Regional Mall REIT - Simon Property Group

89 Pages·2008·4.78 MB·English

Pick Up Stocks
Annual Real Estate Securities Outlook
January 2008
DavidM.Fick,CPA,[email protected] 443-224-1308
RodPetrik,[email protected] 443-224-1306
JohnW.Guinee,[email protected] 443-224-1307
JerryL.Doctrow,[email protected] 443-224-1309
NathanIsbee,[email protected] 443-224-1346
Stifel REIT Team
Senior Real Estate Securities Analysts
David M. Fick, CPA REITs, Retail, Industrial, Commercial Finance
Jerry L. Doctrow Health Care
John W. Guinee Office
Rod Petrik Multifamily, Lodging
The Stifel Nicolaus Real Estate Securities Team
Nathan Isbee Analyst, Retail
Josh Barber Associate Analyst, Industrial, Commercial Finance
Dan Bernstein Associate Analyst, Health Care Real Estate
Gabe Buerkle, CFA Associate Analyst, Lodging
Simon Yarmak Associate Analyst, Multifamily
Erin Aslakson Associate Analyst, Office
Jennifer Hummert Associate Analyst, NNN, REITs
Deb Johnston Real Estate Group Administrator
Pick Up Stocks
2008 Annual Real Estate Securities Outlook
Baltimore 1/4 Boston 1/8 Chicago 1/9
New York 1/7 Philadelphia 1/10
All relevant disclosures and certifications appear on pages 88-89 of this report.
REITs Suffer Debt Market Crisis in 2007
CumulativeAnnualizedREIT ReturnsThrough December31,2007
35%
30%
25%
20%
15%
10%
n
etur 5%
R
al 0%
ot
T -5%
-10%
-15%
-20%
-25%
-30%
1Year 3Year 5Year 7Year
Office -20.6% 10.5% 19.8% 15.9%
Industrial -5.5% 10.8% 18.3% 16.0%
RegionalMalls -14.4% 10.7% 24.0% 25.5%
ShoppingCenters -14.0% 8.8% 20.7% 21.5%
Apartment -25.8% 5.5% 15.1% 11.1%
Hotel -24.8% 1.4% 11.9% 7.3%
Healthcare 3.6% 15.7% 25.8% 29.8%
Diversified -12.5% 12.1% 20.9% 17.7%
EquityREITTotal -16.8% 8.2% 17.9% 18.3%
Source: FactSetResearchSystemsInc.,StifelNicolausResearch
2007 – No Eight-Peat for REITs
• Down 16.8% in ’07 vs. up 35.9% in ’06, 12.1% in ’05; 17.9% 5 yr
• The entire story for REITs in 2007 was debt market liquidity implosion
• High volatility accelerated
• M&A ended
• Sector differentiation in 2007
– Stock picking was important – every major sector had outperformers
• 15 REITs had total returns above 0%
• 57 REITs had total returns below negative 20%
– Coastal, growth theme
– Big Caps underperformed – 30 large caps in RMP were down 18.0% vs
RMS down 16.8%.
2007 – REIT Reversal
• Unprecedented outflows from mutual funds and non-dedicated shops exited
• Average dividend yield increased from 3.7% to 4.9%
– 10-year went from 4.7% (1/1) to 5.3% (6/13) to 4.04% (12/31)
– Yield spread re-established, ended at 87 (192 bps reversal)
• Forward FFO multiples decreased from 17.9x to 13.3x
• Forward FAD multiples decreased from 21.9x to 16.2x
• Private market support disappeared — primary factor as REITs traded down
with liquidity crisis
• Dividend increasers outperformed again
Equity REIT M&A Activity ’04 – ’07
($ millions)
Equity Total
Announced Ticker Type Target Acquiror Value* Value*
1/22/2004 GL Privatization GreatLakesREIT AslanRealtyPartners,LLC 241 241
5/3/2004 KTR Merger KeystonePropertyTrust Prologis 950 1,600
6/21/2004 CPG Merger ChelseaPropertyGroup SimonPropertyGroup 3,500 4,800
8/20/2004 RSE Merger TheRouseCompany GeneralGrowthProperties,Inc. 7,200 12,600
8/24/2004 PLRE Merger PriceLegacyCorporation KimcoRealtyCorporation 696 1,200
10/4/2004 SMT Merger SummitPropertyGroup CamdenPropertyTrust 1,085 1,900
10/25/2004 TCR Merger CornerstoneRealtyIncomeTrust ColonialPropertiesTrust 650 1,500
11/23/2004 PGE Privatization PrimeGroupRealtyTrust TheLightstoneGroup 294 890
12/20/2004 KRT Privatization KramontRealtyTrust CentroPropertiesLimited 610 1,275
6/6/2005 CDX Merger CatellusDevelopmentCorporation ProLogis 3,900 4,900
6/7/2005 GBP Privatization GablesResidentialTrust INGClarion 1,800 3,000
6/17/2005 CRO Privatization CRTProperties,Inc. DRAAdvisorsLLC 937 1,700
9/2/2005 CARS Privatization CapitalAutomotiveREIT DRAAdvisorsLLC 1,700 3,400
10/3/2005 PP Merger PrentissPropertiesTrust BrandywineRealtyTrust 1,900 3,300
10/24/2005 AML Privatization AMLIResidentialProperties MorganStanleyRealEstateAdvisors 969 2,100
12/7/2005 CNT Privatization CenterPointPropertiesTrust CalEastIndustrialInvestors 2,500 3,400
12/19/2005 TCT Privatization TownAndCountry OnexRealEstate 860 1,300
12/21/2005 ARI Privatization ArdenRealty GERealEstate 3,200 4,800
2/21/2006 MHX Privatization MeristarHospitality Blackstone 1,300 2,600
2/23/2006 BED Privatization BedfordProperties LBARealtyLLC 450 900
3/6/2006 CRE Privatization CarrAmerica Blackstone 3,000 5,600
3/7/2006 SHU Merger ShurgardStorage PublicStorage,Inc. 2,600 5,000
5/1/2005 CRP Merger CNLRetirementProperties HealthcarePropertyTrust(HCP) 3,600 5,300
5/22/2006 BOY Privatization BoykinLodging BraveheartHoldingsLP 274 416
5/22/2006 JAMS Privatization JamesonInns JERoberts&Co. 181 371
6/5/2006 TRZ Combination Trizec Brookfield/Blackstone 6,574 8,900
7/9/2006 HTG Privatization HeritagePropertyInvestmentTrust Centro/Watts 1,773 3,200
7/10/2006 PNP Merger PanPacificRetailProperties KimcoRealtyCorporation 2,900 4,000
7/23/2006 NKT Merger NewkirkRealtyTrust LexingtonCorporatePropertiesTrust 1,081 4,600
8/3/2006 RA Merger RecksonAssociatesRealtyCorp. SLGreenRealtyCorp. 4,000 6,000
8/7/2006 SIZ Merger SizelerProperty MorguardCorp.(MRC) 324 409
8/21/2006 GLB Privatization GlenboroughRealtyTrust MorganStanleyRealEstateAdvisors 926 1,900
8/31/2006 BNP Privatization BNPResidentialPropertiesInc. Babcock&Brown 316 766
9/13/2006 WRS Merger WindroseMedicalProperties HealthCareREIT 451 877
9/18/2006 TRA Merger TravelCentersofAmerica HospitalityPropertyTrust(HPT) 950 1,900
9/22/2006 CPV Privatization CentraCorePropertiesTrust GEOGroup 356 396
10/23/2006 GPT Merger GovernmentPropertiesTrust RecordRealtyTrust 223 484
10/30/2006 TSY Privatization TrustStreetProperties GECapitalSolutions 1,145 3,000
11/6/2006 COE Privatization ColumbiaEquityTrust JPMorganAssetManagement 253 502
11/19/2006 EOP Privatization EquityOfficeProperties Blackstone 23,000 39,000
12/21/2006 NHR Merger NationalHealthcareRealty(NHR) NationalHealthcareCorp.(NHC) 225 253
1/19/2007 CHP Privatization CNLHotels&Resorts MorganStanleyRealEstateAdvisors 3,200 6,600
2/16/2007 MLS Merger TheMillsCorporation SimonProperties&FarallonCapital 1,640 7,900
2/21/2007 WXH Privatization WinstonHotels InlandAmericanRealEstate 430 697
2/27/2007 NXL Privatization NewPlanExel CentroPropertiesLimited 3,400 6,200
3/13/2007 SFC Privatization SpiritFinance MacquarieBank 1,640 3,200
4/16/2007 KPA Privatization InnkeepersUSA ApolloInvestmentCorp.(AINV) 800 1,500
4/24/2007 HIH Privatization HighlandHospitality JERPartners 1,210 2,000
4/30/2007 EHP Privatization EagleHospitality ApolloInvestmentCorp.(AINV) 319 668
5/22/2007 CEI Privatization CrescentRealEstate MorganStanleyRealEstateAdvisors 2,885 6,500
5/29/2007 ASN Privatization Archstone-Smith TishmanSpeyer&LehmanBrothers 15,253 22,000
6/21/2007 ENN Privatization EquityInns GoldmanSachsWhitehallFund 1,287 2,200
6/25/2007 APRO Privatization AmericaFirstApartmentInvestors SentinelRealEstate 281 532
7/3/2007 HLT Privatization HiltonHotels Blackstone 20,546 26,000
7/25/2007 RPB Merger RepublicPropertyTrust LibertyPropertyTrust(LRY) 485 900
11/5/2007 AFR Merger AmericanFinancialRealty GramercyCapital(GKK) 1,100 3,400
2007Total 54,476 90,297
*InMillions 2004-2007Total 143,370 240,577
Source: NAREIT,StifelNicolausResearch
Fund Flows Still Track Performance
REIT Mutual FundsFlowsvs.SectorPerformance
$2800 1400
MonthlyNetREITFundsFlows RMSIndex 1300
$2400
Asof12/31/2007 1200
RMS:975.61
ns)$2000 1100
Millio 1000
$1600 900
$
(
s 800
d
n$1200
u 700
F
utual $800 600RM
M 500S
T R
REI $400 400EIT
d 300In
e d
cat $ 200ex
di
e 100
D$(400)
to 0
s
w
o$(800) -100
Fl
d -200
Fun$(1200) -300
-400
$(1600)
-500
$(2000) -600
Annual 1996:$2,737 1997:$4,763 1998:$(493) 1999:$(867) 2000:$319 2001:$24 2002:$3,410 2003:$4,613 2004:$6,815 2005:$2,064 2006:$6,479 2007:($5,889)
Inflows:
6 7 7 7 7 8 8 8 8 9 9 9 9 0 0 0 0 1 1 1 1 2 2 2 2 3 3 3 3 4 4 4 4 5 5 5 5 6 6 6 6 7 7 7 7
9 9 9 9 9 9 9 9 9 9 9 9 9 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Dec- Mar- Jun- Sep- Dec- Mar- Jun- Sep- Dec- Mar- Jun- Sep- Dec- Mar- Jun- Sep- Dec- Mar- Jun- Sep- Dec- Mar- Jun- Sep- Dec- Mar- Jun- Sep- Dec- Mar- Jun- Sep- Dec- Mar- Jun- Sep- Dec- Mar- Jun- Sep- Dec- Mar- Jun- Sep- Dec-
Source: StifelNicolaus,AMGData
Japanese Funds Flows Reverse
U.S./Global REIT Mutual FundsTrading in Japan
FundsUnderManagementasofNovember30,2007
(basedon109.979Yen/USDexchangerate)
30
25
20
s
n
o
Billi 15
$
S
U FundBalances:
(billions)
12/31/03 $0.233
10
12/31/04 $4.491
12/31/05 $9.563
12/31/06 $20.152
11/30/07 $18.143
5
0
Sep-0O3ct-0N3ov-D0e3c-0J3an-F0e4b-0M4ar-0A4pr-0M4ay-0J4un-0J4ul-A04ug-S0e4p-0O4ct-0N4ov-D0e4c-0J4an-F0e5b-0M5ar-0A5pr-0M5ay-0J5un-0J5ul-A05ug-S0e5p-0O5ct-0N5ov-D0e5c-0J5an-F0e6b-0M6ar-0A6pr-0M6ay-0J6un-0J6ul-A06ug-S0e6p-0O6ct-0N6ov-D0e6c-0J6an-F0e7b-0M7ar-0A7pr-0M7ay-0J7un-0J7ul-A07ug-S0e7p-0O7ct-07
Source: HeitmanInternationalLLC,StifelNicolaus
REIT Dividend Yield Spread Reverts to Positive
REITDividendYieldvs.10-YearTreasuryYield
vs.CorporateBBB7-10Year
ModernREITEra1991-2007
10.0%
Asof12/31/2007:
REITDiv.Yield4.91%
10-Yr.Treas.Yield4.04%
CorporateBBBYield6.11%
10-Yr.Treas.SpreadtoREITYield0.87%
9.0%
8.0%
7.0%
6.0%
5.0%
4.0%
3.0%
12/91 12/92 12/93 12/94 12/95 12/96 12/97 12/98 12/99 12/00 12/01 12/02 12/03 12/04 12/05 12/06 12/07
Source:Bloomberg,ThomsonOne REITDividendYield 10-YearTreasuryYield SSBBBB