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Brad Thomas

 
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  • Show Me The Money: The Perils Of REIT ETF Investing
    Mon, Aug. 4 ARCP, DLR, O 77 Comments

    Summary

    • An unstated, though fundamental, element to purchasing many of the widely held equity index ETFs: Buying the good, the mediocre and the bad equities.
    • Peter Lynch, one of the greatest investors of all time, calls this "di-worse-ification.".
    • The investment relationship with ETFs is complicated. Investors shouldn’t get lulled into accepting consistent, slight underperformance, because of a desire to avoid large deviations from index returns.
    • I can’t provide you with specific details because I owe my dedicated subscribers the content; however, I can tell you that my tactically-weighted portfolio has returned over 21% year-to-date.
  • Pebblebrook Hotel Trust - A Luxury Brand To Consider
    Editors' Pick • Mon, Aug. 4 PEB 19 Comments

    Summary

    • In other words, the word luxury is synonymous with the Trump brand and if I did not know any better, I would have thought that Donald Trump created it.
    • When it comes to luxury-based products, loyal patrons will buy beyond traditional purchases, almost immune to price – kind of the complete opposite of a value investor, eh?
    • Although the P/FFO multiple denotes opulence, the durable growth prospects and strong balance sheet provide comfort with the contemplated entry price.
    • There are just a handful of REITs that I would consider buying with P/FFO multiples above 18x and Pebblebrook is one of them.
  • Digital Realty Has A Powerful Moat Of Dividend Repeatability
    Editors' Pick • Thu, Jul. 31 DLR 55 Comments

    Summary

    • Although Mr. Market oftentimes ignores the true long-term profits that are the basis for a wide moat, he eventually becomes more rational in nature and provides a more accurate representation.
    • A wide moat business, purchased at the right price, is the ultimate “sleep well at night” investment, and I recognized that opportunity in December 2013.
    • "This mutual attraction and our interconnected global portfolio essentially act as a wide moat that is extremely difficult for competitors to replicate." - Bill Stein of Digital Realty.
  • I'm Happy To See This Healthcare REIT Spreading The Love
    Wed, Jul. 30 HTA 24 Comments

    Summary

    • Today, HTA’s board of directors sent me an early Valentine’s Day gift by declaring a cash dividend for the third quarter of $0.145 per share.
    • Although I was hoping to see a more substantial boost, the recent dividend news gives me a better feeling that management at HTA is committed to shareholders.
    • My latest purchase was on December 3, 2014 and my total return is up 24%.
  • Will The Lobster Deal Be A Tipping Point For This Net Lease REIT?
    Wed, Jul. 30 ARCP 39 Comments

    Summary

    • "In the end, Tipping Points are a reaffirmation of the potential for change and the power of intelligent action. - Malcolm Gladwell, The Tipping Point.
    • "The name given to that one dramatic moment in an epidemic when everything can change all at once is the Tipping Point." - Gladwell, The Tipping Point.
    • I believe the Red Lobster deal is a "tipping point" for ARCP and with over $2 trillion of opportunities in the highly fragmented Net Lease sector.
  • The Day I Was Surrounded By Market Timers
    Tue, Jul. 29 HCP, O, OHI 50 Comments

    Summary

    • As soon as the first stock chart went on the screen I knew that I was not in Kansas anymore.
    • To put it bluntly, I was witnessing a form of gambling in which there was no valuation analysis whatsoever – just plain and simple speculation.
    • Many ordinary investors all too often act on inflection sentiments when they buy and sell stocks, always looking for instant gratification.
  • Be Prepared For Mid-Year REIT Results, Part 3
    Mon, Jul. 28 DOC, GPT, HCT 11 Comments

    Summary

    • I currently own 19 REIT securities and in this third edition, I will provide the final forecast that includes 5 of the REITs that I own.
    • Maybe Gramercy (GPT) won’t be Babe Ruth (714 HR’s) in 2014 but I’ll settle for Sammy Sosa (609 HR’s).
    • It takes only a few large losses to decimate overall investment performance, even if many other investments prove successful.
  • Can Red Lobster Claw Back Its Once Loyal Customers?
    Editors' Pick • Mon, Jul. 28 ARCP 98 Comments

    Summary

    • Over the century brands have become less about trust and more about certainty, instead becoming advertising catchphrases designed to appeal to customers.
    • People often seek out the closest Starbucks location in a cult-like ritual where the brands trademark is only recognizable by a text-less logo of the mythological Norse Queen.
    • It’s clear that there are lessons learned from the Starbucks transformation and hopefully Golden Gate and Red Lobster can learn from the coffee king.
    • Red Lobster has an uphill battle and the key to predicting the success of the fading brand is to claw back loyal customers.
  • Finding A Margin Of Safety In Realty Income
    Editors' Pick • Mon, Jul. 28 O 63 Comments

    Summary

    • I was not a buyer when shares were trading at over $55.00 a share in May (2013) and I waited on the right pitch to get in the game.
    • Every investor has his or her own risk tolerance level and that simply means that it comes down to how much you can afford to lose.
    • Unfortunately I cannot help you swing the bat, only you can do that.
  • Be Prepared For Mid-Year REIT Results, Part 2
    Fri, Jul. 25 ARCP, CSG, EXR 27 Comments

    Summary

    • Earnings results aren't meant to deceive investors, but it's up to the prospective investor to bifurcate the wheat from the chaff.
    • Once you have a sense of a company's financial health, it's time to check out the earnings call transcript.
    • As an investor in any public company, you are actually paying a fraction of the CEO's salary.
  • Be Prepared For Mid-Year REIT Results
    Wed, Jul. 23 ARCP, DLR, HTA 39 Comments

    Summary

    • As elegant as a headline is that boasts “ABC Company Beats Guidance”, it’s important that investors don’t distill a full quarter of results into a single number.
    • Whatever you’re considering, it’s important to compare apples to apples. That is, make sure that you’re comparing the growth rate of two numbers provided in the filing.
    • When I was a boy scout, I could easily recite the oath and I could never forget the scout’s motto: BE PREPARED.
  • It May Be Time To Check Into Chatham Lodging Trust
    Editors' Pick • Tue, Jul. 22 CLDT 36 Comments

    Summary

    • Chatham pursues a unique strategy of focusing on premium brand select service hotels such as Residence Inn, Homewood Suites, Hyatt Place, Courtyard and Hampton Inn.
    • Over the last 3 years Chatham has increased its annual dividend by an average of 11.1%.
    • Chatham is one of the cheapest Lodging REITs (based on P/FFO) in the peer group.
    • In a perfect world, I would like to own Chatham at $18.00, but that’s not reality.
  • Silly Rabbit, Dividends Do Matter In Retirement
    Editors' Pick • Mon, Jul. 21 O 282 Comments

    Summary

    • The most common reason for a company to avoid paying dividends is to avoid subjecting itself to capital market discipline.
    • The author went on to cite the “Joe and Theresa” analogy which (upon reading it) it clearly suggests that the author doesn't have the slightest understanding of the Modigliani-Miller theorem.
    • It’s not that investors have an “emotional” attachment to a dividend payment, it’s simply that dividends represent a commitment by the company to its shareholders.
    • Realty Income has built its brand value on 4 words: The Monthly Dividend Company.
  • An Intelligent Investor Should Consider REITs
    Fri, Jul. 18 ARCP 100 Comments

    Summary

    • In terms of investing, I would consider a “cheerleader” to be more of a public relations firm.
    • So while I may not be a “cheerleader” for REIT investing, I’m certainly a bullish proponent for the asset class.
    • If I’m every called a cheerleader, I prefer to be called the cheerleader who is known for protecting principal at ALL costs.
  • Whitestone Looks Cheap, Should I Make The Leap?
    Fri, Jul. 18 WSR 12 Comments

    Summary

    • Whitestone's non-credit oriented model is unique to the shopping center REIT space, but does the riskier revenue stream provide investors with out-sized opportunity?
    • The company's value proposition is to buy distressed assets and apply some TLC (tender loving care) and produce enhanced cash flow.
    • This REIT is cheap and I believe the shares don’t adequately reflect the risk premium.
  • Are There Any Blue Chip REIT Bargains?
    Tue, Jul. 15 DLR, ESS, FRT 92 Comments

    Summary

    • The name “blue chip” may have originated from the speculative game of poker.
    • I would never recommend buying a blue chip for the sake of owning a blue chip.
    • The blue chip REIT must have demonstrated a sustainable track record for contributing a long record of stable and reliable growth.
  • How Do You Buy An Irreplaceable Corner?
    Editors' Pick • Mon, Jul. 14 AMRE 8 Comments

    Summary

    • With 20 shopping center REITs today, the sector has become extremely crowded.
    • It’s extremely difficult to find a meaningful value proposition that translates into powerful forms of differentiation.
    • The only shopping center that I covet is Federal Realty.
    • If Regency expects to be successful in its bid to take over AmREIT, it will have to increase its offer significantly.
  • Will This Healthcare REIT Spread Some Dividend Love?
    Mon, Jul. 14 HTA 29 Comments

    Summary

    • HTA entered the MOB space at a perfect time – when new MOB development started to decline.
    • If I was a physician and I wanted to be as close to my customers as possible, where would I lease?
    • All I ask is for management to increase the dividend and spread the love.
  • Where Are The Digital Shorts Now?
    Editors' Pick • Thu, Jul. 10 DLR 131 Comments

    Summary

    • To me, it was obvious that the Highfields wager was foolish, since the data center landlord had strong operating fundamentals and an equally impressive balance sheet.
    • REITs have a much better barometer for valuing earnings, and if I were shorting a REIT today I would be focused on the stability of the dividend stream, not book.
    • Whenever the financial markets fail to fully incorporate fundamental values into securities' prices, an investor's margin of safety is high.
    • S&P just revised the outlook on Digital to stable from negative, as well as affirming the "BBB" corporate credit rating on the company.
  • Mr. Market Doesn't See The Seafood Lover In American Realty Capital Properties
    Editors' Pick • Wed, Jul. 9 ARCP 144 Comments

    Summary

    • ARCP's dividend yield is higher today than it has been since August 2012, while the quality of the income has increased substantially.
    • As I ponder ARCP today, I'm seeing noticeable evidence that the shares are mispriced.
    • As a real estate investor, it's important to recognize the "wheat from the chaff" and determine if there is adequate return for the risk.
    • There is risk in owning this REIT, and the market has rewarded investors with an 8% yield in return.
  • Taubman Is A REIT Brand I Can Trust
    Editors' Pick • Tue, Jul. 8 TCO 4 Comments

    Summary

    • As I saw the “margin of safety” moving my way I pounced on the shares of my only Mall-based REIT at a price of $64.29.
    • I bought shares in Taubman because of its “Rolex-like” track record of dividend performance.
    • For Mall REITs, it comes down to “survival of the fittest” and the key ingredient for that measurement is demographics.
    • With around $450 million of cash to deploy, Taubman could lever up easily and take down a $1 billion whale with no problem.
    • My decision to invest in this luxury-branded REIT had more to do with trusting management than trusting Mr. Market.
  • Should I Short These 3 REITs?
    Mon, Jul. 7 GRT, CLI, CCG 34 Comments

    Summary

    • Occasionally I run across a few plants (stocks) that seem to be deteriorating and, as a result, I seek to avoid the companies all together.
    • Through trial and error, I have found that it’s simply better to be in the market invested in stocks that offer the highest potential returns than play the timing game.
    • Regardless of my risk tolerance level, the short sellers haven’t stopped betting against REITs and when that feeding frenzy becomes a catalyst, the “squeeze” ensues.
    • It’s important to realize that investors who pay close attention to net profit margins have been able to predict just about every negative event.
  • Will This REIT Become The Next 'McDonald's' For Storage?
    Editors' Pick • Mon, Jul. 7 EXR 31 Comments

    Summary

    • Much like the fast food sector, there are just around two dozen self-storage operators (including the 4 self-storage REITs) that own around 7,000 facilities.
    • Because the self-storage industry is highly fragmented, the public REITs should be able to continue to consolidate and achieve efficiency with economies of scale.
    • The larger companies are taking a disproportionate share of customers that are available in the marketplace.
    • It’s time to make a move before Extra Space becomes the next "McDonald’s in self-storage."
  • Ehh, What's Up DOC?
    Wed, Jul. 2 DOC 32 Comments

    Summary

    • MLV’s research is spot-on and it’s great to see broader coverage in the “sharpshooting” health care sector.
    • I sold out of MPW for a variety of reasons, including competition (with the hospital sector) and share under-performance.
    • I support MLV’s price target of $16 as I believe that there is strong momentum to support the estimated 34% growth rate.
    • I plan to maintain my current allocation and for new investors I would wait for a pullback.
  • Is Annaly A Sleep Well At Night Investment?
    Editors' Pick • Mon, Jun. 30 NLY 71 Comments

    Summary

    • Many readers that have read my research over the years realize that my biggest issue with the mREITs is the volatility of the income stream.
    • A SWAN investor is the opposite of a market timer who thinks he or she can capture large returns by jumping in the market to make a quick profit.
    • By paying close attention to profit margins, intelligent investors can better predict the companies that could have a negative earnings impact.
  • ARCP May Have A Secret Sauce And It's Not Tartar Sauce
    Editors' Pick • Mon, Jun. 30 ARCP 59 Comments

    Summary

    • ARCP has become more like the kid in the candy store gobbling up just about everything in sight.
    • Now that ARCP is gaining significant exposure with a non-investment grade tenant, the risk for tenant default becomes much greater.
    • I’m not a seafood lover but I do see some attractive ingredients brewing with ARCP and Cole Capital could be the icing on the cake.
  • The Rockefeller REITs, The Ones That Pay Monthly
    Wed, Jun. 25 ARCP, ARR, CLDT 130 Comments

    Summary

    • In this article I’ll provide you with an updated list of 17 REITs that pay monthly.
    • Oftentimes investors overlook the frequency of the dividend payment.
    • In addition to more frequent compounding, the monthly paying companies also offer less market risk.
    • By investing in REITs that pay monthly you're able to better match fund your living expenses and create a more disciplined approach to saving and investing.
    • My classic reason to own monthly dividend stocks is for the power of compounding.
  • A Small-Cap REIT Differentiated By Risk Control
    Editors' Pick • Tue, Jun. 24 LTC 27 Comments

    Summary

    • LTC is better prepared for reimbursement risks as the company has aggregate government reimbursement exposure less than 45%.
    • LTC has just .48% in secured debt, the lowest in the peer group.
    • 86% of LTC’s debt is fixed long-term with a weighted average interest rate of 4.8%.
    • LTC is compensating much like Realty Income – I get a 5.5% dividend yield with modest growth.
  • General Growth Properties Has Plenty Of SALSA
    Editors' Pick • Mon, Jun. 23 GGP 8 Comments

    Summary

    • As I analyze Retail REITs today, I pay special attention to the companies that demonstrate the best forms of differentiation.
    • Upon closer investigation one can see that General Growth has not always enjoyed a powerful model of repeatability.
    • As the Regional Mall industry continues to consolidate, the strongest players will be the companies with the healthiest sources of differentiation.
    • The most successful REITs must be able to benefit from scale, access capital, and enjoy strong tenant relationships.
  • Simon Says, Health Care REIT Spinoff Might Be Next
    Editors' Pick • Fri, Jun. 20 HCP 21 Comments

    Summary

    • It’s true that the health care property sector remains highly fragmented; however, is it possible that at some point will growth be sacrificed by operation acumen?
    • As a prospective (or current) investor in HCP, the dividend track record is the most compelling metric.
    • I believe that (at some point) one of the large diversified REITs will merge with another.
  • The Inside Scoop On This Pure Play New York REIT
    Thu, Jun. 19 NYRT 15 Comments

    Summary

    • New York City is arguably one of the best real estate markets in the world.
    • By focusing on just this one market we think it gives us a competitive advantage and many of the deals we do are off-market or quasi-off-market.
    • Based on our estimated 2015 AFFO of $0.54 per share, the dividend of $0.46 per share represents an 85% AFFO payout ratio.
  • Silly Rabbit, Externally-Managed REIT Tricks Are For Kids
    Editors' Pick • Wed, Jun. 18 SNH 33 Comments

    Summary

    • I have often argued that the externally-managed REIT model is inherently misaligned resulting from various conflicts of interests.
    • If Ventas doesn’t acquire HCT, the miserable investor will look foolish when he finds out he lost the buyer of his Ford pickup truck.
    • Although SNH has a disadvantage in terms of its exposure with one self-dealing tenant, the company does enjoy a competitive advantage in its balance sheet execution.
    • I just can’t come to grips with investing my hard-earned capital into an externally-advised REIT.