SA News • Wed, Jan. 14
Select Income REIT - A YDP Appraisal For Income Investors
- Select Income REIT is an income investment in a special situation.
- All valuation methods and metrics indicate it is extremely undervalued at this time.
- YDP appraisal indicates SIR to be fair value at $28.81, NAV value places it closer to $42.00. Peer fundamentals suggest a value of $30.48.
- Appraisal of fair value by multiple pathways from multiple sources all indicate buyers should secure positions in SIR shares now and at prices up to $28.80.
You're Not A Sucker, But We All Should Be Better Second-Level Thinkers
- My intent was to provide investors with a harbinger – or warning – that chasing yield – for the sake of yield – can be dangerous.
- For the record, consider yourself warned, not insulted, and if anyone was offended by my use of the word “sucker,” I was not aiming the message at YOU.
- It’s just a matter of keeping risk under control and making sure that the returns you realistically expect are worth the risk you are taking.
A Behavioral Overreaction Makes Select Income Realty An Opportunity
- CommonWealth sold its Select Income Shares to Government Properties.
- The exchange of shares had no fundamental impact on SIR yet its market price dropped ~4%.
- SIR is opportunistically priced for investors who wish to capture the reversal of the overreaction.
Update: Select Income REIT - Largest Shareholder (37%) Sells Its Entire Position
- Commonwealth REIT revealed, after close Wednesday, sale of its entire 22 million share SIR position to Government Properties Income Trust and REIT Management & Research for $31.51/share, a 5.1% premium.
- I see this as a green-mail payment to dissident CWH by White Knights in support of existing management in the fight with Lakewood for control of the SIR Board.
- The preferential buyout was 1 of the 3 key malfeasance issues Lakewood asserts was in the works in its recent open letter to SIR Trustees.
Select Income REIT: 3 Factors Point To 43.5% Fair Value Discount And A Special Situation
- Activist moves by major shareholders Lakewood Capital Management (private hedge fund owning 5.8% of SIR) and Commonwealth REIT (37.4% owner of SIR) can be expected to unlock value.
- Lakewood Capital accuses SIR management of malfeasance and plans aggressive fight.
- On March 25, 2014 Commonwealth REIT removed and replaced its entire Board, which included members representing 60% of the current SIR Board.
- Commonwealth and Lakewood are now actively working to remove and replace the SIR Board through new Board elections and probable legal actions due to the alleged Board malfeasance.
Wed, Jan. 14, 7:04 AM
- Select Income REIT (NYSE:SIR) becomes the next Portnoy vehicle to be targeted by an activist as Lakewood Capital Management - an owner of 6.8% of the company - believes the stock to be conservatively worth 30-70% more than current levels. The current underpricing and dramatic underperformance, says Lakewood, is due to "widely-held concerns around corporate governance."
- Lakewood's presentation
- Equity Commonwealth (NYSE:EQC) shareholders have been through the drill and will also take notice.
Mon, Jan. 12, 2:26 PM
- Select Income's (SIR -0.2%) existing $750M credit line with a maturity date of March 2016 and interest rate of Libor plus 122.5 basis points has been replaced with a new one maturing in March 2019 and interest rate of Libor plus 105 bps.
- The $350M term loan facility maturing in July 2017 with interest rate of Libor plus 140 basis points has been replaced with one maturing in March 2020 and interest rate of Libor plus 115 bps.
- An accordion feature allows for the combined facilities to be boosted to as high as $2.2B under certain circumstances.
- Source: Press Release
Mon, Jan. 12, 9:07 AM
Oct. 27, 2014, 10:14 AM
- Q3 normalized FFO of $39.3M or $0.66 per share vs. $33.1M and $0.67 one year ago as average share count was boosted to 59.9M shares from 49.7M.
- As of quarter-end, total rentable square feet leased of 96.1% vs. 95.6% a year ago. Occupancy for properties owned continuously since July 2013 of 95.8%, up 30 basis points.
- Same-property cash basis NOI up 3.3%.
- Conference call at 1 ET
- Previously: Select Income misses by $0.02, misses on revenue
- SIR -1.1%
Oct. 27, 2014, 8:08 AM
Oct. 26, 2014, 5:30 PM
Oct. 7, 2014, 9:10 AM
Sep. 3, 2014, 10:49 AM
- Select Income REIT (SIR -1.1%) adds to yesterday's sharp decline as Bank of America downgrades to Underperform following SIR's deal to buy Cole Corporate Income Trust in a deal valued at about $3B.
- Cole shareholders will receive either $10.50 in cash of 0.36 shares of SIR for each share of Cole they own.
- The purchase would more than double Select Income's assets and enterprise value, and the company said the result should be a lower cost of capital and boosted shareholder value.
- Select Income is managed by the Portnoy family's RMR - the same team which was just ousted from CommonWealth REIT (now called Equity Commonwealth, ticker EQC) for maybe being too interested in boosting AUM at the expense of shareholder value.
Sep. 2, 2014, 7:48 AM
- In connection with Select Income REITs (NYSE:SIR) $3.1B purchase of Cole Corporate Income Trust, the company is offloading the healthcare properties in CCIT's portfolio (23) to Senior Housing Properties Trust (NYSE:SNH) for $539M.
- The properties to be purchased by SNH are 100% occupied with average term of 9.5 years. Seventy-two percent of rents are payable by investment grade tenants. The GAAP cap rate is about 6.4%.
- After the sale of the healthcare assets to SNH, Select will be adding 64 office and industrial properties to its portfolio. The company expects - following closing of the purchase in early 2015 - to boost its quarterly dividend by $0.02 to $0.50 per share.
- Previously: American Realty's CCIT to be sold to Select Income REIT
Sep. 2, 2014, 7:10 AM
- Cole Corporate Income Trust (CCIT) is managed by Cole Capital, ARCP's private capital management business. It's being sold to Select Income REIT (NYSE:SIR) in a deal valuing the enterprise at about $3.1B.
- The deal is expected to close early next year and should generate AFFO for ARCP of about $0.02 per share through incentive and disposition fees.
- Source: Press Release
Jul. 28, 2014, 8:02 AM
Jul. 27, 2014, 5:30 PM
Jul. 14, 2014, 8:07 AM
Jul. 10, 2014, 9:31 AM
- The company's deal to purchase CommonWealth REIT's stake in Select Income REIT (SIR) supports "long-held concerns" that Reit Management & Research's (RMR) incentives aren't aligned with shareholders. Wells cuts the price target on GOV to $20-$22 from $21-$23.
- To review, RMR - which was recently ousted from power at CommonWealth after an ugly fight - continues as the external manager of both GOV and SIR.
- Previously: CommonWealth sells Select Income stake to Government Properties
Jul. 9, 2014, 4:13 PM
- Now under new management, CommonWealth REIT (CWH) sells its 22M shares of Select Income REIT (SIR) to Government Properties Income Trust (GOV) and Reit Management & Research (the Portnoys' management company) for $705M.
- GOV made the bulk of the purchase with 21.5M shares and RMR purchased the other 500K. Both GOV and SIR continue to be managed by RMR.
- Source: Press Release
- CWH +6.1%, SIR -1.6% AH
Jun. 12, 2014, 10:27 AM
- "During the past five weeks, we have witnessed a sickening series of events unfold whereby the Select Income REIT (SIR +2.3%) trustees have deliberately taken multiple steps to protect their own interests at the expense of shareholders," writes Lakewood Capital, a 5.8% owner of the company. "We have spoken with several other significant SIR shareholders and they share our outrage."
- Lakewood demands an immediate cessation of further equity offerings, an expansion of the board, and the repurchase of stock from CommonWealth REIT (CWH -1.2%), Select Income's largest shareholder (and no longer under Portnoy control).
- The Select Income board and management notes receipt of the letter.
SIR vs. ETF Alternatives
Other News & PR