Office REIT peer comparison

Peer comparison of largest 15 REITs with rentable office space >1 million m2.

Screenshot_20200426-215034

 

As you know I have invested in REITs lately with Catching the dip #2 – Brookfield Property Partners (BPY) and Catching the dip #4 – Simon Property Group (SPG). Due to their massive yields. Now i’m looking at office REITs as I like the segment much more then Retail and I think offices are here to stay. Don’t say that work from home will kill it. It will not. Me and 95% of others will never work from home. There has to be a line separating work and home. I don’t work properly at home and worst don’t properly rest from work later as I feel somewhat still at work. Same goes for most of my collegues as well.

So digging into comparison I find my BPY most leveraged with 8x compared to average of 6x. Least leverage looks to be VNO, OFC, HIW and WPC. Also BPY pay most of earned EBITDA for interests. VNO stands out with substantial cash reserve after their sale. LTV averages around 50%. I calculste dividend payout baded on EBITDA minus interest (EBTDA). To my view it is better then FFO as you can do “improvements” in FFO with WCR changes for ex. increasing supplier payable. Here BPY stands out in a good way as massive 16% yield looks well covered: 1,3 bn$ dividend payment / EBITDA 6,6 bm$ – interest 2,9 bn$ = 35% payout ratio. Other big diversified REITs VER and WPC look bit more at risk for dividend cuts with payout 80-90%, altough they are less leveraged. On average office REIT looks secure with average 6% yield and payout of ~50%.  There is value here due to declined share prices with Price/EBTDA around 10, and some even bellow. Yes RE will be hit by recession, but i’m willing to take that risk eith P/E bellow 10. So here are my top 3 from the list:

#1 – Vornado realty trust (VNO)

logo-3901.1505997064.2723REIT with nearly 2 million square meters of prime office asset mainly in NY. Small portion of Prime retail and residential in NY, but absolute majority 80% is office. Company got lucky with divestment at 2H of 2019 and now they enjoy big cash reserve of 1,5 bn$ and low leverage – 5,2x Annualised dividends of 2,64$ leads to high dividend yield – 7,0% quite well covered payment with safe 63% payout ratio from EBTDA of 4,2$/share. Price/EBTDA – 9,0 and share price droped from 65$ to 38$ YTD -42% so to my view this looks like a good buy.

#2 – SL green reality (SLG)

SL-Green-Realty-CorpNext we have another major NY office landlord with massive 2,7 million own square meters on Manhattan + another 1,5 million controled. Small portion of that or ~100k m2 is retail, so majority 98% is prime office in NY. Just announced monthly dividends of 0.295$ leading to very solid dividend yield – 7,9% with 71% payout bit on a higher side. Apart from high yield Price/EBTDA – 9,0 also looking attractive. Share price decline from 90$ to 45$ YTD -50%. Weak side is higher leverage – 6,9x.

#3 –  Boston Properties, Inc. (BXP)

BXP_Logo_Vertical-Color-RGBAnd third in the list the true office REIT king, largest of them all with near 5 million square meters and offices in major US cities – Boston, NY, LA, San Francisco and Washington DC. Dividend yield – 4,8% is comparably low, but with 50% payout looks safe. Price/EBTDA – 10,3 on a higher side. Leverage – 6,4x in line with average. Price declined from 135$ to 90$ YTD -33%. Decline lower then two above so as this REIT looks less attractive, but still its massive size matter. Scale in RE business becoming more and more important.

Next #4-5 to mynview would be HIW and BDN. Least attraktive looks to be DEI with higher leverage along with low yield and ARE with high P/E of 17x and low yield 2,8% not comparable with higher risk of investmemt in RE. I would rather go form JNJ then.

What if your view on REITs?

2 thoughts on “Office REIT peer comparison

Add yours

  1. Wow, I can honestly say I’m not familiar with any of these REITs. I only own Realty Income, but in general I like REITs for more reason than one.

    I feel you in that working from home is not ideal. Usually, when I’m stressed at work, I can come home to relax. But, now that I’m working from home, where do I go to relax? Home is not the most relaxing at the moment because there is no separation. I just can’t wait for things to get back to normal.

    Like

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Powered by WordPress.com.

Up ↑

Engineer my Freedom

Financial freedom from Dividend Growth Investing

Išmok investuoti lėtai ir protingai

Our journey to financial independence

Polliesdividend

Dutch Dividend Engineer

European Dividend Growth Investor

Compounding into freedom - A European perspective

Dividend Compounder

Accumulating Wealth, Slowly But Surely

Broke Investor

My Journey to Financial Independence

www.honestfire.lt/

ATVIRIAUSIAS BLOGAS APIE FINANSINĘ LAISVĘ

One Million Journey

Shaping the Future through Saving & Investing

Total Balance

Ignite your FIRE

Young Dividend

Our journey to financial independence

Generalist Lab

Our journey to financial independence

Passive Canadian Income

Our Journey To Financial Freedom

My Dividend Dynasty

Achieving Financial Independence - Saving, Investing, and Building a Dividend Empire

Dividends Diversify

Our journey to financial independence

The Dividend Guy Blog

Our journey to financial independence

Traveling Lithuania

Traveling Lithuania

Financially free in 10 years

Saving, investing and working towards financial freedom

George's Dividend Meter

Just another WordPress.com site

Dividend Portfolio

A Portfolio For The Small Investor

Engineer my Freedom

Financial freedom from Dividend Growth Investing

Išmok investuoti lėtai ir protingai

Our journey to financial independence

Polliesdividend

Dutch Dividend Engineer

European Dividend Growth Investor

Compounding into freedom - A European perspective

Dividend Compounder

Accumulating Wealth, Slowly But Surely

Broke Investor

My Journey to Financial Independence

www.honestfire.lt/

ATVIRIAUSIAS BLOGAS APIE FINANSINĘ LAISVĘ

One Million Journey

Shaping the Future through Saving & Investing

Total Balance

Ignite your FIRE

Young Dividend

Our journey to financial independence

%d bloggers like this: