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This text was beforehand printed within the August 2020 version of the Forbes Actual Property Investor
We imagine that the majority REITs will survive the pandemic, proceed to function, proceed to pay their cumulative most well-liked dividends, and have minimal impairment. This month we spotlight three most well-liked REIT picks.
Do not forget that most well-liked shareholders are senior to the whole fairness stack and sit senior to all widespread distributions. Given the dislocation within the sector in the present day, we think about preferreds a superb income and sustainability through the pandemic.
Most well-liked Choose 1
Saul Facilities (BFS) is a self-managed, self-administered fairness REIT headquartered in Bethesda, Maryland. It presently operates and manages an actual property portfolio of 60 properties that features 50 neighborhood and neighborhood purchasing facilities and 7 mixed-use properties with roughly 9.eight million sq. toes of leasable space, and three land and improvement properties.
Roughly 85 p.c of the Saul Facilities’ property working revenue is generated by properties within the metropolitan Washington, D.C./Baltimore space. The principal quantity of Saul Facilities’ excellent debt totaled roughly $1.1 billion at March 31, of which roughly $928.9 million was fixed-rate debt and roughly $199.5 million was variable charge debt excellent beneath the credit score facility.
Debt represents about 55 p.c of the capital construction. Fairness and most well-liked inventory signify 36 p.c and 9 p.c of the capital construction, respectively. Moreover, Saul Facilities has roughly $32 million in money on the steadiness sheet.
Amortizing fixed-rate mortgage debt with staggered maturities from 2021 to 2035 represented roughly 82.three p.c of the Saul Facilities’ notes payable, thus minimizing refinancing threat. Saul Facilities has two sequence of most well-liked inventory, BFS D and BFS E. Each most well-liked shares are cumulative.
Because of this if the dividend can’t be paid, it accrues till it will probably and is paid earlier than widespread dividends. On or after January 23, 2023, BFS D is redeemable in entire, or partially, at a money redemption value of $25.00 per share, plus an quantity equal to all dividends accrued and unpaid. BFS E is redeemable on or after September 17, 2024. BFS D has a 6.125 p.c coupon.
As of July 21, BFS D’s value and yield have been $20.95 and seven.three p.c, respectively. BFS E has an 6 p.c coupon. BFS E’s value and yield have been $20.30 and seven.four p.c, respectively.
Most well-liked Choose 2
Ohio-based SITE Facilities (SITC), previously often known as DDR Corp.
, a self-administered and self-managed REIT, is within the enterprise of buying, proudly owning, creating, redeveloping, increasing, leasing, financing and managing purchasing facilities.
SITE Facilities owns roughly 57.zero million complete sq. toes of gross leasable space (GLA) by means of all its properties and managed roughly 13.2 million complete sq. toes of GLA for Retail Worth (RVI), an proprietor and operator of purchasing facilities.
SITE Facilities has roughly $2.2 billion in unsecured indebtedness and $54 million in mortgage indebtedness. Debt represents about 57 p.c of the capital construction. Fairness and most well-liked inventory signify 35 p.c and eight p.c of the capital construction, respectively.
Moreover, SITE Facilities has roughly $514 million in money on the steadiness sheet. Over the prior three years, it has been a internet vendor of property and used the proceeds to deleverage.
From January 1, 2017 to December 31, 2019, SITE Facilities bought 115 purchasing facilities for an combination gross sales value of $three.three billion. On July 1, 2018, the corporate accomplished the spinoff of RVI. At the moment, RVI owned 48 purchasing facilities, representing $2.7 billion of gross e-book asset worth and $1.three billion of mortgage debt.
SITE Facilities has two sequence of most well-liked inventory, SITC A and SITC Okay. SITC A is rated BB by S&P and BB+ by Fitch. SITC Okay is rated Ba1 by Moody’s
, BB by S&P and BB+ by Fitch. The corporate is rated BBB- by S&P and BBB by Fitch. Each most well-liked shares are cumulative.
On or after June 5, 2022, SITC A is redeemable in entire, or partially, at a money redemption value of $25.00 per share, plus an quantity equal to all dividends accrued and unpaid. SITC Okay is presently redeemable. SITC A has a 6.375 p.c coupon. As of July 21, 2020, SITC A’s value and yield have been $22.43 and seven.1 p.c, respectively. SITC Okay has an 6.25 p.c coupon. SITC Okay’s value and yield have been $22.05 and seven.1 p.c, respectively.
Most well-liked Choose three
Vornado Realty Belief (VNO) is a completely‑built-in REIT and conducts its enterprise by means of, and considerably all its pursuits in properties are held by, the working partnership. The corporate has roughly $5.6 billion in mortgages payable and $three.eight billion in unsecured debt.
Debt represents about 55 p.c of the capital construction. Fairness and most well-liked inventory signify 40 p.c and 5 p.c of the capital construction, respectively. Moreover, Vornado has roughly $1.6 billion in money on the steadiness sheet.
Vornado presently owns 19.1 million sq. toes of Manhattan workplace house in 35 properties, 2.three million sq. toes of Manhattan road retail in 70 properties, 1,991 models in 10 residential properties, the 1,700-room Lodge Pennsylvania positioned on Seventh Avenue at 33rd Road within the coronary heart of the Penn District, and a 32.four p.c curiosity in Alexander’s (ALX).
Moreover, Vornado owns the three.7 million sq. foot the MART in Chicago and a 70% controlling curiosity in 555 California Road, a three-building workplace complicated in San Francisco’s monetary district aggregating 1.eight million sq. toes
Vornado has three sequence of most well-liked inventory, VNO Okay, VNO L and VNO M. All three most well-liked shares are rated Baa3 by Moody’s and BB+ by S&P and Fitch. The corporate is rated BBB by S&P and Fitch. All three most well-liked shares are cumulative.
VNO Okay and VNO L are presently redeemable in entire, or partially, at a money redemption value of $25.00 per share, plus an quantity equal to all dividends accrued and unpaid. VNO M is redeemable on or after December 13,2022. VNO Khas a 5.7 p.c coupon.
As of July 21,2020, VNOK’s value and yield have been $22.51 and 6.three p.c, respectively. VNO L has a 5.four p.c coupon. VNO L’s value and yield have been $21.21 and 6.four p.c, respectively. VNO M has a 5.25 p.c coupon. VNO M’s value and yield have been $21.21 and 6.2 p.c, respectively.