Take a look at PSB. They are 40% owned by PSA. They basically have no debt either, but preferreds take up a fair share of the market cap. PS Business Parks preferreds are my second biggest holding.
He bet the farm on WWE at $9 and is taking it to the bank. Heard he made over $1 million in the past few months and will donate it all to charity. Class act.
O and NNN are relatively safe investments, as they take on less risk because they normally don't develope properties. DLR builds some of their properties, so they have the risk of cost overruns and they also collect no rent while the property is being built.
REIT common stocks will generally outperform the preferreds, but they are many good reasons to own them. Investors that are retired, or may retire in the next 10 years, may not want large swings in their portfolio. Just look at the investors that purchased shares of REITs earlier in the year and now have 20% losses. Also, most investors would settle for low-risk 8% returns.
I've been investing in preferreds for 15 years and have not lost a dime. The 08-09 crisis was challenging, but I held on to my securities and many of those have been called at $25 now. I loved my PSA 7.5% V shares. They were the old V shares that have now been replaced with a 5.38% coupon rate.
I agree with your logic on this. REITs don't pay taxes, so it does not really matter if they issue debt or preferreds. With the preferreds, they never have to worry about refinancing or interest rates increasing as they have locked in their rate forever. Plus, if rates drop, they can call the issues.
Plus, if they issue shares at 7% and purchase a property with a cap rate of 8%, they can increase rental rates in future years - and the interest rate is fixed.
If a preferred is mentioned on this board, it has already passed Kaptain Lou's Rigorous Screening Process.
Maybe next week you will tell us the Internet is going out of business. You know, just like Zero's malls are doing (nevermind O does not own any malls).
You are right, Yahoo Finance is not the place to research company financials. Their information is normally outdated and incorrect.
The default rate on REIT preferreds is extremely low. The Mortgage REITs are a completely different investment and I avoid those like the plague. GGP was actually a decent company, but was not able to refinance their substantial debt at the height of the credit crisis. As you mentioned, their preferred holders did not show a loss - but dividend payments were delayed, which in some ways could be considered a loss.
The one ares of the REIT sector I normally avoid is the hotel investmemts. Dogs like Felcor suspended payments on their preferreds, although they have been restored now. I always asked myself the question - why would I invest in a company when I don't know who their tenants will be in 10 days? At least with my NNN preferreds, I know who their tenants will be in 10 years.
Your interest rate coverage is correct, but for REITs I normally add back a substantial amount of depreciation before calculating the interest coverage rate.
Per their website, they have 130 properties. However, the buildings do have mulitiple tenants and they currently have over 600 tenants.
I agree there is more risk than O, so I would buy the preferrred in limited quanities, but it still has a place in my medium risk portfolio. Their debt is rated BBB and Baa2. Nice 7.7% yield on the G shares, as the other two classed yield only about 7.5%.
2014 may be a better year for REITs than 2013. However, in the long run, most of the REITs have performed very well.
Happy investing everyone! Nice rally on preferreds the past two months.
Trader, wish I had bought in earlier last week. I could have got in for a yield well over 8%. The price has increased a buck in the past couple of days. Sometimes the preferreds trade on the OTC/Grey market for a few days and saavy investors can pick some of these up at bargain prices.