VALUE: After Hours (S07 E18): REITs and Real Estate Opportunities

During their recent episode, Taylor, Carlisle, and Tim Travis discussed REITs and Real Estate Opportunities. Here’s an excerpt from the episode:

Tim: Yeah, I think there’s pockets of opportunity. So, one area that I like is I like real estate investment trusts right here. People look at those businesses, and they’re not the sexiest necessarily, but look, they have lease escalations where you’re getting 2%, 3% increases in revenues each year. So, depending on what area of the market you’re in– Something like Avichi Properties, where you got 5.6%, 5.7% dividend yield and 100% occupancy, 100% collections. They’re growing at a reasonable rate. High single digits, low double digits type returns moving forward. And these things, they’ve taken dips over time.

Crown Castle. Another one. Wireless towers that they got hit really hard. They did some restructuring, and that’s one where we were able to take advantage when it got cheap. Both those I think are closer to fairly valued now.

One stock that I think is criminally undervalued right now is Alexandria Realty. So, that is kind of life science technology REIT. So, they house a lot of like the Modernas, a lot of these really high-tech, biotech type companies. They have the real estate for the labs and the office facilities. These are not work from home businesses. I’m sure obviously they can do some stuff, but it’s not something you want in your garage refrigerator necessarily.

Jake: [laughs]

Tim: I actually say that from my experience, because my dad was a biochemist. He’d have these things in the garage refrigerator and was like, “Don’t touch. Don’t drink.”

Tobias: [laughs]

Tim: So, I don’t suggest that. You got RFK Jr. You have a new administration that looks at the vaccine regimen and the Wuhan lab. They look at it a lot differently than the past administration did. And so, there’s a lot of pessimism in the space. Biotech stocks as a whole are beaten up. And so, the market’s projecting that, “Look, there’s too much supply. They’re not going to be able to fill all their buildings.”

And so, the stock’s gotten really cheap. So, this is a stock that used to trade at 16 times cash flow to up to 36 times cash flow. The stock was over 200 just a couple years ago for a couple years in a row. It hasn’t been this cheap in, I want to say, over a decade, something like that. And right now, it’s trading at about a little over nine times cash flows. It has a dividend yield of 7.8%. The dividend is really well covered. It’s got one of the best coverage ratios in the industry, an investment grade balance sheet. They’re focused on clusters.

So, around MIT, around San Diego. The top scientists, they tend to gravitate towards the Bay Area, these certain areas. And so, it’s a clustered approach. It’s very different than traditional office space. And so, that’s one I just wrote up a research report on it for Seeking Alpha. I haven’t done that in a while, but I’ve been adding a lot to it. Definitely down on it. It’s been one of the few big losing positions year to date, but it’s one that I like quite a bit. I think it could double and you get 7.8% dividend while you’re waiting.

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