STIFEL: Rtl REIT - Retail REIT Comp Sheets 10/10/16

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Retail REIT Comp Sheets 10/10/16

REITs had a tough start in October, down 5.3% last week. REITs are up 6.0% YTD. Retail REITs are underperforming the REIT index YTD, up 4.3%, as regional malls are up 2.3% and shopping centers are up 7.4%.
The REIT sector is trading at a 4.2% discount to NAV. Regional malls are attractively priced to the REIT sector, in our view, trading at an 18.3% discount to NAV while shopping centers are trading at a 3.6% discount to NAV.

 

  • Tanger Factory Outlet Centers (SKT, $36.75, Hold) sold an additional $100 million of its 3.125% 10-year notes. SKT completed the initial $250 million note offering in August 2016. The additional $100 million of proceeds will be used to pay down borrowings on its lines of credit after paying off the $96.9 million mortgage on Savannah in late September. SKT acquired its partner’s 50% interest in Savannah in August for $111.9 million - $15 million in cash and the assumption of the $96.9 million mortgage.

 

  • SKT broke ground on its new outlet center development in Fort Worth, TX, adjacent to the Texas Motor Speedway. The 350k sf center is over 60% pre-leased and SKT is planning for a 2017 holiday opening. SKT acquired the land for $11.2 million.

 

  • Washington Prime Group (WPG, $11.55, NC) named Lou Conforti as CEO. Mr. Conforti has served as interim CEO since June 2016. Prior to joining WPG, Mr. Conforti was the executive director and global head of strategy at Colony Capital, served as the global head of real estate for UBS O’Connor, and head of real estate investments at Stark Investments.

 

  • Fitch affirmed DDR’s (DDR, $16.40, NC) credit rating of BBB- with a stable outlook. Fitch noted the improvement in quality in DDR’s real estate, management’s focus on streamlining the business, continued capital recycling activity, and high quality tenant base.

 

  • Fitch affirmed Federal Realty’s (FRT, $145.20, Hold) credit rating of A- with a stable outlook. Fitch noted the consistent and steady cash flow generated by FRT’s portfolio, prudent capital allocation, and redevelopment and mixed-use development opportunities within the portfolio.

 

Pricing as of 10/7/16 close.

Janney/REITs: Weekly REITCap: Portfolio Managers Guide to Property REITs

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Weekly REITCap: Portfolio Managers Guide to PropertyREITs – September 23, 2016

Our Weekly REITCap Portfolio Managers Guide provides general corporate information, total returns, valuation and balance sheet measures for 150+ property REITs across the major asset types (e.g. office, multifamily, retail, industrial), as well as more esoteric REITs (such as the prisons and towers).

  • For the week ending September 22, the MSCI US REIT Index (RMZ) return was +3.9% versus the S&P 500 return of +1.4%. The NASDAQ was +1.7%, the DJIA was +1.0%, the Russell 2000 was +3.0%, the DJ Utilities were +4.5%, and the S&P Financials were +0.6%.

  • The best-performing REIT subsectors last week were Industrial (+5.3%), Triple-Net Lease (+5.1%), and Student & Manufactured Housing (+5.0%), while the worst were Single-Family Rentals (+0.2%), Hotels (+1.7%), and Regional Mall (+2.6%).

  • The best-performing REIT stocks last week were GEO (+14.4%), DOC (+8.3%), and UHT (+8.1%), while the worst were CBL (-2.7%), PEB (-1.7%), and CUZ (-0.7%)..

  • YTD REITs are now outperformingthe S&P 500 by 560bps. The REIT sector is now +13.9% in 2016, while the S&P 500 is +8.2%, both on a total return basis. YTD the Russell 2000 total return is +11.2%, the NASDAQ is +6.6%, the DJIA is +5.6%, the DJ Utilities are +20.5%, and the S&P Financials are +2.2%.

  • The best-performing REIT subsectors YTD are Triple-Net Lease (+33.9%), Industrial (+32.3%), and Healthcare (+23.6%), while the worst are Storage (-8.4%), Single-Family Rentals (+2.6%), and Apartments (+3.0%).

  • The best-performing REIT stocks YTD are SNH (+68.0%), GOV (+60.5%), and NXRT (+58.8%), while the worst are CXW (-36.3%), NYRT (-17.2%), and FPO (-15.2%).

  • Over the past 12 months, the REIT sector total return is +22.5%, while the S&P 500 is +14.6%. Over the last 3 months, the REIT sector total return is +4.4%, while the S&P 500 is +4.9%.

  • The US is outperformingmany of the major global real estate markets YTD. The YTD US REITtotal return of +13.9% compares to -0.6% for Europe, +10.7% for Asia, -8.7% for the UK, and +11.8% for Australia.

  • REIT sector’s average cash dividend yield is 3.7%. This compares to the average yields on the 10-year Treasury (1.6%) and Moody’s Baa Corporate Bond Index (4.4%)

  • We remain Neutral on the US Property REITs. With a 10% total return expectation for 2016, we remain Neutral on the US Property REITs, as solid internal growth and continued access to inexpensive and plentiful capital are somewhat offset by strong valuations, greater levels of new supply, and the threat of higher interest rates.

  • In terms of our subsector views, we are positive on the Multifamily, CBD Office, and Industrial subsectors; neutral on Data Centers, Regional Malls, Self-Storage, Shopping Centers, Student & Manufactured Housing, Tower, and Triple-Net; and negative on Diversified, Healthcare, Hotels, Suburban Office, and Single-Family REITs. Specific company ratings and operating details can be found inside.

  • Our favorite small-cap REITs are ADC, AHH, CIO, MNR and TIER. We also like MAA and NNN among the mid-cap names, and AIV, EQR, and O among the large-cap REITs.

  • We have MNR management on the road next week.

  • No changes to our earnings and fair value estimates this week.

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STIFEL: Rtl REIT - Retail REIT Comp Sheets 9/20/16

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Retail REIT Comp Sheets 9/20/16

REITs were down 0.65% last week, but are up 9.6% YTD. Retail REITs are performing in line with the REIT index YTD, up 9.65%, as regional malls are up 8.4% and shopping centers are up 11.6%.
The REIT sector is trading at a 1.4% discount to NAV. Regional malls are attractively priced to the REIT sector, in our view, trading at a 13.2% discount to NAV while shopping centers are trading at a 1.3% premium to NAV.

  • General Growth Properties (GGP, $28.16, Buy) and Simon Property Group (SPG, $208.73, Buy) along with retail licensing firm Authentic Brands completed the bankruptcy court approved acquisition of Aeropostale. The consortium submitted a bid of $243.3 million for 229 stores. The consortium negotiated with other mall owners to keep another 171 stores open in exchange for rent concessions. Aeropostale operates over 600 stores and while there will be some store closures, the amount is much more manageable following the rent concession agreements.
  • Sears Holdings (SHLD, $12.12, NC) exercised its right under a master lease with Seritage Growth Properties (SRG, $47.01, NC) to terminate the lease with respect to 17 unprofitable stores totaling 1.7 million sf of GLA. Sears expects to vacate the stores in January 2017 and will pay rent until that time. Sears will also pay Seritage a termination fee equal to one year of the annual base rent plus estimated operating expenses. The annual base rent of the 17 stores is approximately $5.8 million or 2.8% of Seritage’s total annual base rent as of 6/30/16.
  • Taubman Centers (TCO, $74.11, NC) announced that Peter J. Sharp will assume the position of President, Taubman Asia, as current President Rene Tremblay transitions to Chairman of Taubman Asia, effective January 1, 2017. Mr. Sharp was previously at Walmart International, serving as President of Walmart Asia Realty, overseeing Walmart’s Asia real estate portfolio and leading Walmart’s expansion into China and entry into India, Japan, and South Korea.
  • Golfsmith International filed for Chapter 11 bankruptcy with plans to reorganize or find a buyer for the company. Golfsmith’s restructuring plans include the closing of 20 underperforming stores and refinancing of debt. The company operates 109 Golfsmith stores in the U.S.
  • Kite Realty completed its initial public debt offering of $300 million of 10-year notes at 4%. KRG plans to use the proceeds to pay off its $200 million term loan due in July 2019 and other debt repayments, redevelopment, and possible acquisitions.

Pricing as of 9/16/16 close.

NOTE: Additional Disclosures can be found on page 2 as well as pages 11-14.

Aeropostale, Inc. is a client of Stifel or an affiliate or was a client of Stifel or an affiliate within the past 12 months.

Aeropostale, Inc. is provided with investment banking services by Stifel or was provided with investment banking services by Stifel or an affiliate within the past 12 months.

Stifel or an affiliate has received compensation for investment banking services from Aeropostale, Inc. in the past 12 months.

Stifel or an affiliate expects to receive or intends to seek compensation for investment banking services from Aeropostale, Inc. in the next 3 months.

STIFEL: Healthcare REITs - NIC Conference Fall 2016 - Key Takeaways

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NIC Conference Fall 2016 - Key Takeaways

 

  • We attended the 2016 Fall NIC Conference (September 14 & 15) in Washington D.C. where we met with seniors housing operators, healthcare REITs and property owners as well as capital providers and industry figures. Here we summarize some of the themes discussed and give some key meeting takeaways from seniors housing and REIT management teams.

 

  • Seniors housing supply remains the topic du jour. Many operators we spoke to are understandably concerned about rising supply in the industry. A key difference we see between this year's conversations and the prior year is that many of the private operators we've spoken to are seeing supply impact their business personally, not just in the national headlines or competitors. Despite the supply issues, operators largely remain cautiously optimistic on seniors housing outlook.

 

  • As a response to the wave of new development, it appears that lenders are tightening standards of lending to developers, which could slow future development and help to bring supply back in line with demand. We noticed fewer developers at this conference than in the past.

 

  • Discounting rate seems to be a tool that operators are widely using to attract new residents and prop up occupancy. On average, the discount equates to one month's rent, but may take the form of a waiver in community fee, first month free or other discounts.

 

  • Labor cost inflation complicates matters. Rising minimum wages, increased threshold for full-time vs. hourly employees and competition in a tight labor market mean that labor expense growth may outpace revenue growth, especially on the coasts.

NIC Conference Meeting Takeaways - Fall 2016

 

CareTrust (CTRE, $14.22, Hold)

  • Continues to find small portfolios in secondary markets to execute sale leaseback transactions with quality operators.
  • Has the capacity to do and has looked at larger deals, but small deals still move the needle.
  • Open to SNF acquisitions but with operators other than Ensign as diversification of operator base is still a priority.
  • Believes secondary and tertiary markets like Iowa, Nebraska and other Middle America states, are less impacted by change to value-based systems due to lower competition.

 

New Senior (SNR, $11.30, Hold)

  • Believes there is an abundance of capital in the space looking for yield, especially private equity formed capital.
  • Believes the gap between buyer and seller expectations is narrowing, but transactions are taking longer to close than historically.
  • Believes HCREITs are largely being more selective in the deals they pursue.
  • Seeing operators using incentives such as reduction of one-month non-refundable deposit to drive occupancy.
  • Expects to close on some dispositions in the fourth quarter.

 

Sabra (SBRA, $23.42, Hold)

  • Bulk of the SBRA owned GEN operated assets being marketed (19 of 29) are located in Kentucky. The balance is located amongst six other states, primarily Midwest.
  • Seniors housing pipeline is active, primarily secondary markets with yields in the 7% range.
  • Expects rent coverage ratio to stabilize and largely be flat over the next 12 months.
  • Seeing foreign investors interested in SNF JVs as they are attracted to the yield.

 

Brookdale (BKD, $17.31, Hold)

  • Announced dispositions should close by year end 2016 barring any licensing issue delays. The remaining dispositions are primarily legacy Emeritus assets.
  • Management believes the market is active with buyers as smaller players are looking to build out portfolios.
  • Using a discounting strategy to improve occupancy for facilities with lower occupancy; the incentives are not typically offered at high occupancy facilities.
  • Houston and San Antonio have been identified as challenging markets.

 

HCP Inc. (HCP, $37.03, Sell)

  • Looking to reduce senior housing portfolio as a % of total (currently 50%) as well as BKD exposure (post-spin 34%). Target exposure to BKD is around 20%. Will be selective in senior housing acquisitions.
  • Concurrently, would like to grow its RIDEA portfolio and add new operating partners. Cap rates on new HCP RIDEA transactions are 6% to 7% range.
  • Interested in growing MOB portfolio. This is likely to involve higher volume of smaller transaction rather than larger portfolio transactions.
  • Spin-co has begun marketing its capital structure to investors.

 

Welltower (HCN, $73.61, Buy)

  • Actively marketing $500M to $1.0B of GEN assets. Expects to meaningfully reduce GEN exposure over the next 12 months.
  • Pursuing acquisitions in the senior housing and MOB spaces. Given high valuations of MOB space, HCN will grow through one-off transactions and with existing partners via development opportunities.
  • The company has limited interest in life science or hospital assets.

 

LTC Corp (LTC, $50.59, Hold)

  • With $82M in transactions closed YTD, LTC believes it can hit $100M by year-end.
  • Observes increased interest in smaller deals in the market, which is consistent with what we’ve heard at the conference. LTC is currently underwriting new SNFs at 8.0% to 8.5% and private pay senior housing at ~7%
  • Management is confident in the stability of its operators.
  • Management anticipates renewing its Sunrise master lease in line with the current lease.

 

Capital Senior Living (CSU, $17.06, Hold)

  • Optimistic that three transactions that were delayed for either licensing or labor issues will close before year-end.
  • Experienced lower wage inflation relative to peers due to the lower level of care provided and the geography of CSU facilities.
  • Expects operations to bounce back after a weak 2Q. Management not seeing supply in its markets as a concern.

Janney/REITs: Weekly REITCap: Portfolio Managers Guide to Property REITs

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Weekly REITCap: Portfolio Managers Guide to Property REITs – September 15, 2016
 

Our Weekly REITCap Portfolio Managers Guide provides general corporate information, total returns, valuation and balance sheet measures for 150+ property REITs across the major asset types (e.g. office, multifamily, retail, industrial), as well as more esoteric REITs (such as the prisons and towers).

 

  • For the week ending September 14, the MSCI US REIT Index (RMZ) return was -6.1% versus the S&P 500 return of -2.7%. The NASDAQ was -2.1%, the DJIA was -2.7%, the Russell 2000 was -3.9%, the DJ Utilities were -2.6%, and the S&P Financials were -2.9%.

  • The best-performing REIT subsectors last week were Single-Family Rentals (-0.5%), Apartments (-4.5%), and Storage (-4.6%), while the worst were Healthcare (-7.6%), Data Centers and Towers (-7.0%), and Office-Suburban (-6.9%).

  • The best-performing REIT stocks last week were AFCO (+22.1%), GEO (+2.2%), and CXW (+0.1%), while the worst were WPG (-12.8%), FPO (-12.5%), and IRET (-11.1%).

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  • YTD REITs are now outperformingthe S&P 500 by 350bps. The REIT sector is now +9.1% in 2016, while the S&P 500 is +5.7%, both on a total return basis. YTD the Russell 2000 total return is +6.7%, the NASDAQ is +3.3%, the DJIA is +3.5%, the DJ Utilities are +14.5%, and the S&P Financials are +1.0%.

  • The best-performing REIT subsectors YTD are Triple-Net Lease (+26.7%), Industrial (+25.2%), and Healthcare (+17.3%), while the worst are Storage (-11.4%), Apartments (-2.6%), and Single-Family Rentals (+2.2%).

  • The best-performing REIT stocks YTD are SNH (+55.7%), NXRT (+52.2%), and GOV (+49.6%), while the worst are CXW (-37.5%), GEO (-19.0%), and FPO (-17.9%).

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  • Over the past 12 months, the REIT sector total return is +20.3%, while the S&P 500 is +11.3%. Over the last 3 months, the REIT sector total return is +1.8%, while the S&P 500 is +3.0%.

  • The US is outperformingmany of the major global real estate markets YTD. The YTD US REIT total return of +9.1% compares to -2.6% for Europe, +8.3% for Asia, -11.2% for the UK, and +10.4% for Australia.

  • REIT sector’s average cash dividend yield is 3.9%. This compares to the average yields on the 10-year Treasury (1.7%) and Moody’s Baa Corporate Bond Index (4.4%).

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  • We remain Neutral on the US Property REITs. With a 10% total return expectation for 2016, we remain Neutral on the US Property REITs, as solid internal growth and continued access to inexpensive and plentiful capital are somewhat offset by strong valuations, greater levels of new supply, and the threat of higher interest rates.

  • In terms of our subsector views, we are positive on the Multifamily, CBD Office, and Industrial subsectors; neutral on Data Centers, Regional Malls, Self-Storage, Shopping Centers, Student & Manufactured Housing, Tower, and Triple-Net; and negative on Diversified, Healthcare, Hotels, Suburban Office, and Single-Family REITs. Specific company ratings and operating details can be found inside.

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  • Our favorite small-cap REITs are ADC, AHH, CIO, MNR and TIER. We also like MAA and NNN among the mid-cap names, and AIV, EQR, and O among the large-cap REITs.

  • We had STOR management on the road earlier this week. Our thanks to Chris Volk and Mary Fedewa.

  • We updated our Fair Value estimates this week for AFCO and PPS as a result of their pending acquisitions. See Figure 6 for complete details.