VEREIT, Inc. VER is witnessing an improvement in its rent-collection tally. The company’s rental receipts for August have increased to roughly 94% from July’s 92%, June’s 86%, May’s 86% and April’s 87%. The company has also announced asset sales of $157.5 million for payment of $150 million preferred stock.
The coronavirus pandemic has been wreaking havoc and affecting demand for real estate. Also, amid the macroeconomic uncertainties and job-market choppiness as well as the pandemic’s adverse impact on business and consumer sentiment, tenants’ rent-paying capabilities have significantly suffered.
However, VEREIT’s rent collection update highlights that the company is benefiting from its portfolio’s geographic, property type and industry diversification, investment-grade tenancy and public versus private ownership.The company has a combined allocation of more than 80% to single-tenant office & industrial, high collection/necessity based retail and quick-service restaurants. These sectors have been lesser affected than others in the pandemic and so, rent collections are better despite the challenging environment.
Moreover, the company has announced dispositions of $157.5 million in the third quarter for accretive funding of the previously-announced partial redemption of $150 million of its 6.70% Series F Cumulative Redeemable Preferred Stock on Sep 20. The disposition in total comprised the company’s property share contributed to office partnership of $39.8 million, an additional office sale for $107 million, and $10.7 million of non-core assets that included a Red Lobster restaurant.
Notably, VEREIT is focused on growth through asset recycling into strategic buyouts, together with reduction of preferred stock as well as refinancing of future debt at a comparatively lower cost. As such, since the beginning of the year through Sep 2, 2020, the company’s dispositions aggregated $356.7 million, including its share of dispositions contributed to the office partnership of $110 million.
Meanwhile, the company has allocated $456.2 million of capital. This included $300 million of 6.7% Preferred Stock redemptions and $156.2 million of property acquisitions, while also acquiring $246.8 million and $33.1 million for industrial and office partnership, respectively. Further, VEREIT’s efforts included the issuance of $600 million aggregate principal amount of 3.40% senior notes due 2028 for refinancing its 3.75% convertible senior notes due December 2020.
Such measures add to the company’s flexibility. As of the second-quarter end, VEREIT raised its corporate liquidity from $1.2 billion to $1.8 billion. This comprised $278.9 million in cash and cash equivalents and the full $1.5 billion of availability under its credit facility.
Also, the company’s improving rent collections, which has been well above 90% during the third quarter, boosts its cash flows. In addition, institutional partnerships serve as an alternate capital source, providing incremental income through acquisition and management fees. However, in the near term, rent relief and deferral requests are likely to be concerns.
Shares of this Zacks Rank #3 (Hold) company have appreciated 6.9%, quarter to date, compared with the 3.6% rally of its industry. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Stocks to Consider
The Zacks Consensus Estimate for Duke Realty Corporation’s DRE 2020 funds from operations (FFO) per share has been revised 2.8% upward to $1.49 over the past month. The stock currently carries a Zacks Rank #2.
Industrial Logistics Properties Trust’s ILPT FFO per share estimate for the ongoing year moved 1.6% north to $1.87 over the past month. The company currently carries a Zacks Rank of 2.
EastGroup Properties, Inc.’s EGP FFO per share estimate for the current year has moved up 1% to $5.31 over the past month. It currently carries a Zacks Rank of 2.
Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.
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