An Analysis of Publicly Traded REITs

TAUBMAN

Founded in 1950 by A. Alfred Taubman, Taubman is a publicly traded REIT headquartered in Bloomfield Hills, Michigan known for its focus on dominant retail malls. They own 28 properties ranging from 300,000 to 1.6 million square feet and 60 to 200+ stores. The basic mission of Taubman is to own, manage, develop, and adquire retail properties that deliver exceptional performance to shareholders. They strive to do this by creating superior retail environments for shoppers, retailers, and investors.

Taubman owned regional and super regional malls are located in major markets across the United States and is extending the company to international markets through its Taubman Asia subsidiary based in Hong Kong.They manage an extremely productive portfolio with sales averaging $641 per square foot in 2011, a record for the publicly held U.S. regional mall industry. Compounded annual growth of tenant sales per square foot has been 3.8% over the past ten year period, compared to the Consumer Price Index compounded over the same period. Because tenant sales per square foot are an important measure of the quality of regional mall assets, Taubman seems like an attractive investment to those looking into healthy, growing companies.

Taubman began trading on the New York Stock Exchange in 1992 under the ticker TCO and has had one of the highest ten-year total returns within the Mall REIT sector. A solid balance sheet and strong performance made it possible for Taubman to steadily increase the dividend over the past several years, as show in the graph below.

 

In addition, Taubman was able to reward shareholders with a 27% total return on their investment in 2011, compared to the S&P 500 Index's return of 2.1% and the MSCI US REIT Index's return of 8.7%. An area to be watching is the company's debt position. The debt-to-asset ratio is 84%, somewhat high compared to competitors. Taubman also has significant amounts of debt coming due in the next few years, particularly in 2015 and 2016. However, the company does estimate strong FFO projections in the near future and stock price is contuing to rise. Since becoming public, the company has almost quadrupled its total enterprise value along with equity market capitalization. All in all, Taubman is an attractive investment opportunity for investors wanting a stable income stream and consistenly good returns.

PUBLIC STORAGE

 

Public Storage, headquartered in Glendale, California, is one of the largest self-storage companies in the United States. The company opened its first self-storage facility in 1972 and today operates over 2,200 locations in the United States and Europe.

Having achieved higher occupancies and better pricing in the past year, net operating income growth dramatically improved to 6.6% from 0.2% in the previous year. Unfortunately, the outlook for the European self-storage market is not great as demand is deteriorating. In addition, Public Storage's commercial property investments continue to be challenged by high unemployment and slow business activity. Overall, revenues increased 7% in 2011, and net operating income improved by over $100 million due to improved same store results as well as acquisitions and expansions. This is a great sign considering same store properties are fundamental strength of the company's business.

Dividends have been stable and increasing in the past 20 years. Although the dividend is relatively conservative as observed by the payout ratio, profits would have to decrease more than 30% for the dividend to fall. It is expected to continue to grow.

As seen in the graph below, stock price performance has been superior compared to Public Storage's direct competitors.

Since the recent recession, there have been virtually no new self-storage facilities built and financing for them has nearly evaporated. Due to this lack of new supply and possibilty of inflation,  Public Storage is expecting above average growth going forward.

SL GREEN REALTY CORP.

SL Green Realty Corp., is NYC's largest commercial office landlord and is the only fully integrated, self-managed and administered Real Estate Investment Trust primarily focused on owning and operating office buildings in Manhattan. The investment focus of SL Green is to create value through strategically acquiring, redeveloping and repositioning office properties primarily located in Manhattan, and re-leasing and managing these properties for maximum cash flow.

As of December 31, 2011, SL Green owned interests in 65 Manhattan properties totaling more than 38.7 million square feet. This included ownership interests in 27.0 million square feet of commercial properties and debt and preferred equity investments secured by 11.7 million square feet of properties. In addition to its Manhattan investments, SL Green holds ownership interests and debt and preferred equity interests in 32 suburban assets totaling 7.3 million square feet in Brooklyn, Queens, Long Island, Westchester County, Connecticut and New Jersey.

The company manages a strong and durable asset portfolio, as observed by an extremely healthy average occupancy rate of 96% since 1993 and investment in Class A tenants. SL Green also holds 10% of REIT market share by revenues. In 2012, the NYC portfolio incurred minimal damage as a result of Hurricane Sandy.

SL Green's debt is structured so that rent payments to the company cover amortized loan payments. Unfortunately, in 2008 the company did take a hard hit compared to the S&P REIT Index. However, since then stock price increases and revenu growth indicates that the company will remain successful in years to come.

 

AMERICAN CAMPUS COMMUNITIES

 

American Campus Communities is the nation's largest developer, owner and manager of high-quality student housing. In 2004, ACC became the first publicly traded student housing REIT. Since 1996, the company has developed more than $3.8 billion in properties and acquired more than $3.7 billion in student housing assets. ACC has also become a national leader in third-party development and management of on-campus student housing.

The company tends to develop on-campus communities as well as off-campus communities in close proximity to the university or college. They are focused on markets with high barriers to entry in order to maintain a stronger grip on the market. The goal is to develop quality, differentiated products that are unmatched by competitors. The total owned, joint-venture, and third-party managed portfolio includes 148 high quality properties, all in A plus locations.

ACC has been fortunate to have mainted strong performance through the recent economic recession. In the recent year, rental rates saw over 4% growth, and same store revenue is up more than 3%.

 

In 2011, American Campus Communities was the top performing residential REIT in the Morgan Stanley REIT Index and the second best performing REIT in this index as a whole, delivering a total shareholder return of 37.3%, very favorable compared to competitors. On average, the company exhibits a conservative payout ratio as compared to other publicly traded REITs. As seen in the graph below, dividends have remained stable since fiscal year 2004, when they were increased substantially. The dividend is not currently expected to increase, but for those investors looking for a steady income stream from a strong, healthy company, American Campus Communities is a great choice.