Inland Real Estate Corp. (IRC) shares have been under accumulation with insiders making repeated buys throughout 2012. Inland is a real estate investment trust that owns and operates everything from smaller, single tenant properties to major shopping centers. Inland has ownership interests in about 149 properties, totaling approximately 15 million square feet of space. The company is primarily focused on the Chicago metropolitan area and northwest Indiana as these make up about 60% of the retail square footage in its portfolio. The rest of the square footage is primarily located in the Minneapolis-St. Paul area, Minnesota, Wisconsin, Indiana, Ohio, Missouri, Nebraska, Kentucky, Florida, and Tennessee.
The commercial real estate market has been firming up in the past couple of years thanks in part to very low interest rates, and the stimulus programs that have been put in place in order to boost the economy. However, when considering this stock as an investment, it is important to note that some of its largest tenants are major grocery retailers, some of which serve as anchors, and are currently challenged by the retail environment. For example, Supervalu, Inc. (SVU) occupies about 8.6% of the Inland portfolio, Roundy's (RNDY) occupies about 4.1%, and Dominick's Finer Foods, which is owned by Safeway (SWY) occupies about 3.6%. Some major grocery retailers might not renew leases in the future if those locations continue to underperform. Supervalu appears to have a number of stores that might be facing challenges.
Supervalu is major chain of grocery stores with a number of different brands including: Acme, Albertsons, Cub Foods, Farm Fresh, Jewel Osco, Lucky, Save-A-Lot, Shaw's, Shop n Save, Shoppers Food & Pharmacy, Star Market and others. It has been challenged by the likes of Walmart (WMT) and Target (T) which have stepped up sales of food products with extremely competitive pricing. On the higher-end, Supervalu has also been impacted by the rising popularity of organic and health food retailers like Whole Foods (WFM). Supervalu is reviewing strategic alternatives, but so far it seems that most firms are only interested in buying parts of Supervalu rather than the whole company. This leaves a possible uncertain future for many Supervalu locations and that could be a potential risk for Inland Real Estate, if certain locations do not renew their leases. However, it appears well-equipped to deal with the potential challenges, and it could even turn this into an opportunity. If underperforming stores are closed by one company, perhaps a health food retailer would move in and make the entire center even more profitable in the future.
Insiders certainly appear confident that the future looks bright and this could be a sign that the challenges are manageable for this company. On September 27, 2012, Daniel Goodwin, a director, bought 8,000 shares, in a transaction valued at about $66,400. In a second transaction on that same day, he bought another 4,000 shares. On August 29, 2012, Mark Zalatoris bought 1,400 shares in a transaction valued at $11,418. Then, on August 12, 2012, Daniel Goodwin, bought another 5,000 shares, in a transaction valued at about $40,500. On August 7, he bought 7,700 shares, in a transaction valued at about $61,985. On August 6, he bought 5,000 shares, in a transaction valued at $41,000. On August 5, he bought about 29,000 shares, in a transaction valued at about $230,000.
Here are some key points for IRC:
Current share price: $8.32
The 52 week range is $6.73 to $9.65
Earnings estimates for 2012: 86 cents per share
Earnings estimates for 2013: 92 cents per share
Annual dividend: 57 cents per share which yields about 7%
Here are some key points for SVU:
Current share price: $2.29
The 52 week range is $1.68 to $8.75
Earnings estimates for fiscal year 2013: 69 cents per share
Earnings estimates for fiscal year 2014: 64 cents per share
Annual dividend: none
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