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  • Simon Property courts Macerich [View news story]
    SPG and MAC are lumbering giant mall owners with limited growth prospects. Their stocks have become bond substitutes, as fixed income investors have ventured into equities for higher yields. But this has driven their prices to an overvalued level. SPG now yields only 2.9% -- the 7-year average is 3.8%. MAC yields 3.1% vs the 7-year average of 5.8%. What happens when the 10-year treasury goes over 3% again -- as surely will happen sometime?
    Mar 5, 2015. 11:27 AM | 1 Like Like |Link to Comment
  • American Realty Capital Properties: What's The Fuss All About? [View article]
    Who knows? They are required to pay 90% of taxable income to maintain REIT status. But they don't tell us what their taxable income is. It differs from GAAP net income due to differences in depreciation schedules and some other items. GAAP, however, shows losses for the past few quarters, primarily due to non-recurring expenses related to acquisitions and, perhaps, legal costs.
    Mar 4, 2015. 05:20 PM | Likes Like |Link to Comment
  • American Realty Capital Is Still A Speculative Security Suspended In Animation [View article]
    This is an article about ARCP, but it contains a lot of comparison with O (Realty Income).

    As it happens, Citi just put out an alert on O from its 2015 Global Property CEO Conference. Here are some items that Citi culled from O's CEO speech:

    """Transaction Market – O has not seen a major impact in the transaction market as a result of a major player [ARCP?] not being active. O notes that the market remains efficient with public REITs, non-traded REITs, and foreign and domestic capital in the market. While non-traded REITs are not as active as in the past, the market is seeing increased activity from both foreign and domestic capital chasing deals. Additionally, the presence of individual buyers has increased as bank financing has become more available. There is not much of a pricing difference between individual and portfolio deals. The return of individual buyers with bank financing has increased pricing on single asset deals to the level of portfolio deals.

    Spreads – Historically spreads were in the mid-100bps range while last year were
    closer to 200bps. The spread has increased this year to ~250bps. O notes that as cap rates came down, their capital costs came down even more. Very attractive
    spreads on a relative and absolute basis. O notes that they have not changed their underwriting standards and remain disciplined in what they decide to acquire."""

    Citi has a target price of $39 for O, which "reflects a ~14.5x 2015 AFFO multiple". Citi has a long held bearish view of O -- it is 1 of only 2 REITs for which they carry a Sell rating -- they estimate the NAV for O at $32. I.e., they estimate that O is currently at a premium to NAV of about 58%.

    Citi has no rating for ARCP, but puts the NAV at $10.30.
    Mar 4, 2015. 02:43 PM | 2 Likes Like |Link to Comment
  • American Realty Capital Is Still A Speculative Security Suspended In Animation [View article]
    Peter, this has no absolutely relevance to the discussion on ARCP.
    Mar 4, 2015. 02:11 PM | 3 Likes Like |Link to Comment
  • Where's The Trust In Hospitality Property Trust? [View article]
    I meant to say: "Portnoy definitely was not alone in "overpaying" for real estate in 2007."
    Mar 4, 2015. 08:10 AM | Likes Like |Link to Comment
  • Flying High With RLJ Lodging's Immutable Dividend Record [View article]
    1. RLJ has only traded publicly since 2011. Hotel REITs are notorious for taking a hit during recessions, when travel for both business and pleasure is severely cut back. One of Brad's recent recommendations, HST, cut quarterly dividends to a penny a share in the 2009 debacle, for instance. I don't see how this article can talk of "RLJ Lodging's Immutable Dividend Record" when the record only goes back to 2011!

    2. ""most externally managed REITs tend to underperform from an operating perspective. The primary reason is that the external manager is only interested in growing assets under management, and is spending less time on watching the bottom line.""

    tiki, you are quoting Brad, but Brad's statement is unsubstantiated, especially when he says, "the external manager is only interested in growing assets under management."

    The fact is that RMR restructured the management agreement with HPT in 2013, in order to more closely align shareholder interests with management incentives.

    Here is the base fee: ""The new calculation of the base management fee will be based on approximately 0.5% multiplied by the lower of: (i) the historical cost of HPT's real estate assets or (ii) HPT's total market capitalization. The comparatively low level of general and administrative, or G&A, expenses that HPT has historically enjoyed will continue, but with this change it is possible that G&A expenses may further decline if the market value of HPT's common shares declines.""

    Here is the incentive fee: "" The new incentive fee will be calculated based on total return per share (dividends and share price changes) realized by HPT's shareholders in comparison to the total return of the SNL U.S. REIT Hotel Index, or the Benchmark. The incentive fee formula will be based on the amount of outperformance, if any, realized by HPT's shareholders during the measurement periods compared to the Benchmark, multiplied by a 12% participation rate. For example, if HPT's shareholders' total return is 10% during the measurement period and the Benchmark's total return is 5% during that same period, the incentive fee will be 12% of the 5% of total outperformance realized by HPT's shareholders. The measurement period for the new incentive fee will be a rolling, cumulative three year period starting January 1, 2014.""

    From the new fee agreements, it does not strike me that RMR would only interested in "growing assets".

    3. RLJ sells at 11.9 X FFO, and yields 3.8%. HPT sells at 9.1 X FFO and yields 6.4%. I've got my bet placed with the bird in hand, that is, HPT's current dividend. I will leave the birds in the bush to others, that is, the guesses on future growth rates for RLJ versus HPT. BTW, HPT stock rose today. RLJ and HST declined.

    Disclosure: I went back into HPT after reading Brad's articles on HPT and HST. I added to may position after HPT announced earnings. Am currently in a gain position.
    Mar 3, 2015. 04:33 PM | Likes Like |Link to Comment
  • Where's The Trust In Hospitality Property Trust? [View article]
    ""Arguably Portnoy has overpaid for everything.""

    The deal was done in 2007. Arguably, anyone who bought any kind of real estate in 2007 overpaid -- houses, hotels, land, offices, etc. Hindsight is great, but Portnoy definitely was alone in "overpaying" for real estate in 2007. With everything collapsing in 2009, the leases had to be restructured -- and were!
    Mar 3, 2015. 03:33 PM | Likes Like |Link to Comment
  • Where's The Trust In Hospitality Property Trust? [View article]
    ""just because HPT generates a high cap rate on TA doesn't necessarily mean TA can pay the rent in 2-3 years""

    Brad, this statement is from HPT's latest report: "For the three months ended September 30, 2014, the aggregate coverage ratio of (x) total cash flow at the leased travel centers available to pay HPT’s minimum rent due from TA to (y) HPT’s minimum rent due from TA was 1.79x." This looks pretty good to me. As for capex, you know real estate, Brad. Some maintenance capex is obligatory, but most of it is discretionary. I would be much more concerned about the cash flows in the much more cyclical hotel business, than the cash flows from the truck stop business.

    So what does Red Lobster and ARCP have to do with HPT and TA?
    Mar 3, 2015. 03:27 PM | Likes Like |Link to Comment
  • Alexander's: An Excellent Growth Story In An Overheated Market [View article]
    Sorry, but 22 X FFO, and a 3.2% yield, just does not cut it for me. Its not GARP, and if the 10-year treasury goes back over 3% in the next 1-2 years, where do you think the yield on ALX will go?
    Mar 1, 2015. 02:44 PM | Likes Like |Link to Comment
  • NYT: Exxon settles $9B New Jersey environmental case for $250M [View news story]
    More likely, the state put a more realistic number on the settlement, and also weighed the odds that Exxon would appeal and drag out proceedings if the judgment was too onerous.
    Feb 28, 2015. 04:01 PM | Likes Like |Link to Comment
  • NYT: Exxon settles $9B New Jersey environmental case for $250M [View news story]
    According to the NY Times, there is no record anywhere of Exxon donating anything to any Christie campaign.
    Feb 28, 2015. 03:55 PM | Likes Like |Link to Comment
  • NYT: Exxon settles $9B New Jersey environmental case for $250M [View news story]
    Actually, Exxon left some time ago. They sold the Bayway refinery to Phillips Petroleum in 2001, which then merged with Conoco. In 2012, Conoco spun off the downstream operations into Phillips 66, which now owns Bayway.
    Feb 28, 2015. 03:53 PM | Likes Like |Link to Comment
  • Last Chance To Board The American Realty Capital Train? [View article]
    Re: "" . . exit . . on Monday, before the news and then re-buy after the news.""

    My advice, FWIW, is to hold on. The Cole thing is already discounted in the price, IMO. Meanwhile, the stock closed Friday at its highest level in over 2 months, and the technical trend indicators are positive (hourly and daily MACD and RSI).

    With the technicals, we are playing probabilities, of course, and it could go either way. I just think the probability favors an up move, at least, in the short term.
    Feb 28, 2015. 01:04 PM | 3 Likes Like |Link to Comment
  • BP Brings Fracking To The Middle East To Support High Dividend Yield [View article]
    Callum, this type of gas is known as "stranded gas". There simply is not a big enough local market for this quantity of gas, and it will have to be exported by building LNG facilities. Oman, a country with a population of only 3.6 million, already exports half of its existing natural gas production. LNG exports from Oman will be in competition with other mammoth projects in Qatar, Indonesia, and northwest Australia.

    The upfront investment of $16 billion will definitely not support BP's high yield. Not for many years, anyway.
    Feb 27, 2015. 09:04 AM | Likes Like |Link to Comment
  • BP Brings Fracking To The Middle East To Support High Dividend Yield [View article]
    Just what the world needs -- another giant gas field in a desert country!
    Feb 27, 2015. 07:44 AM | Likes Like |Link to Comment