Whatever the market thinks, mall REIT property values (NAV) and earnings (AFFO) have grown nicely.
Note that AFFO growth for this quintet has been less than stellar.
For 2006 Green Street projects Simon's AFFO growth to be 6.2%, off 1.3 percentage points from its five-year average but hardly a wipeout.
If dividends exceed AFFO, a REIT either has to go deeper into hock, stint on necessary repairs or sell properties to fund the payout.
To get a handle on who might be next, compare dividend checks to adjusted funds from operations (AFFO), a measure of real estate's cash-generating ability.
At 28 times the AFFO the company is likely to earn this year, the stock has the highest multiple of all REITs followed by Green Street.
Over five years Simon Property Group, the largest mall REIT, has booked a respectable 7.5% average increase in earnings--in REIT parlance called "adjusted funds from operations, " or AFFO.
One of the best buys among mall REIT stocks is Taubman Centers, which Green Street expects will get a 12.9% boost in AFFO this year, or 1.7 points better than its five-year average.
With those higher dividend yields, single-tenant retail REITs also have a higher median 2013 estimated adjusted funds from operations (AFFO) payout ratio, at 83.5 percent, compared to 70.3 percent for all equity REITs.
Over five years Simon Property Group (nyse: SPG - news - people ), the largest mall REIT, has booked a respectable 7.5% average increase in earnings--in REIT parlance called "adjusted funds from operations, " or AFFO.
One of the best buys among mall REIT stocks is Taubman Centers, (nyse: TCO-G - news - people ) which Green Street expects will get a 12.9% boost in AFFO this year, or 1.7 points better than its five-year average.
ProLogis has bested the others in the appreciation of its properties' worth, called net asset value, and in growth of earnings, whose REIT version is known as adjusted funds from operations (AFFO): net income plus depreciation, minus one-time items and maintenance outlays (see table).
Although we know the 10 year treasury yield is artificially low right now, we still feel like REITs are not overvalued given the higher quality of REIT portfolios today (which would warrant lower relative cap rates), and given the lower dividend payout ratios (currently 74 percent of AFFO versus historical average of 82 percent).
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