Billionaire Sam Zell Says Buy Real Estate, 2 Big Dividends To Follow His Lead

Sep. 14, 2021 8:35 AM ETATAX, AWP, EQC, EQC.PD, ILPT, MNR.PC, PLD, PLDGP104 Comments


  • Sam Zell is a legendary investor and businessman specializing in real assets.
  • We take a moment to learn from his skills and look to the market.
  • Recurring income, inflation protection, strong capital preservation are all provided by these picks.
  • Looking for a portfolio of ideas like this one? Members of High Dividend Opportunities get exclusive access to our model portfolio. Learn More »

real estate concept, choose house to buy
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Co-Produced with Treading Softly

When it comes to investing in the market, it is often wise to heed the advice of those who have a long track record of success. They clearly know something about how to make money from money. Sam Zell is a legendary investor and businessman. He has investments all over the market and oversees with Equity Commonwealth (EQC) that is attempting to buy out Monmouth Real Estate (MNR).

He is famously quoted for encouraging investors or would-be businesspeople to invest in real assets:

As an investor, I look at real estate as an area where we're dealing with hard assets and brick and mortar. There may be a lot of people who get a lot of joy out of virtual assets, but somehow or other, there's a great deal of comfort that comes from being able to see and touch and understand.

Real Estate operates as a fantastic means to generate not only long-term income, but also strong capital gains. Land isn't being created anymore. Properties are being developed, maintained, and improved. Buying the debt tied to properties or being the landlord can provide excellent income and the ability to outpace inflation as it rises.

Today, we are going to channel our inner Sam Zell and take a look at two excellent real asset picks to generate long-term income for our portfolios.

Source: Dreamstime

Pick #1: ATAX - Yield 6.6%

America First Multifamily Investors, L.P. (ATAX) is a partnership with a unique niche. ATAX primarily invests in MRBs (Mortgage Revenue Bonds), GILs (Government Issuer Loans), and the development of multi-family properties.

ATAX Asset Profile

Source: ATAX Financial Report - June 30, 2021

MRBs are loans issued by state-level housing agencies on apartments that have an "affordability" component. MRB programs are designed to incentivize affordable housing. The loans are first-lien secured by the property. The big perk for investors is that the interest from the loans is Federal tax-exempt - a benefit that is passed along to unitholders of ATAX through the partnership structure.

GILs are similar to MRBs, with interest being Federal tax-exempt. The GILs that ATAX has been investing in are construction loans for the development of affordable housing. These are shorter-term loans that will be refinanced when construction is complete. With interest rates so low, these shorter duration loans are more attractive and reduce risk when interest rates rise.

ATAX also has an investment in a joint venture, called "Vantage" that develops new multi-family properties, primarily in the "Sun Belt", the area from Texas to South Carolina. When the properties are leased up, they are sold for a profit. This has been very profitable for ATAX, and they have been able to maintain a steady supply of properties ready to be sold. They now have four properties ready to market for sale with occupancy over 90%, another three that are being leased up, and six that are in the construction or planning phases. The profits from these sales are not tax-exempt.

The multi-family market is very strong, and with inflation fears, the value of apartments is likely to continue rising. This is very bullish for ATAX's Vantage properties.

ATAX protects itself from rising rates in several ways, pairing floating rate debt with floating-rate loans, using interest rate swaps to hedge floating-rate debt, and turning to shorter-duration investments like GILs in this low-interest-rate environment.

Throughout the pandemic, ATAX's portfolio was reliable. The primary negative impact on earnings was ATAX's decision to hold off on selling properties. With the economy picking back up, ATAX is back to selling properties and raised its distribution twice this year to $0.11/quarter. ATAX is likely to raise it again later this year or early next year to meet or exceed pre-COVID distribution levels.

Investors today get a 6.6% yield, with a portion of it tax-exempt. Historically, 40-60% of the distribution is from tax-exempt sources. This benefit is passed along to the investors. Plus, we estimate that ATAX has about 20% in price upside.

ATAX is a limited partnership and issues a Schedule K-1 to investors.

Pick #2: AWP - Yield 7.3%

Aberdeen Global Premier Properties (AWP) is a CEF (Closed-End Fund) that invests in property REITs around the world. With under 60% of assets in the U.S., AWP provides diversified exposure to international REITs. Aberdeen Global Premier Properties Geographic Exposure

Source: AWP Fact Sheet

In addition to being diversified by country, AWP is very well diversified by sector.

Aberdeen Global Premier Properties Fund (<a href='' title='Aberdeen Global Premier Properties Fund'>AWP</a>) Sector Allocation

Source: AWP Fact Sheet

Inflation isn't just a U.S. issue, it is happening around the world, and Real Estate will be one of the big winners. REITs are benefiting from access to cheap debt, plus rising rents. Furthermore, REITs inherently provide inflation protection because they own Real Estate, which tends to go up in price as inflation heats up!

For example, Prologis (PLD), AWP's largest position, reported a record rent growth of 15.5% on a cash basis in Q2! This is driven by high demand for industrial space and is one of the factors that will drive inflation. Even as rents are rising, PLD can borrow funds at incredible prices, refinancing $2 billion at a weighted-average coupon of 0.9% in February. Its largest source of revenue is going up, while its highest single cost is going down. This is happening throughout the REIT sector, yet REIT stock prices remain inexpensive relative to the general market.

REITs are experiencing incredibly strong fundamentals, and a diversified CEF is a great way to take advantage of that. The best part is that AWP can support a 7%+ dividend without using leverage.

2022 will be a very strong year for REITs as inflation pushes up rents, they realize the benefit from all the acquisitions they made this year, and they continue to refinance old debt at historically low interest rates. AWP is trading at a 4% discount to its "Net Asset Value" (or NAV), so buying AWP is cheaper than buying its individual holdings directly. In today's market, it is getting difficult to find CEFs trading at discounts, and this is a great one that is still cheap!

Source: Shutterstock


Buying up real assets that not only generate strong income but also provide capital protection and preservation is an effective and important part of portfolio and retirement planning.

As income investors, we are looking to see how we can learn from the acumen of legendary investors. Sam Zell says to buy real assets and that publicly-traded REITs have the advantage over private Real Estate funds. Sam Zell has spent years generating a fortune from buying and selling Real Estate or other real assets. He likes things that you can see, touch, and easily understand. Likewise, as income investors, it's important to find strong recurring income. We can follow Sam Zell's lead and generate excellent income from Real Estate.

Today, we have looked at two routes to buy into publicly-traded real estate via ATAX and AWP. Both offering strong upside potential and great immediate income.

This income can provide you with opportunities to enjoy your retirement more freely. Life is way better when you're not stressed whenever you look at your pocketbook. Having money flowing in from real, tangible assets is exceptionally valuable when the value of those assets is rising due to inflationary pressures.

This can be your future. Your happiness. It's your choice.

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