3 Overlooked REIT Preferred Stock Options Offering Double-Digit Return Potential

Summary

• CDR, MDRR, and MHPC have preferred stock outstanding offering the potential for double-digit returns.
• CDR and MHPC have positive risk-reward dynamics. The two companies have stable assets and are profitable.
• MDRR's preferred shares carry much higher risk than the latter two, as the dividend is not covered.
• MDRR's assets are struggling the most of the three, with heavy non-grocery-anchored retail and hotel exposure.

Thesis

Equity REIT stock prices have approached pre-covid levels for many companies. However, REITs in the most affected sectors have seen their stock prices remain low. Whether stocks in the retail, hotel, and office sectors can return to pre-pandemic levels will largely be dependent on rent collections, rental rates, occupancy rates, and leasing volume levels. Preferred stock, a hybrid equity and debt investment, opportunities in the REIT space exist. Cedar Realty Trust and Medalist Diversified REIT have preferred shares trading at large discounts, as their properties face headwinds due to covid. Manufactured Housing Properties has continued to perform strong throughout the pandemic, but has an attractive, non-traded preferred stock return potential as well.

Cedar Realty Trust

Cedar owns a portfolio consisting of predominately grocery-anchored shopping centers that consists of e-commerce resistant tenants.

Source

CDR collected 77% of 2^nd Quarter rents, and rent collection rates have increased to 88% for July. These results have surpassed their peers. July rent collection for many publicly-traded shopping center REITs remained below 80%. Despite having lower than average rental rates per square foot, Cedar’s grocery-anchored portfolio has held up strong throughout the pandemic. With rising retail bankruptcies, covid will have a negative short-term impact on CDR. However, Cedar’s well-positioned portfolio and adequate financial results make its preferred shares a low risk, high return investment opportunity.

Company	July Rent collection levels
CDR	88%
REG	79%
BRX	80%
ROIC	85%
WRI	79% (June)

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Source- Quarterly Reports

Cedar’s series C shares offer an 8.5% annual dividend yield at current prices, with the potential for more than 30% appreciation in price.

Ticker	Price	Div rate	Current yield	Liquidation value	Potential appreciation
CDR.PC	19.14	1.63	8.5%	25	30.6%
CDR.PB	22.2	1.81	8.2%	25	12.6%

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The risk to Cedar’s preferred dividends is extremely

Analyst’s Disclosure:I am/we are long CDR. 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.

May initiate a position in each of the three preferred holdings within the next 72 hours