Never Let A Good Crisis Go To Waste

Summary

• I don’t want to see any businesses – or investors – fail because of circumstances that are completely out of their control.
• This pandemic and subsequent shutdowns weren’t any REITs’ fault.
• Yet they’re suffering anyway.
• This idea was discussed in more depth with members of my private investing community, iREIT on Alpha. Get started today »

As a sophisticated curator of real estate investment trusts, you already know this first fact…

There are many publicly-traded companies that have cut their dividends this year. Unfortunately, that includes a number of the REITs we know and love.

Some of them, we saw coming. As I wrote on April 30 in “Dividend Cuts A-Plenty”:

“Since the outbreak of COVID-19 here in the U.S., there have been 23 equity REITs that have either cut or suspended their dividends:

“11 hotel REITs

“2 healthcare REITs

“6 retail REITs

“2 office REITs

“1 net lease REIT

“1 infrastructure REIT

“Some of those moves were anticipated, such as with MAC, WSR, PEI, WPG, and GNL. Others were not, as with ROIC.

“We suspect there will be many more over the next few weeks. And we’d rather be in the know about as many of them as possible as we enter earnings season.”

We then proceeded to analyze the possibilities, specifically looking at adjusted funds from operations, or AFFO. Here’s why:

“Keep in mind that AFFO is not sanctioned by the SEC or Nareit. As such, it’s not always consistently calculated or reported.

“That said, AFFO disclosure by companies is very helpful to determine their high-level estimate of normalized cash flows per share. So that’s what we’re using to classify the following REITs as poorly placed when it comes to their promised dividends.”

What we found and what came next combine for a story that’s really worth telling.

(Source)

8 out of 10: Both Bad and Not Bad at All

Remember that this was way back in April. The end of April, yes, but April nonetheless – so a solid five and a half months ago that I pegged the following REITs as risky based on AFFO payout ratios:

• Gladstone Commercial (

Analyst’s Disclosure:I am/we are long UBA, KIM, VTR, HASI, LADR, FCPT, EPRT, ABR, STAG, STOR, PSA, ACC, EQR, BXP, ESS, FRT, AVB. 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.