Single-Family Rental Sector: Growing Up Before Our Eyes
SFR Estimated Median Gross Yields
In a special report and accompanying conference call on the Single-Family Rental (SFR) sector, Dave Bragg and David Segall conclude that a consolidation wave has only just begun and should accelerate. Their report provides highlights from Green Street’s proprietary database of 75,000+ institutionally-owned SFR assets with insights on gross yields, rent growth, and asset quality. It also gives an updated valuation of SFR REIT American Homes 4 Rent (AMH).
Mall Sector - Sears Special Report
Sears Boxes By Quality Grade
(as a % of total Sears Mall Locations)
Operational troubles at Sears Holding Corp. (SHLD), the owner of Sears and K-mart brands, have escalated despite the implementation of a plan in ’12 to improve sales and margins. Recently, liquidity concerns have reemerged as Sears is burning through significant cash. As such, the company recently received a $400 million loan to help fund inventory needs for the balance of '14.
The growing distress at Sears, which anchors nearly 50% of the country’s malls, may generate more uncertainty for lower-quality mall owners that have a larger exposure to the retailer. High-productivity owners could experience near-term disruption, but the long-term impact is likely positive if Sears closes a material number of locations. Sears has been in decline for over a decade, but the continuing decline suggests that mall investors need to stand on guard.
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Announcing Additions to Green Street's Proprietary Data Offering
DataVault Now Includes:
REIT Sector-Level Occupancy
REIT Value per Unit
Implied Value per Unit
Net Asset Value (NAV) & Unleveraged Asset Value (UAV) Premiums for Non-Major Sectors
Nine new fields of data have also been added to the companion Excel spreadsheets for the Real Estate Securities Monthly and Weekly Pricing Update.
2014 U.S. Strip Center Outlook
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Cedrik Lachance and his team published the 2014 U.S. Strip Center Outlook, a new report within the Real Estate Analytics product suite. Green Street has also published outlook reports for the apartment, industrial, mall, and office sectors. By utilizing Green Street's extensive analytical experience, this report delves into strip center supply and demand drivers, retailer trends, the eCommerce threat, operating fundamentals, capital expenditures, asset values, and return expectations.
2014 U.S. Industrial Outlook
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Green Street published the 2014 U.S. Industrial Outlook, the latest publication as part of the Real Estate Analyticics product line. The report serves as a deep dive into the fundamentals and valuation of the U.S. industrial sector and 30 key markets. It offers insight into the traditional forces driving industrial demand, and the potential impact of emerging ones such as eCommerce and the expansion of the Panama Canal. The report also describes the constant risks including obsolescence which have contributed to teh sector's lackluster NOI growth profile over time.
CRE Investors: Still Crazy After All These Years
The commercial real estate industry has long been in denial about the true long-term costs of owning real estate. Despite the accumulation of overwhelming evidence of the importance of adequate cap-ex, we have never come across a property-market practitioner that employs a cap-ex reserve as large as what we use. Green Street first labeled cap-ex as the industry’s “crazy aunt in the basement” nearly 20 years ago, a label that remains as appropriate as ever.
How to Value REITs: Download Green Street's Updated Guide
*Past performance as of 5/30/14 cannot be used to predict
future performance. Please see our track record disclosure.
Green Street just posted its updated REIT Valuation guide based on its NAV-based pricing model for the general public. The model has been pivotal behind the firm’s superb twenty-year recommendation track record. The guide provides the nuts and bolts of an NAV-based analysis, the factors that impact the premiums at which REITs should trade (franchise value, balance sheet risk, corporate governance, and overhead), and Green Street's relative valuation approach for identifying the most/least attractively valued REITs.
Strip Center Special Report: Capital Expenditures
The Strip Center team recently completed a seminal review of cap-ex in the sector. The team reports that cap-ex has a material impact on the total returns of commercial real estate, and many market participants understate the true cost. The report takes a deep look at what comprises cap-ex, and provides a comparison of the cap-ex burden across companies and strip center types. Green Street's recent Sector Allocation report identified cap-ex as one of the key areas where savvy investors can find mispricing.
RESM and CPO Enhancements
Recent Changes to Property Values
Green Street recently published a Heard on the Beach which describes valuable enhancements to the Real Estate Securities Monthly (RESM) and Commercial Property Outlook (CPO) reports. The RESM has been bolstered with a section on sector valuation, which, in addition to valuation of the major sectors, includes valuation conclusions for many niche property sectors. The CPO report has been expanded to cover lodging, storage, and senior housing for eight sectors in total. The report now starts with a "Quarter in Brief" page for a quick overview. Andy McCulloch writes that fundamentals have been good, with the lodging, office and storage sectors reporting particularly good news. Property appreciation also looks to be re-accelerating.
Green Street in the News: Starboard Real Estate Primer on Darden
Green Street's Advisory & Consulting group recently completed an in-depth valuation analysis of Darden Restaurants, Inc.'s (NYSE: DRI) real estate holdings for Starboard, a sophisticated hedge fund client. The analysis included a detailed review of each of Darden's locations. Using Green Street's proprietary data and industry contacts and knowledge, in combination with publicly-available information, our consulting team derived valuation estimates for the company's owned and leased real estate. Starboard used this information as part of a publicly-filed presentation to argue for a sale or spin-off of the Company's real estate to enhance shareholder value.
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Special Report: Capital Allocation Roadmap for REITs
Allocating capital is one of the most important jobs of a REIT management team. In this report, Mike Kirby and Peter Rothemund advocate a simple, disciplined strategy for REITs to follow—grow when you are blessed with an NAV premium and shrink when you trade at a discount to NAV. By funding growth during “green-light” periods with a proportionate issuance of equity/debt or repurchasing stock/debt with proceeds from property sales when NAV discounts are present, REITs can permanently increase their NAV and create shareholder wealth.
2014 U.S. Mall Outlook
Cedrik Lachance and his team published the 2014 U.S. Mall Outlook, a new product within Green Street’s Real Estate Analytics product line. According to the report, the mall business is at an inflection point due to a sea change in consumer behavior. As a result, many lower-quality malls are likely to falter. The report includes 30 informative mall market snapshots that have never been published before.
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Mike Kirby Wins Graaskamp Award
Photo Courtesy of Michael Grecco
The James A. Graaskamp award aims to recognize people who, through significant research, contribute practical insights of immediate use to real estate decision makers.
Empire State Realty Trust (ESRT) is Second-Largest REIT IPO Ever
Empire State Realty Trust, a $5 billion office REIT concentrated in Manhattan and featuring the world-famous Empire State Building, priced its initial public offering (IPO) at the low end of the proposed range. Michael Knott and the Office team published three reports about the company. The new REIT offers things to like (e.g., lease-up opportunity, improving submarkets, good balance sheet) and ample things not to like (e.g., governance issues, execution risk, and challenges in valuing the ESB and the observatory).
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Listen to Bloomberg Radio interview
Barron’s Interviews Mike Kirby
Barron's Interviews Green Street Advisors
Michael Grecco for Barron's
Barron's recently talked with Green Street's president, Craig Leupold, and its director of research, Mike Kirby, about REIT valuations, leading stocks, popular exchange-traded funds and the merits of REITs versus private real-estate investments.
Barrons - REITs with the Right Stuff