Monmouth: A High-Yield Commercial REIT to Consider

Although the smart money is snapping up distressed real estate on the cheap in many areas of the country for long term rental purposes, most readers can't run away fast enough from almost anything associated with real estate. I can't quarrel with that attitude. However, I would like to bring to your attention one little known REIT that may provide a hefty yield coupled with reasonable security for your portfolio.

That REIT is Monmouth Real Estate Investment Corporation (MNRTA).

Monmouth has been in business since 1968 and invests in net-leased (primarily triple-net leased) industrial properties with long-term leases to investment grade tenants such as Anheuser-Busch, Caterpillar, DHL Express, Western Container, Mead Paper and Sherwin-Williams. The high quality of this $191 million dollar portfolio gives investors the unique opportunity of investing in institutional quality real estate while at the same time receiving high yields generally available only with more speculative investments. In tune with smart money buying on the cheap, Monmouth has acquired over $100 million dollars in net-leased industrial properties since late 2004. MNRTA currently owns 58 properties in 26 states, making it regionally diversified. It leases over 5,700,000 square feet of space.

Monmouth has traditionally maintained a conservative balance sheet, although the fourth quarter 2007 gained significantly over the fourth quarter 2006. Especially noteworthy was an increase in rental revenue by 27%. The stock is trading as of this writing at approximately $7.90 a share and yields 8.61%.

Neither institutions (15% of shares outstanding) nor analysts have appeared to discover this REIT to any degree. The Landy family, which has had its hands in everything from harness racing to mobile home parks holds influence over the operations of this REIT and two other entities, Monmouth Capital and UMH Properties.

They appear to be a steady influence that mandate the "steady as you go" approach that befuddles many of the hot-shot REITs.They also seem to relish high dividends.

In a down and out real estate world, this company stands an excellent chance of avoiding the carnage and should be considered as a cash generator for portfolio diversification.

Disclosure: I own MNRTA in my Permanent Portfolio.

Comments

[mtp:]

why not consider the preferred shares - MNRTP?

2008 Jan 07 05:27 AM

[Consider:]

There is an extremely high level of "self-dealing" at this REIT; an "independent" board member consistently receives compensation as a "consultant" in property-level transactions (leasing, dispositions). One wonders if truly independent third-parties might provide the same services at more competitive rates. Additionally, the Landy family law office serves as outside counsel to the REIT - again, one wonders if a truly independent vendor would be more cost effective. Given the relatively small asset base, even minor savings in these areas could likely be measurable.

2008 Jan 07 08:46 AM

[Thomas Smic...:]

I can't quarrel with owning the preferred. That said, I feel that this REIT over the long haul is in a good niche and thus could attain a higher common stock appreciation than in the past.

The Landy family, as indicated in the article, has a strong hand in play with this REIT. They aren't going away, imo. If they did decide to bail out, MNRTA and the other two companies mentioned would likely receive a premium price. That said, the Landy's have gotten very rich in their business dealings and the investor will profit to a satisfactory degree with them.

2008 Jan 07 04:23 PM