Last week I wrote an article Picking An All-Star REIT Team To Defend Against Interest Rate Risk that included many of my SWAN (sleep well at night) picks. Although I didn't include all of the REITs that are in my Intelligent REIT Investor newsletter, I did include many. As I explained in that article, it's important to build out a team and it's even more essential to designate each REIT for its unique value proposition.

I like using the team analogy because that's exactly how an investor should think when he or she is modeling a REIT portfolio. You are the coach and you should look at each REIT as a prospective player in hopes of determining whether the individual prospect can be optimized and integrate into your overall playbook.

Better yet, you (the coach remember) should look at each REIT in an effort to filter out the

The demand for income has certainly fueled the fire, making it more difficult to find value in stocks, and REITs aren't immune. However, it's plain to see that REITs continue to look attractive today, especially when compared with the world of low-yielding stocks. Unlike stocks, REITs offer the best of both worlds: the potential for long-term capital appreciation and steady income.

Intelligent investors must recognize that REIT dividends are regarded as a "holy grail" of sorts and unlike ordinary stocks, REITs MUST pay out at least 90% of taxable income in the form of dividends. That is especially important to recognize in uncertain times when a dividend is often regarded as more important than the market price of the shares.

I often argue that REITs should be a CORE asset class (as opposed to an alternative) simply because of the dramatic shortage of quality yield in the marketplace. My

Earlier this week, I was reading fellow Seeking Alpha writer Dane Bowler's Two Part articles on Optimizing Triple Net Lease Investments. In Bowler's first article he was recommending a strategy of selling shares in Realty Income (O) and in the second article he was suggesting to replace the O shares with Gladstone Commercial (GOOD) shares.

First off, I believe that Bowler wrote a fairly convincing article on the "extreme" valuation of O. From a pure value investor's viewpoint, I consider O to be trading in the moderately expensive range (shares closed at $54.10 with a P/FFFO of 22.8x). However, as I argued in a recent article, value in relation to price, not price alone, must determine your investment decisions. As I explained:

But, for an income investor, there is value. In fact, I would argue that Realty Income is fairly valued, especially when comparing the

Well it's going to be busy week. I'm headed to The Money Show in Las Vegas tomorrow to begin the official launch of my monthly newsletter, The Intelligent REIT Investor. Then later in the week I will be attending the 2013 RECon Las Vegas conference. For those of you who don't know, RECon is a global convention for shopping center professionals and this year's event promises to be well attended with over 30,000 industry professionals and over 1,000 exhibitors.

My first ReCon conference was in 1988 (just out of college) and then the retail industry was just heating up. It was then that I learned about the "big box" format (Wal-Mart (WMT) didn't open its first Supercenter until 1988) and I witnessed, first hand, the boom fueled by the inflated stock market, loose credit, and consumer consumption.

The retail industry flourished in the 1990s and so did

I find it amazing that some of the wealthiest investors around - the hedge funds - claim to have a vast knowledge and understanding as to the nature of their complex strategies, yet the funds' overall performance often turns into Fool's Gold.

We all know that hedge funds by nature are opportunistic as they are designed to pool people's money to invest in a diverse range of assets. Because hedge funds are lightly regulated (and are not sold to retail investors) they typically buy riskier positions and they often employ the use of short selling and leverage.

Although it is difficult to evaluate hedge fund performance compared with other investments (because the risk/return characteristics are unique), I still remain baffled as to why so many hedge fund managers cross into my sweet spot - REITs - trying to short a particular stock that is anything but distressed or even showing

In August (2012), I wrote an article (How Much Salsa Should I Put in My Intelligent REIT Portfolio?) that included around 25 REITs that an intelligent investor would own. In that portfolio - I refer to as the SALSA portfolio (also in my Intelligent REIT Investor newsletter) - I included a 1.67% interest in American Realty Capital Properties (ARCP). I did not include more than 1.67% then because ARCP was still a fairly new REIT and I wanted to see how the company would perform and more importantly, to witness a track record of dividend safety and reliability.

In another article last year, I explained that I wanted to watch ARCP grow from its highly concentrated IPO (September 7, 2011) portfolio of just three tenants (Citizens Bank, Community Bank, and Home Depot) to a more diverse triple-net REIT composition. I recommended ARCP then based upon

In today's REIT marketplace, cap rate compression for most of the major asset classes is continuing. This is reflected in the fact that valuations for publicly traded REITs are going higher and show few signs of stopping. (see my article on cap rate compression here).

A market like this acts like a rising tide, which raises all boats (or REIT stocks). These stock market gains can be great for investors who currently own REIT stocks. However, it is easy for investors to fall into the trap of thinking that all companies are created equal and will continue to go up. On Wall Street, this is best described by the old adage that one should not "Mistake a bull market for stock picking ability."

As intelligent REIT investors, it is our job to look beyond Mr. Market's current sentiment to see what is coming next. As Warren

It was just four months ago that I wrote an article warning REIT investors of the expensive valuations relative to historical standards. Whether we blame it on the current low interest rate environment or not, these valuations can be justified given the limited income options from the bond market.

So far this year, U.S. REIT performance has been very strong as investors continue to flock to the only "forced" dividend alternative (REITs) that has exceeded many other risk-aligned investment options. The pace has intensified in April as REITs (FTSE NAREIT All Equity REIT Index) returned 5.8%, beating the S&P 500 (1.93%), DJIA (1.79%) and NASDAQ (1.88%) by a wide margin.

But we all know that the market cannot sustain the growth and the momentum that we have all witnessed over the last few months. Yet, this love affair for REITs is awfully hard to dismiss - especially when searching

A few days ago I wrote an article (Waiting Patiently For A Blue Chip REIT Pullback) in which I argued that "REIT investors should consider staying away from the riskier mortgage REITs and instead focusing on more risk-averse blue chip REITs". My somewhat biased dividend safety argument is simply based on perhaps the most important and critical risk component that is facing any income investor today: rising interest rates.

Most REITs have seen a tremendous run over the last twelve months and my biggest concern for REIT investors now is the uncertain interest rate environment that could impact operational fundamentals for the weaker, highly leveraged, mortgage REITs. Yet, it seems that the blue chip REIT management teams have become more fixated on preparation as Philip Kibel, Vice President of Moody's explained (in a new report):

REITs, especially investment-grade REITs, continue to show the strength that allowed

When I was a kid I loved magic tricks. My favorite trick was pouring water into a hat and then creating the illusion that it had vanished in thin air. Then I would pull a toy rabbit out of my hat and scream "I am Houdini, the Greatest Magician of all time."

In REIT-dom there is no better magician than Nicholas Schorsch, Chairman and CEO of ARC Properties Advisors. The veteran non-traded REIT financier has put together a string of full-cycle liquidity events that has a created magical kingdom in which individual investors have gained access to real estate in an illiquid but less volatile format.

Lately, the Non-Traded REIT sector has seen considerable growth as explained by Bruce Kelly (in an article in Investors News):

Since 2000 Non-Traded REITs have seen phenomenal growth. The number of registered offerings has increased to 62 from 11 over that time,

Last week I wrote an article, Waiting Patiently For A Blue Chip REIT Pullback, in which I provided a list of a dozen REITs, most considered blue chips, which appeared to be trading at prices with very little margin of safety. As I explained, "blue chip REITs are trading at outrageous pricing levels" and the likelihood of "buying a wonderful business at a moderate price" is becoming increasingly difficult. So I asked the question:

Should we wait for a correction before we put money to work? Or, should we ease valuation standards and look for small cap REITs even though they lack the fortress balance sheets and untested management teams possessed by the blue chip REITs?

Yesterday, my friend and fellow contributor, Tim McAleenan Jr., addressed the same topic in an article, Some Blue-Chip Dividend Stocks Have No Margin Of Safety. McAleenan explains:

I would be especially hesitant

Back in the good ole days when I was a developer, it seemed that all of my developer friends owned a Rolex. But I could never come to terms with buying a watch with such a high, if not inflated, price; especially when there are so many other watches that perform well, if not better, at a substantially less price.

It's funny that there are so many watches that resemble a Rolex but don't have the big brand name. Of course, Rolex watches are of the highest quality and they do last for generations. Some claim that their Rolex watches never wear out and that they are even indestructible. That durability component is also the investment appeal that makes Rolex a preferred watch brand and also the reason that the luxury watch appreciates substantially in value.

As I surf REIT-dom looking for the irreplaceable dividend brands - the more durable

In the March 27th (2013) issue of Kiplinger's Eleanor Laise wrote:

Rebalancing - the process of selling your winners and buying losers - is never as simple as it sounds. At a gut level, nobody wants to sell stocks when they're soaring or buy them when they're plunging. And now, investors confront the prospect of rebalancing from stocks into bonds, whose low yields generally look unattractive.

Laise went on to say that investors should:

...resist the urge to plow money taken from stocks into higher-yielding junk debt or longer-term bonds. Junk bonds have already had a big run, and investors should consider rebalancing out of these riskier holdings too.

I completely agree with Laise's approach and I would go as far to say that REIT investors should also consider staying away from the riskier mortgage REITs and instead focusing on more risk-averse blue chip REITs.

As Ralph

The attraction to REITs today has been driven by the strong investor demand for income. After all, most REITs obtain rent from a variety of tenants and the more successful REITs are the ones that lease out space to highly sustainable users. It's clear to see that the most attractive REITs today have the most sought after facilities that make the demand fundamentals the strongest.

One of the most appealing asset sectors today is healthcare. Unlike some of the other sectors - like retail, self storage, and office - everyone has to visit a healthcare property. Accordingly, the healthcare sector has become a most reliable asset category that is driven by the necessity-based characteristics that make the income stream all that more durable.

In a Market Overview Report dated January 2013 (Source: U.S. Healthcare Industry and Medical Office Market Overview) by Rosen Consulting Group (or RCG), Randall

One of my favorite REITs is Tanger Factory Outlets (SKT). Not just because the Greensboro-based company is just a few hours away from my hometown (Greenville, SC) but more so because I really admire the company's CEO, Steven B. Tanger. I guess I could also say that Tanger is my "home town" favorite since the Carolina-based REIT helped transform the course of the outlet sector by opening its first strip center with brand name outlet stores in Burlington, North Carolina (in 1981).

It was Stanley Tanger, CEO from inception thru 2009, who was the catalyst for the Tanger Factory Outlet brand as he was responsible for turning the city of Burlington into a destination for shoppers who often arrived by the busload (four banks turned him down before he obtained a loan to launch the business). Tanger died a little over two years ago and his son,

Some of you may recall a Seeking Alpha article that I wrote about a few weeks ago called 3 Healthcare REITs With Mispriced Risk. In that article I explained that several of the mid-cap health care REITs with lower quality asset portfolios (higher cap rates) have run-up to unhealthy levels - a concept that I refer to as mispriced risk. As I explained:

I am feeling somewhat nervous and the purpose for this article is to provide you with one important and increasingly dangerous risk: be careful when buying lower quality (health care) REITs that pay higher dividends. This is not say that I would immediately unload all of your shares in OHI, MPW, or AVIV. I simply want to make the case that in the long run, high quality always wins.

Mispriced risk is, in the words of the legendary Ben Graham, much like what

Investopedia defines risk as:

The chance that an investment's actual return will be different than expected. Risk includes the possibility of losing some or all of the original investment.

To address risk in a modern sense, the noted "margin of safety" author and investor, Howard Marks (in his book, The Most Important Thing) wrote:

Great investing requires both generating returns and controlling risk. And recognizing risk is an absolute prerequisite for controlling it.

Marks went on to explain:

When you boil it all down, it's the investor's job to intelligently bear risk for profit. Doing it well separates the best from the rest.

The Intelligent REIT Investor Recognizes Mispriced Risk

Two weeks ago I wrote a Seeking Alpha article (3 Healthcare REITs With Mispriced Risk) in which I warned that several REITs were becoming risky based on underlying income fundamentals. As I explained:

It's clear

The Triple-Net REIT playground is becoming more and more crowded today with non-listed REITs rushing to create liquidity events for investors. In addition, many non-REITs are looking to also cash in on the REIT craze by way of converting to more tax-friendly publicly-listed securities.

The most recent Triple-Net deal in play with Cole Credit Property Trust III (CCPT3) has created a bidding war in which two arch rivals - Cole Holdings and American Realty Capital Properties (ARCP) - are pumping fists at each other in hopes to win the prized REIT - CCPT3 - that owns 1,014 properties in 47 states. Recently I wrote an article describing the playground battle in progress:

Withstanding the fact that ARCP has no experience in managing multi-tenant retail or office properties (and way over-priced), my biggest issue with the "playground bully" is ARCP's externally managed platform. In my opinion, ARCP

I love New York City real estate. Although there are many economies around the world that are unstable, New York continues to be the "gold standard" for investment in commercial real estate. In a recent Forbes.com article, I explained:

Certain things are true of all commercial properties; their value and profitability depend on property- specific issues, such as location, lease revenues, property expenses, occupancy rates, and tenant quality. It is important that REIT investors also understand property cycles and how they affect local economies.

According to Eastern Consolidated, a leading full-service real estate investment services firm, New York ended the year on a solid note as a flurry of commercial property sales were closed in the final days of 2012. The total commercial sales volume doubled from $5.9 billion in the third quarter to $13.6 billion in the fourth quarter. The number of transactions jumped from 320 in

In August of last year (2012), I wrote an article on AmREIT, Inc.'s (AMRE) issuance of Class B common shares on the New York Stock Exchange. The purpose for the previous article was to introduce investors to this Houston-based shopping center REIT and its differentiated value proposition.

With the exception of just a few REITs, I rarely recommend REIT IPOs because as Benjamin Graham believed, during an IPO, the previous owners are generally attempting to raise capital to (1) expand the business, (2) cash out for estate planning, or (3) a variety of other reasons - all three resulting in one thing: "a premium price that offers little chance for buying your stake at a discount." Graham would often argue that

some hiccup in the business could cause the stock price to collapse within a few years, giving the value minded investor an opportunity to load