Take Charge With These 5 'Fortress' REITs

Oct. 05, 2018 7:00 AM ETAVB, FRT, O, PSA, SPG37 Comments

Summary

  • Maintaining a healthy balance sheet is a tremendous driver for REIT performance, as it suggests discipline and the commitment by the management team to drive earnings growth.
  • Liquidity and access to capital within the REIT sector are strong, and most REITs have enjoyed healthy access to capital up and down the capital stack.
  • Many publicly-traded REITs have managed to survive and thrive for decades using risk-aligned practices distinguished by sound balance sheet fundamentals and rhino-focused dividend performance.
  • These 5 REITs own assets in a variety of property sectors, so it’s important to recognize that each REIT has its own risk characteristics.
  • This idea was discussed in more depth with members of my private investing community, Intelligent REIT Investor. Get started today »

Since the end of the financial crisis, many REITs have seen a renewed appreciation for managing risk. Specifically, they have realized that an investment-grade credit profile provides them with the opportunity to tap an unsecured debt market and to continue to unencumber their portfolios.

Maintaining a healthy balance sheet is a tremendous driver for REIT performance, as it suggests discipline and the commitment by the management team to drive earnings growth. By focusing on dispositions, many REITs are continuing to delever in a time when cap rates remain attractive.

Just like when I pay off my credit card debt and get rewarded with a higher credit score, REITs are also rewarded for their strict discipline and improved cost of capital. So far in 2018, there have been 38 rating agency actions, of which 26 were positive.

Liquidity and access to capital within the REIT sector is strong, and most REITs have enjoyed healthy access to capital up and down the capital stack.

Eva Steiner, a professor at Cornell University, was co-author of the "Outstanding Paper" submitted at the 2017 NAREIT-AREUEA Real Estate Research Conference. In an interview with NAREIT last year, she said:

"We know that capital structure risks, especially high leverage and a high share of short-term debt, significantly reduced the cumulative total return of U.S. REITs in the 2007-2009 financial crisis. In this study, we found that reducing those risks ahead of the crisis, specifically by reducing leverage and extending debt maturity in 2006, was associated with a significantly higher cumulative total return 2007-2009, even after controlling for the levels of those variables at the start of the financial crisis."

She concluded by saying, "adjustments to capital structure ahead of the crisis were an important component of managerial skill and discipline that supported firm value during the

Brad Thomas is one of the most read authors on Seeking Alpha (based on page views), and over the years, he has developed a trusted brand in the REIT sector. His articles generate significant traffic (around 500,000 views monthly) and he has thousands of satisfied customers who rely on his expertise.

Marketplace subscribers have access to a growing list of services, including weekly property sector updates and weekly Buy/Strong Buy/Hold/Sell (and soon Strong Sell) recommendations. Also, we are now providing daily early morning REIT recaps, including breaking news across the entire REIT universe.

For new subscribers we will include a free signed copy of The Intelligent REIT Investor. Act now!

This article was written by

Brad Thomas profile picture
107.29K Followers
Author of iREIT on Alpha
The #1 Service For Safe and Reliable REIT Income

Brad Thomas is the CEO of Wide Moat Research ("WMR"), a subscription-based publisher of financial information, serving over 10,000 investors around the world. WMR has a team of experienced multi-disciplined analysts covering all dividend categories, including REITs, MLPs, BDCs, and traditional C-Corps.

The WMR brands include: (1) iREIT on Alpha (Seeking Alpha), and (2) The Dividend Kings (Seeking Alpha), and (3) Wide Moat Research. He is also the editor of The Forbes Real Estate Investor

Thomas has also been featured in Barron's, Forbes Magazine, Kiplinger’s, US News & World Report, Money, NPR, Institutional Investor, GlobeStreet, CNN, Newsmax, and Fox. 

He is the #1 contributing analyst on Seeking Alpha in 2014, 2015, 2016, 2017, 2018, 2019, 2020, 2021, and 2022 (based on page views) and has over 106,000 followers (on Seeking Alpha). Thomas is also the author of The Intelligent REIT Investor Guide (Wiley) and is writing a new book, REITs For Dummies. 

Thomas received a Bachelor of Science degree in Business/Economics from Presbyterian College and he is married with 5 wonderful kids. He has over 30 years of real estate investing experience and is one of the most prolific writers on Seeking Alpha. To learn more about Brad visit HERE.

Disclosure: I am/we are long ACC, AVB, BHR, BPY, BRX, BXMT, CCI, CIO, CLDT, CONE, CORR, CTRE, CXP, CUBE, DEA, DLR, DOC, EPR, EQIX, ESS, EXR, FRT, GDS, GEO, GMRE, GPT, HASI, HT, HTA, INN, IRET, IRM, JCAP, KIM, KREF, KRG, LADR, LAND, LMRK, LTC, MNR, MPW, NNN, NXRT, O, OFC, OHI, OUT, PEB, PEI, PK, PSB, PTTTS, QTS, REG, RHP, RLJ, ROIC, SBRA, SKT, SPG, SRC, STAG, STOR, TCO, TRTX, UBA, UMH, UNIT, VER, VICI, VNO, VNQ, VTR, WPC. 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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