American Realty Capital
) quickly rose from relative anonymity to being one of the
largest publicly traded REITs, becoming a huge player in the
double and triple-net lease space. Much of the growth came from
the parent company buying up its own public non-traded REIT
offerings over the course of the last several years. Investors in
the non-traded REITs were handsomely rewarded as many of the
offerings reached full cycle liquidity within one year of the
offering closing to new investors at premiums upwards of 20%. The
acquisitions didn't stop with ARCP offerings. ARCP swallowed up
rival Cole in a deal that helped catapult ARCP and CEO Nick
Schorsch into the spotlight. After the Cole merger ARCP owned
nearly 3,710 double and triple-net lease assets across 48 states.
With its triple-net lease offerings tabled for the time being,
ARCPs strategy shifted to incorporate multi-tenant shopping
centers that are anchored by investment grade tenants. It's this
multi-tenant retail portfolio that ARCP is now planning to
spin-off into another publicly traded entity, ARCcenters under
the proposed ticker ARCM. The spin-off is expected to
increase run rate AFFO for ARCP by $1.20 per share on a combined
The technical picture for ARCP is rather encouraging as well.
Since the start of the year the stock has been in an uptrend,
peaking in mid-January then pulling back to the 25x5 SMA. The
last run up to $15 has presented us with a similar technical
situation to what we saw two months ago. ARCP is within ear shot
of moving average support and has stochastics just about neutral
with a slight overbought bias. A day or two of strength in this
name could provide a buy signal and propel the stock higher above
ARCP currently carries a Zacks Rank #3 (Hold) but if analysts
revise their earnings estimates to account for the spin off, ARCP
could quickly change rank in the coming weeks. In addition to
earnings estimate revision, ARCP could potentially increase its
dividend from the $1.00 it pays now giving a yield of 6.9%.
Compare this yield to Zacks Rank #3 (Hold)
Realty Income Corp
). Realty Income pays 5.17% and has a portfolio that consists
mostly of single tenant triple net leases similar to what the new
incarnation of ARCP will be post spin off. Realty Income's
technical picture is similar to the story we see with ARCP. Keep
in mind that these REITs have sensitivity to the 10 Yr Treasury
and rising rates are seen as a risk to prices. Still, Realty
Income has pulled back off its high, reached support at its 25x5
SMA and could be heading higher from here.
If you're intrigued by ARCP's spin off ARCM, you have a few
publicly traded options to look at.
Simon Property Group
) has a Zacks Rank #2 (Buy) and a yield of 3.1%. Simon's
portfolio consists mostly of income-producing properties such as
regional malls and community shopping centers. Earnings are
expected to grow from $9.57 a share this year to $10.34 next
year. Eleven analysts have revised earnings to the upside for the
current year in the last 60 days.
SPG stock is less volatile that ARCP. So far this year the
stock has traded between $150 and $165. Consistent with the other
REITs we looked at in the space, SPG trades above its 25x5 SMA,
indicating a solid uptrend.
AMER REALTY CAP (ARCP): Free Stock Analysis
REALTY INCOME (O): Free Stock Analysis Report
SIMON PROPERTY (SPG): Free Stock Analysis
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