I am used to people posting on the board what they have bought or sold and then getting a lot of feedback on what they had done. I thought that I would post what I am thinking about doing and get the feedback before making up my mind.
A year ago, I bought three REITs in a taxable account and would like to sell some of them, but I limit how much I take in capital gains early in the year so I limited how much I will sell.
The three REITs were AHT, LXP, and CORR. All were bought at what I thought were very cheap prices, but are no longer that cheap due to appreciation. They all went long-term last week.
My cap gain on CORR approximately equals my cap gain on both AHT and LXP, so I could sell 1) AHT & LXP, 2) all my CORR, or 3) half my CORR and either AHT or LXP.
The fundamentals and my opinion of each are:
CORR – An energy infrastructure REIT that primarily owns pipelines.
Price - $36.04 FFO $4.04 (latest quarter x 4) Price/FFO – 8.92x Yield - 8.34%
Pros – 1) With who is being appointed to various cabinet positions traditional energy looks poised for a few good years; 2) Still the cheap by many matrix and still the highest yielding.
Cons – 1) Everyone is aware of who is being appointed to the administration and the positives are priced in and perhaps this give CORR more downside than the others; 2) This is one type of REIT where I suspect GAAP EPS night be superior to FFO; 3) Over the last ten years CORR’s share price is down about 45%.
LXP – A single tenant REIT with long term leases and a varied portfolio consisting mostly of office and and industrial properties.
Price - $10.67 FFO - $1.08 (latest qtr x 4) Price/FFO – 9.88x Yield – 6.54%
Pros – 1) Has successfully gone through a recent period with lots of lease renewals; 2) Fairly diversified; and 3) Will benefit most from periods of moderate economic growth and moderate inflation.
Cons – 1) Will not perform well, compared to most other REITs, during periods of higher inflation – typically considered goof for REITs; 2) On recent leases and renewals it is often getting only 2 percent annual rent escalators instead of the 3% it used to routinely get; 3) Also susceptible during periods of recession – it got killed during 2007-2009 and is still down about 45% since early 2007.
AHT – Hotel REIT
Price - $7.94 FFO - $1.60 (lastest quarter x 4) Price/FFO – 4.96x Yield – 6.11%
Pros – 1) Should benefit the most if the economy improves significantly and probably should do the best if inflation picks up, i.e. short leases. 2) Perhaps the cheapest of the three in my opinion. 3) REVPAR was up 3.4% in the 3rd qtr(latest) and up 4.4% in hotels not under renovation
Cons – 1) Economic sensitivity of hotels, 2) What seems to me to be the historic poor performance of hotel REITs, AHT is up only about 7% over the last ten years, but the other two REITs on this list are down about 45% over the same time. 3) They seem to be increasing leverage and the yields at which they issue preferreds 7.375% indicates they are risky.
Opinions on any of these three?