The “valuation gap” is the difference between a seller’s
asking price and the market value of a company.
In REIT terms, investors are continuing to seek out
high-quality real estate as evidenced by the valuations of many dividend
stalwarts such as Tanger Factory Outlets (SKT), Simon Property Group (SPG), and
Kimco Realty (KIM).
In my monthly newsletter (being published November 1st) and
within my Intelligent REIT Lab, there are many HOLDs and BUYs, but just a
handful of STRONG BUYs.
Not all REITs are the same, and we are now witnessing a
number of sectors being beaten down by macro-economic forces. As a result,
these under-performing sectors have seen share prices decreasing, further
widening the gap between lower REIT market values and higher net asset values.
This “valuation gap” has prompted speculation among
investors over the prospect for increased REIT mergers or buyouts by big
private equity players. As you know, from time to time, I will point to REIT
M&A when I see cheap REITs, but I always caution investors not to confuse
real catalysts with fantasy football.
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