The All-Star REITs

London is set to host the 2012 Summer Olympics in a few days and the U.S. men’s basketball team should produce plenty of excitement.
The all-star cast this year includes Carmelo Anthony, Kobe Bryant, Kevin Durant, LeBron James and Chris Paul, among others.
Veteran U.S.A. coach Mike Kryzewski has assembled an all-star cast that promises to be something special this year. As Coach suggests, “I think it has the potential to be special if we learn to use our versatility. It’s a more versatile team than 2008. Now does that translate into being better?”This year’s all-star lineup can be summed up the leadership described by Coach K: A leader has to be positive about all things that happen to his team. Look at nothing in the past as failure.
In the July 18 edition of Bloomberg Businessweek, Diane Brady wrote about Coach K’s summer Olympic expectations, “If you don’t learn anything from the outstanding players in your game, then something’s wrong. We can’t assume we’ll win again: 1992 was the Dream Team, 2008 was the Redeem Team. There’s no theme this time around. I just want them to be called the 2012 Olympic champions.”
Certainly investors can also learn from failures of the past while also focusing on the potential for future loss. Accordingly, great basketball players and great investors are distinguished at least as much for their ability to control risk (defense) as they are for generating returns (offense). The mark of an all-star player (or investor) is to intelligently bear risk for profit (balance defense and offense) and doing that well is what separates the best from the rest.
The All Star REITs
Real Estate Investment Trusts (REITs) offer strong long-term total returns. According to NAREIT, during the period from January 1978 through December 2010, equity REIT performance exceeded both the broad equity market and other forms of real estate investment by more than one percentage point per year, producing an average annual return of nearly 12.3 percent. As such, a $100 million investment in equity REITs at the beginning of that time period would have been worth more than $5,500 million by the end.
Accordingly, REITs provide excellent long-term performance and strong diversification attributes that make for a natural component of a well-balanced, efficiently performing portfolio. Adding REITs to the typical investment portfolio can have a dramatic impact on its long-term stability and returns.
Some of the top performing REITs have developed remarkable consistency in both managing risk and generating sound returns. This group of all-star REITs have been able to build their strategies (for offense and defense) on vivid forms of differentiation over time through constant change.
By focusing on sharper differentiation strategies, these all-star REITs have been able to build greater competitive advantages that in turn produce the game changing products of consistency and durability.
My all-star line-up of REITs include Realty Income (O), National Retail Properties (NNN), Regency Centers (REG), Weingarten Realty (WRI), W.P. Carey & Co. (WPC)*, Tanger Factory Outlets (SKT), Taubman Centers (TCO), Ventas (VTR), Omega Healthcare (OHI), Washington REIT (WRE), Extra Space Storage (EXR), and Kimco Realty (KIM)
The up and coming REITs that are likely to join my all-star list soon include American Campus Community (ACC), Federal Realty (FRT), CubeSmart (CUBE), Stag Industrial (STAG), American Realty Capital Trust (ARCT), Healthcare Trust of America (HTA), Monmouth REIT (MNR) and Retail Opportunity Investment (ROIC).
As Ben Graham wrote (in The Intelligent Investor), “the defensive investor must confine himself to the shares of important companies with a long record of profitable operations and in strong financial condition.” Like professional athletes, successful investors must also manage to acquire that necessary “trace of wisdom” that Ben Graham calls for and by doing that well, you are likely to be an all star performer.
(*) W. P. Carey & Company is growing closer to merging its Corporate Property Associates 15 Inc.(CPA®: 15) non-traded REIT into W. P. Carey & Co., LLC . Upon merging these two entities, the merged company will become a publicly-listed REIT. (credit Brad Thomas, Forbes)
Source: NAREIT and SNL Financial


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