend play with a fair valuation at this time.  Investors may want to add shares on a price pullback to $60 or lower.

PSA Profits up 24% – Increases Dividend 14%

Public Storage’s (PSA) fourth-quarter profit rose 24% as the real-estate investment trust posted wider margins, although revenue missed analysts’ expectations.  Public Storage reported income of $271.4 million, or $1.22 a share, up from $ 220.2 million, or 96 cents a share, a year earlier. Per-share earnings reflect effects from preferred and restricted shares.

Excluding foreign currency exchange impacts and other items, funds from operations (FFO), a key performance benchmark in the REIT sector, grew to $1.86 a share from $1.50. Rental revenue rose 5.3% to $385.6 million.

For the year endedDecember 31, 2012, net income allocable to common shareholders was$669.7 million or $3.90per diluted common share, compared to$561.7 million or $3.29per diluted common share for the same period in 2011, representing an increase of$108.0 million or$0.61per diluted common share.

For the year endedDecember 31, 2012, FFO was$6.31per diluted common share as compared to$5.67for the same period in 2011, representing an increase of 11.3%.

First Call analysts’ consensus has a projected 2013 FFO of $7.09 which is a 12% increase.  Based on its current PE, PSA has a 12-month price target of $170.  This represents an 11.8% price upside which presents a 15% total return with dividends included. PSA has an equity summary score of 7.2 out of 10 for a Bullish outlook.

Concurrent with its earnings release, Public Storage announced a hike in its quarterly dividend. The increased dividend now stands at $1.25 per share, reflecting an augmentation of 15 cents per share, or 14% from the prior-quarter amount. This dividend will be paid on Mar 28, 2013 to shareholders of record as of Mar 13.

PSA has a current dividend yield of 3.28% with a 5-year annual dividend growth rate of 20%.

The REIT, which owns self-storage facilities, has benefited from industry consolidation, giving it an advantage advertising-wise and allowing it to gain market share. The company’s top-line results rebounded in the second half of last year, after four consecutive quarters of weaker earnings.

During the three months endedDecember 31, 2012, PSA acquired ten self-storage facilities (761,000 net rentable square feet of self-storage space and additional space that we intend to convert into 220,000 net rentable square feet of storage space for an additional cost of$15 million), located inFlorida(three),Georgia(two),California(two) and one each inArizona,New YorkandTexas, for an aggregate acquisition cost of approximately$82 millionin cash.

We are encouraged with the better-than-expected results at Public Storage. We believe that the company is well poised to maintain its growth curve backed by its robust presence in all the major markets in the U.S.

It is the leading owner and operator of storage facilities in the U.S. and has significantly increased the scale and scope of its operations through the acquisition of Shurgard Storage Centers that has a considerable presence in the European markets.

It also owns a 41% common equity interest in PS Business Parks Inc. (PSB), which owns and operates commercial space, primarily flex, multi-tenant office and industrial space. In addition, the storage facilities of the company have high visibility and are usually located in heavily populated areas that enhance the local awareness of the brand.

Lodging Around for Growth and Income

Chesapeake Lodging Trust (NYSE: CHSP) is a self-advised lodging real estate investment trust (REIT) focused on investments primarily in upper-upscale hotels in major business and convention markets and, on a selective basis, premium select-service hotels in urban settings or unique locations in the United States. The Trust owns 15 hotels with an aggregate of 4,722 rooms in seven states and the District of Columbia.

Chesapeake Lodging Trust reported its financial results for the quarter ended September 30, 2012 with a 8.9% increase in RevPAR for comparable 10-hotel portfolio over the same period in 2011.  For the quarter, the Trust produced EPS of $0.21 compared to $0.18 a year ago.  For the 9 months, the Trust produced EPS of $0.47 compared to $0.21 a year ago, an increase of 124%.

On August 21, 2012, the Trust acquired the 520-room W Chicago – Lakeshore located inChicago, Illinois for approximately $124.9 million, including acquired working capital. The Trust funded the acquisition with available cash on hand and a borrowing under its revolving credit facility. The Trust entered into a long-term management agreement with Starwood Hotels & Resorts Worldwide, Inc. to continue operating the hotel under the W flag.

On September 7, 2012, the Trust acquired the 429-room Hyatt Regency Mission Bay Spa andMarina located in San Diego, California for approximately $59.8 million, including acquired working capital. The Trust funded the acquisition with available cash on hand and a borrowing under its revolving credit facility. The Trust assumed the existing management agreement with Hyatt Hotels Corporation.

Chesapeake Lodging Trust announced that its board of trustees has declared a dividend payment of $.22 per common share. The dividend will be paid on January 15, 2013 to shareholders of record at the close of business on December 31, 2012. The dividend represents a 5% annualized yield based on the closing price of the Trust’s common shares on December 12, 2012.  Chesapeake Lodging has a current dividend yield of 4.08% which was increased 10% in the past year.

Chesapeake Lodging is projected to grow EPS by 19.8% in 2013.  First Call consensus has a BUY recommendation with a 1.7 rating.  Chesapeake Lodging has an equity summary score of 7.5 out of 10 for a Bullish outlook.

Chesapeake Lodging Trust (NYSE: CHSP) has a 12-month price target of $26.50.

This Healthcare REIT will Grow EPS 20% in 2013

Medical Properties Trust, Inc.’s (NYSE: MPW) continued successful execution of its growth and investment strategies have driven the Company’s strong results.  Since 2010, MPW has made hospital investments totaling more than $1.0 billion with average returns of more than 10%.  MPW has rewarded shareholders with a current dividend yield of 6.81%.

Medical Properties Trust, Inc. operates as a real estate investment trust (REIT) in the United States.  It acquires, develops, and invests in healthcare facilities; and leases healthcare facilities to healthcare operating companies and healthcare providers.

Third quarter 2012 total revenues increased 55% to $53.7 million compared with $34.6 millionfor the third quarter of 2011. Normalized FFO for the quarter increased 71% to $33.4 millioncompared with $19.5 million in the third quarter of 2011. Per share Normalized FFO increased 39% to $0.25 per diluted share during the 2012 third quarter, compared with $0.18 per diluted share in the third quarter of 2011. The FFO dividend payout ratio for the third quarter of 2012 was 80%, an 11% improvement compared with the second quarter of 2012.

Net income for the third quarter of 2012 was $31.5 million (or $0.23 per diluted share) compared with net income of $0.4 million (or $0.00 per diluted share) during the third quarter of 2011.

For the nine months ended September 30, 2012 normalized FFO was $85.5 million (or $0.65per diluted share) compared with $57.5 million (or $0.52 per diluted share) in the corresponding period in 2011. Revenue for the nine months ended September 30, 2012 was$145 million compared to $102 million in the corresponding period in 2011. Net income for the first nine months of 2012 was $61.3 million compared with $13.8 million in 2011.

Based upon its expected 2012 performance and placement of its properties under construction into service, MPW expects to enter 2013 with a Normalized FFO run rate of approximately $1.08 per diluted share. This does not include the impact of any potential 2013 acquisitions or financing activities.  This is an increase of 22.81% next year compared to 2012.

MPW has an equity summary score of 8.6 out of 10 for a Bullish outlook.  Based on a PE of 14, MPW has a 12-month price target of $15.

Mortgage REITs – Annaly Capital to Buy CreXus

Annaly Capital Management, Inc. ( NLY ) announced that it has put forth a proposal to acquire CreXus Investment Corp ( CXS ).

The proposal states that Annaly would purchase with cash the remaining outstanding stock of CreXus that is does not already own. Annaly currently owns about 12.4% (9.5 million) of the 76.6 million outstanding shares of common stock of CreXus.

Annaly would pay $12.50 per share in the deal. That is a +12.6% premium on the $11.10 share price that CXS closed at on Friday.

The potential acquisition has been made as Annaly seeks to diversify its investments.

The deal has only been put forth to the Board of Directors of CreXus and is still subject to approval.

Wellington Denahan, Chairman and Chief Executive Officer of Annaly Capital Management, Inc., made the following statement:

“Since our inception in 1997, Annaly has maintained the capacity to diversify its asset base to include real estate related assets in addition to Agency mortgage-backed securities if we determined that compelling other long-term investment opportunities exist relative to the Agency market. While we remain committed to the Agency market, given the current environment, we believe it is prudent to diversify a portion of our investment portfolio. Therefore, we may allocate up to 25% of our shareholders’ equity to real estate assets other than Agency mortgage-backed securities.

“A powerful step in this direction is the proposed acquisition of CreXus. We believe that wholly owning the commercial real estate platform we currently manage through FIDAC is complementary to our existing business and return profile and should provide stable and diversified risk-adjusted returns to our shareholders. CreXus’ capabilities and growth may be significantly enhanced when coupled with Annaly’s broad capital base.

“Our commercial real estate expertise, as well as our expertise in a number of other asset classes, are valuable strategic tools, and we look forward to updating the market on our portfolio as it evolves.

 

REIT Conversion with 18% Special Dividend Yield

Ryman Hospitality Properties Inc. (NYSE: RHP) declared a special dividend of $6.84 a share, marking another step towards the hospitality-and-entertainment company’s conversion into a real estate investment trust.  The dividend is payable to stockholders of record as of Nov. 13. The company plans to pay the dividend on Dec. 21.

The special dividend equates to a dividend yield of 18.14%.

Ryman, formerly known as Gaylord Entertainment, owns four massive conference resorts and had previously disclosed plans to offer a special dividend as part of its conversion to a REIT. In May, Gaylord Entertainment agreed to sell its brand and management operations to Marriott International Inc. (MAR) for $210 million, following a strategic review of its business.

Shareholders will have the option to receive the dividend in the form of cash or shares of common stock, with the total amount of cash payable to shareholders limited to about $61.9 million.

“The special dividend brings us one step closer to completing our conversion to a REIT effective January 1, 2013,” said Colin Reed, chairman, CEO and president of Ryman Hospitality Properties.  “We believe the REIT structure will support our strategic direction and the tax efficiency of the REIT structure will provide a benefit to our shareholders.”

Get Paid Monthly Income from this new REIT with a Strong Buy Recommendation

American Realty Capital Properties, Inc. (NASDAQ: ARCP) is an externally managed real estate company that owns and acquires single tenant free standing commercial real estate properties that are primarily net leased on a medium-term basis generally to investment grade tenants.  The Company commenced operations in September 2011 in conjunction with the closing of its IPO. Prior to that date, ARCP did not hold any real estate properties or have any sources of income or any expenses; the only activity of the Company was limited to organizational activities.

As of September 30, 2012, the Company owned 124 freestanding, single tenant, 100% occupied net leased properties comprised of 2.2 million square feet (excluding one vacant property classified as held-for-sale). These properties are located in 24 states and include 14 tenants, operating in 10 distinct industries.  American Realty Capital has a current dividend yield of 6.93% with monthly distributions.

Funds from operations (“FFO”) for the three months ended September 30, 2012, totaled $1.9 million, or $0.17 per share basic and $0.15 per share fully diluted.  FFO for this period includes one-time net acquisition and transaction related expenses of $0.7 million.  Excluding such one-time costs, core FFO is $2.6 million, or $0.24 per share basic and $0.20 per share fully diluted.

Adjusted funds from operations (“AFFO”) for the three months ended September 30, 2012, totaled $3.1 million, or $0.28 per share basic and$0.24 per share fully diluted.  This represents a 15.0% increase in AFFO per share compared to the second quarter ended June 30, 2012.

For the nine months ended September 30, 2012, FFO totaled $2.7 million, or $0.31 per share basic and $0.28 per share fully diluted.  FFO for this period includes one-time net acquisition and transaction related expenses of $3.0 million.  Excluding such one-time costs, core FFO is$5.7 million, or $0.67 per share basic and $0.60 per share fully diluted.

AFFO for the nine months ended September 30, 2012 totaled $6.5 million, or $0.76 per share basic and $0.69 per share fully diluted.

“Our investment strategy is performing exactly as planned and we are witnessing an increasingly rich pipeline.  We are systematically assembling a well-diversified portfolio of free standing, single tenant properties net leased to predominantly investment grade tenants at prices accretive to our dividend,” stated Nicholas S. Schorsch, Chairman and Chief Executive Officer of ARCP.  “During 2012, we acquired approximately $100 million of investment properties at a weighted average capitalization rate of 9.5%.  We recently announced $36 million of additional acquisitions expected to close during the balance of 2012 at equally attractive pricing.  Our core earnings will be favorably affected by these acquisitions.”

On October 1, 2012, ARCP announced its fourth consecutive dividend increase. The Company’s board of directors authorized and the Company declared, on September 30, 2012, an increase in its annual dividend rate to $0.895 per share, beginning November 9, 2012.  On November 15, 2012, the Company will pay the new annual dividend rate to stockholders of record on November 8, 2012.

This is following three prior dividend increases in March, June and September 2012. On February 27, 2012, the Company’s board of directors authorized and the Company declared an increase in its annual dividend rate from $0.875 to $0.880 per share. Accordingly, on March 15, 2012, the Company paid a dividend of $0.0733 per share to stockholders of record at the close of business on March 8, 2012.

Total dividends paid to common stockholders by the Company were $2.4 million for the three months ended September 30, 2012. For the nine months ended September 30, 2012, dividends totaled $5.6 million.

First Call analysts have a consensus “Strong Buy” recommendation with a 1.3 stock rating.

Hatteras Financial (HTS) has a 12% Dividend Yield

Hatteras Financial (HTS) is a real estate investment trust formed in 2007 to invest in single-family residential mortgage pass-through securities guaranteed or issued by U.S. Government agencies or U.S. Government-sponsored entities, such as Fannie Mae, Freddie Mac or Ginnie Mae.   Hatteras announced financial results for the quarter ended September 30, 2012.

Book value per share increased 7.8% in the quarter to $29.60; 4.3% higher than our estimate. Book value growth was aided by the opportunistic deployment of capital from the August preferred deal into the 15-year sector ahead of QE3.

During the quarter ended September 30, 2012, the Company earned net income of $82.0 million, or $0.83 per diluted common share, compared to net income of $89.1 million, or $0.91per diluted common share, during the quarter ended June 30, 2012. Net interest income for the quarter ended September 30, 2012 was $79.6 million, compared to $83.0 million for the quarter ended June 30, 2012 reflecting the continued compression of net interest margin.

The Agency MBS portfolio increased by $4 billion (18%) in the quarter. The end of period balance was 14% above our estimate. The percentage of 15-year fixed MBS as a percentage of the portfolio increased to 17% from 7% last quarter, now totaling $4.4 billion from $1.6 billion. Average earning assets for the quarter increased by 15%, and were 7% above our estimate.

The Company declared a dividend of $0.80 per share of common stock with respect to the quarter ended September 30, 2012, compared to a $0.90 per share dividend for the quarter ended June 30, 2012.

Hatteras is trading at an 11% discount to third quarter book value and yielding 12.15% on the expected next 12 months dividends.

Hatteras has an equity summary score of 9.2 out of 10 for a VERY Bullish outlook.

Get Rent Checks from the Government

Government Properties Income Trust (NYSE: GOV) is a real estate investment trust (REIT).  The Company was formed to invest in properties that are leased to government tenants.  The Company owns 29 properties, 25 of which are leased primarily to the United States Government and four of which are leased to the states of California, Maryland, Minnesota and South Carolina, respectively.  The Company is a wholly owned subsidiary of HRPT Properties Trust (HRPT).

As measured by square footage, the IRS is GOV’s biggest tenant.  The next-biggest tenant is U.S. Customs & Immigration. These two make up over 20% of GOV’s rental income. The next biggest in terms of rental income is the Department of Justice.

Government Properties announced that it priced a public offering of 7,500,000 common shares at a price to the public of $23.25 per share. GOV expects to use the net proceeds of this offering to repay amounts outstanding under its revolving credit facility and for general business purposes, including funding potential acquisitions.  Government Properties is currently trading at $22.25 or 4.5% below the share offering price.

Government Properties recently announced it has raised its regular quarterly common share distribution by $0.01 to $0.43per common share ($1.72 per share per year).  Government Properties has a current dividend yield of 7.73%.

Normalized FFO for the six months ended June 30, 2012 were $49.5 million, or $1.05 per share, compared to Normalized FFO for the six months ended June 30, 2011 of $40.5 million, or $1.00 per share.

Net income was $25.0 million, or $0.53 per share, for the six months ended June 30, 2012compared to $21.2 million, or $0.52 per share, for the same period last year.

Since its initial public offering in 2009, GOV has acquired nearly $1 billion of property, at an average cap rate of 8.7%.  Since April 1, 2012, GOV has acquired seven properties for an aggregate purchase price of$125.2 million.

Government Properties has an equity summary score of 8.3 out of 10 for a BULLISH outlook.  It has a 12-month price target of $26.50.

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