Yesterday Sabana released their first quarter 2014 results, and it was a poor result.
They were very hard hit when their master-tenanted properties lost much of their individual tenant such that the main tenant doesn’t renew with Sabana. Now they have to take over the leasing.
When the news came out, together with last years correction, many were presented with this ‘value opportunity’ for a high yield play, that is likely to be ‘misunderstood’
I’m just afraid that the mom and pop investor are usually taken in by the exceptional prevailing yield of 8%, that they may think a lot of things will work itself out.
The market sometimes sell down a REIT because the general investors do not have the same time horizon as you, and thus misunderstood.
This may present a good opportunity.
But at other times, the important fundamental determinant may have shown deterioration. In this case it is the ability of the manager and the power of this manager.
No doubt, not all industrial reits result have been fully released, but one manager in the same category as Sabana, that is Cambridge release their results yesterday and it was ok.
Incidentally, Sabana’s manager was Cambridge old manager, who made quite a fair bit of missteps in the GFC.
Focusing on the industrial REITs on my Dividend Stock Tracker, you will realize the prevailing yield is not as attractive versus peers anymore. The net debt to asset is also amongst the highest (note Aims Amp have the highest since they have some AEI ongoing, it is rather close to 37% instead of 25%)
Evaluation of REIT by yield alone is dangerous. At the end of the day, it is a group of finance folks deploying money and leveraging to buy and rent properties, sometimes selling. The manager plays an important role here.