Duke Realty Corp. (DRE) and CubeSmart (CUBE) may offer investors opportunistic value plays with dividend yield. These REITs have improved their exposure to to industrial property for DRE, and balance sheet for CUBE, the self-storage leader, and they both are top picks for Paul E. Adornato, Senior Analyst at BMO Capital Markets.
“We like Duke because they have increased their exposure to industrial property, which has historically been the bread and butter focus for Duke. Over time, they had amassed a significant suburban office portfolio, but just in the last year they sold that portfolio to Blackstone and redeployed the proceeds into industrial in a very efficiently executed series of transactions. I think that the market is still digesting the financial impact of this, and therefore we see an opportunity for investment at this time,” Adornato said.
Regarding CUBE, Adornato says the REIT is a leader in its niche and may realize more upside that its peers, “because it has more vacancy to fill, and therefore, more potential to increase NOI within their existing portfolio,” Adornato said. “Also, they have yet to fully realize the benefit of substantial balance sheet improvement. They recently obtained investment-grade credit ratings and have tapped the unsecured debt market for $250 million in June of this year.”
Regarding REITs as a whole, Adonato says there is little new construction in the real estate space, which benefits REITs as whole. He also says they have good access to capital.
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