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The Intelligent REIT Investor. The Source for REIT Investment Strategies. Why REITs?. Real Estate Was the First Asset Class. Will Rogers said: “Buy land. They ain’t making any more of the stuff.”. What Type of Real Estate?.

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the intelligent reit investor

The Intelligent REIT Investor

The Source for REIT Investment Strategies

real estate was the first asset class
Real Estate Was the First Asset Class

Will Rogers said:

“Buy land. They ain’t making any more of the stuff.”

what type of real estate
What Type of Real Estate?

Today, there are 25 countries around the world that have adopted the REIT (or REIT-like) structure as a tax-efficient way for small investors to achieve the many benefits of owning an indirect interest in high-quality, well-located, and professionally-managed, income-producing real estate.

a world of new sectors
A World of New Sectors

Data Centers

Campus Housing

other new sectors
Other New Sectors



other new sectors1
Other New Sectors


Movie Theatres

other new sectors2
Other New Sectors


Single-Family Rentals

why play the game
Why Play the Game?

REITs provide excellent diversification by reducing risk without inhibiting returns. The more money you have to invest in REITs, the bigger your average position size should be, particularly if you are trying to achieve an optimally concentrated portfolio. I generally recommend that one should own between 10% to 20% in REITs and in some cases, depending on risk tolerances of course, 25% to 30% may seem reasonable


By diversifying, you provide yourself with insurance that if one of your stocks blows up, it will not severely impact your egg's nest.


As a result of their liquidity, REITs have become the most efficient way for investors and investment managers across the globe to gain exposure to commercial real estate; an effective way for professional investment managers to manage their investment exposure to real estate; and a meaningful way to reduce the risk of illiquidity.


As the investor base for listed real estate has grown over the past decade, average daily dollar trading volume in the U.S. has soared – from about $100 million in 1994 to more than $4 billion today.


2013 was notable for the robust REIT IPO activity – topping off the year with a total of 16 REIT IPOs on the NYSE which raised over $4.4 billion.


REITs provide tax transparency, meaning that the REIT pays no corporate tax in exchange for paying out strong, consistent dividends. Rather, taxes are paid only at the individual shareholder level.

In addition, REITs provide operating transparency, meaning that listed REITs are registered and regulated by the Securities and Exchange Commission and adhere to high standards of corporate governance, financial reporting and information disclosure. They are also covered by a robust group of Wall Street and independent analysts.

reits are forced to payout dividends
REITs are FORCED to Payout Dividends

By law (est. 1960), REITs MUST payout at least 90 percent of their taxable income in the form of dividends.

traditional stock model icing on the cake
Traditional Stock Model“Icing on the Cake”

Non-REITs are not forced to payout a dividend so the majority of their TOTAL RETURN consists of capital appreciation, not dividends.

So when these stocks pay a dividend, it’s just icing on the cake

traditional stock model icing on the cake1
Traditional Stock Model“Icing on the Cake”

Benjamin Graham wrote:

“Paying out a dividend does not guarantee great results, but it does improve the return of the typical stock by yanking at least some cash out of the manager’s hands before they squander it or squirrel it away”.

the reit model
The REIT Model

Total Return

Most REITs return around 60%

in the form of dividends and

40% in the form of share


Dividends + Share Growth =

Total Return

the most important thing
The Most Important Thing

Howard Marks:

“Successful investors

manage to acquire that

necessary ‘trace

of wisdom’ that Ben

Graham calls for”.

the most important thing1
The Most Important Thing

Howard Marks:

“It’s the investors job to

intelligently bear risk for

profit. Doing it well is

what separates the best

from the rest”.

a margin of safety
A Margin of Safety

Ben Graham:

“The margin of safety

concept may be used to

distinguish the differences

in a investment operation

and a speculative one”.

a margin of safety1
A Margin of Safety

Ben Graham:

“The margin of safety is the essence of value investing because it is the metric by which hazardous speculations are segregated from bona fide investment opportunities”.

a margin of safety2
A Margin of Safety

It's important not to use P/E for REITs, or to

compare P/E for REITs with P/E for non-REIT

stocks. Funds from Operations, or FFO, is a

standardized metric, though not GAAP; AFFO is

not standardized, and equity analysts have

different ways of constructing it. Both of them

are better than earnings for valuing REITs.

a margin of safety3
A Margin of Safety

By utilizing price to FFO valuation, analysts and

investors can determine the trading history of each

REIT by itself and relative to the entire REIT sector.

Accordingly, payout ratios are based on AFFO (adjusted

funds from operations) because it more accurately

measures cash flow when compared to net income

(due to depreciation), and given the contractual nature

of lease payments today, earnings growth rates are

higher than the S&P.

a margin of safety4
A Margin of Safety

So REITs should not only

be compared to non-REIT

stocks, but also to other

fixed-income instruments.

the bottom of the 3 rd inning
The Bottom of the 3rd Inning

Dr. Brad Case, Sr. VP NAREIT:

“REIT earnings suffered over the last

few years as real estate operating

fundamentals-rent growth and

occupancy levels-declined

dramatically. With the economy

starting to recover, both rent growth

and occupancies have started to

improve, but REIT earnings are still

low relative to a normal market


the bottom of the 3 rd inning1
The Bottom of the 3rd Inning

Dr. Brad Case, Sr. VP NAREIT:

“ Investors like REITs not just

because they have strong

current dividend yields relative

to other income assets, but

also because investors expect

their operating earnings to

grow strongly as the economy


triple net reits
Triple Net REITs
  • Realty Income (O)
  • National Retail Properties (NNN)
  • American Realty Capital Prop. (ARCP)
  • EPR Properties (EPR)
  • Agree Realty (ADC)
  • W.P. Carey (WPC)
  • Spirit Realty Capital (SRC)
  • Gramercy Property Trust (GPT)
industrial reits
Industrial REITs
  • First Industrial Realty Trust (FR)
  • PS Business Parks (PSB)
  • Terreno Realty Corp. (TRNO)
  • Prologis, Inc. (PLD)
  • EastGroup Properties (EGP)
  • DCT Industrial Trust (DCT)
  • Duke Realty Corp. (DKE)
  • STAG Industrial (STAG)
  • Chambers Street Group (CSG)
  • Monmouth Real Estate (MNR)
  • Gladstone Commercial Corp. (GOOD)
shopping center reits
Shopping Center REITs

Federal Realty Regency Centers (FRT)

Equity One (EQY)

Brixmor Property Group (BRX)

DDR Corp. (DDR)

Retail Opportunity Investment (ROIC)

Weingarten Realty (WRI)

Kimco Realty (KIM)


Retail Properties of America (RPAI)

Inland Real Estate Corp. (IRC)

Urstadt Biddle (UBA)

Excel Trust (EXL)

Whitestone REIT (WSR)

Wheeler Real Estate (WHLR)

health care reits
Health Care REITs

Ventas, Inc. (VTR)

National Health Investors (NHI)

Sabra Health Care (SRBA)

Healthcare Realty Trust (HR)

Healthcare Trust of America (HTA)

HCP, Inc. (HCP)

LTC Properties (LTC)

Health Care REIT (HCN)


Medical Properties Trust (MPW)

Physicians Realty (DOC)

Senior Housing Prop. Trust (SNH)

margin of safety

“If a stock is priced way

over intrinsic value, it may

become vulnerable to the

‘king is wearing no

clothes’ syndrome”.

my approach
My Approach

Like the legendary Ben

Graham, I’m a student of

intrinsic value as a

method of determining

what a company is worth

– because when applied

properly, I have an edge

over the market.

that s called intelligent investing
That’s Called Intelligent Investing

Getting in at the

bottom of a stock

market cycle

produces better

returns than getting

in at the top.

subscribe today
Subscribe Today

Brad Thomas is the

Editor of The

Intelligent REIT

Investor, also known

as iREIT Investor.