Amazon Is Growing Like A Weed: Cash In On REIT Landlords - 2016 Update

Bill Stoller profile picture
Bill Stoller
6.87K Followers

Summary

  • This article is not part of the bull/bear debate regarding Amazon's growth vs. high earnings multiple after the recent run-up in share prices.
  • It updates my thesis that there are profits to be made investing in REITs which support public cloud providers and e-commerce order fulfillment and package delivery.
  • Surprisingly, despite the strong performance of Amazon's shares, REITs that benefit from e-commerce and public cloud deployments have outperformed AMZN significantly 2016 YTD.

Brick-and-mortar retail is not dead, but it had a really, really bad day on Wednesday.

Source: Investors.com - image Ingfbruno

Over 90% of retail sales are still generated by brick and mortar, but Macy's (M) poor Q1 results and earnings call guidance turned Wednesday's trading day into a retail rout. Subsequently, other top retail names continued to disappoint Wall Street, which has added more red ink.

Shopping center and mall REITs also took a beating on a day when brick-and-mortar retail was being taken to the woodshed. Class-A mall REITs General Growth Properties (GGP), Simon Property Group (SPG) and Macerich (MAC) spiked down 5.91%, 4.99% and 4.64%, respectively.

Lower-quality B-mall landlords CBL & Associates (CBL), WP Glimcher (WPG) and Penn REIT (PEI) slid 5.01%, 4.91% and 4.01%, respectively.

On the flipside, shares of e-commerce giant Amazon.com (NASDAQ:AMZN) continue to surge to new highs.

During the past 52 weeks, Amazon had traded in a range of $418.36-704.55 per share. On Wednesday, AMZN's shares hit an intraday high of $719.00 prior to closing at a new high of just over $713 per share.

However, it might surprise most investors that REITs which can play "supporting roles" have rewarded shareholders with superior returns. Additionally, the best-performing brick-and-mortar retail REIT has outperformed Amazon by a factor of 5x so far this year. There are very few investors who saw that one coming. However, Warren Buffett happened to be one of them.

E-Commerce Real Estate

By now, you would have to be either a troglodyte or a certified Luddite not to have made a purchase online.

Source: CyrusOne

However, that does not mean that you are familiar with the facilities owned by landlords including many publicly-traded REITs that are operating behind the scenes.

Source: Data Center Knowledge - Equinix

Source: Equinix - Facebook page December 2015

This article was written by

Bill Stoller profile picture
6.87K Followers
Researching and writing at the corner of Main St. & Wall St. where real estate often intersects with trends in: technology, ecommerce, office/industrial, healthcare, cloud computing, energy infrastructure & green initiatives. Data Center Knowledge - I cover business and investing news in a weekly column: DCK Investor Edge. Sr Contributor writing about data centers REITs -- a new and growing asset class -- attempting to bridge the gap between technology & traditional REIT investors. In Q4 2015, it became clear to me that public cloud "friend or foe," was going to be a positive catalyst for Data Center REITs. The global public cloud giants follow a bifurcated strategy of owning and leasing space. Another paradigm shift involved Amazon Landlords, industrial REITs which own fulfillment, warehouse/distribution, and smaller "last mile" urban infill properties, and the DC REITs which support exponential growth of the AWS public cloud (as well as MSFT Azure, Google Cloud Platform, IBM Cloud, Oracle Cloud, Salesforce, and others). Many SA readers have followed my work over the past few years to profit from my expertise, research and analysis. The majority of my insights and analysis are now published on REITs 4 Alpha, an SA Marketplace service where members get real-time access on Live Chat each day the market is open.I have over 25 years of experience as a: developer of institutional quality office and industrial facilities, general contractor, homebuilder, managing general partner for private limited partnerships, and have performed consulting and transactional real estate services for others, including entitlements for planned commercial/office/industrial developments.Past job experience included: V.P. of Energy Services for a Florida based Mechanical Contracting company, which subsequently was acquired by EMCOR (NYSE: EME). Responsibilities included development and "financial engineering" of projects to reduce energy consumption and total cost of ownership solutions, partnered with the two major Florida electric utilities, and private companies, (including Enron Energy Services!). Education: UCLA - BA Economics, including graduate coursework in Real Estate Finance. Masters Degree from St. Thomas University - Miami, FL

Disclosure: I/we have no positions in any stocks mentioned, but may initiate a long position in SRG, CONE, COR, QTS, DLR, EGP, PLD, MNR over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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