REITs sector Adam Watson, Brian Yang, Tianlai Zhao, Binzhao Zou
Agenda Overview Business Analysis Financial Analysis Economic Analysis Valuation Recommendation
Overview S&P 500 Sector Real Estate 2.8% of S&P 500 Real Estate 0% of SIM
Overview Real estate sector Office REITs Industrial REITs Retail REITs Lodging REITs Residential REITs Timberland REITs Health Care REITs Self-storage REITs Infrastructure REITs Data Center Diversified REITs Specialty REITs Real estate sector Industry Equity Real Estate Investment Trust--- 1.02T Real Estate Management & Development--- 67.26 B
Overview Top 10 Players Simon Property Group Public Storage Prologis General Growth Properties Welltower Inc Ventas AvalonBay Communities Equity Residential Boston Properties Vornado Realty Trust
YTD/QTD YTD QTD
Business Analysis
Business Analysis: Five forces Threat of new Entrants Low Complex regulations and other obligations High capital expenditure required Bargaining power of buyers Medium Influenced by business environment Concern about unknown future Bargaining power of supplier High Recovery of macroeconomic Pricing has rising for supplier Threat of substitute product Low switching cost for investing purpose Online retailer influence Threat of rivalry Intensive competition among reits Have to compete geographically and internationally
Business Cycle
External Factors Interest rate: changes in interest rates can greatly influence a person's ability to purchase a residential property. The economy: overall health of the economy can influence the value of real estate market. Usually measured by economic indicators such as GDP, employment data Government policies/ subsidies: Tax credits, deductions and subsidies are some of the ways the government can temporarily boost demand for real estate for as long as they are in place. Demographics: age, race, gender and median income of a particular area will influence the real estate market.
Financial Analysis
Sales and Earnings
FFO
REIT FFO by Type
Margins Top table: Reits Bottom table: S&P500 (years 2009-2018)
Economic Analysis
Economic Indicators Indicator Correlation Coeff. Significance Level S&P500 +0.702 100% GDP 0.340 99.2% Consumer Confidence +0.308 Fed Funds Rate -0.157 87.7% US Unemployment -0.079 71.4% US Wage and Salary +0.313 98.5%
S&P 500
GDP
Consumer Confidence
Fed. Funds Rate
US Unemployment
US Wage & Salary
Trump Favorability
Valuation
Real Estate Industry in Absolute Basis Valuation Real Estate Industry in Absolute Basis Absolute Basis High Low Median Current P/E 74.6959 15.4117 38.9579 42.7666 P/B 2.9224 0.7493 1.9726 2.3532 P/S 7.1388 1.5753 5.5562 6.2373 P/EBITDA 16.2914 3.7708 13.1852 14.4116
Valuation Real Estate Industry relative to SP500 High Low Median Current P/E 4.9045 1.1869 2.4254 2.0298 P/B 1.4714 0.5978 1.1174 1.1049 P/S 4.8687 2.3121 3.7969 3.3513 P/EBITDA 2.0937 0.8023 1.5282 1.2794
Valuation Consensus Estimate Absolute Basis Current F12 Est Next Year Est F2 Years Est P/E 42.7666 39.53 35.62 32.53 P/B 2.3532 2.29 3.14 3.36 P/S 6.2373 6.44 6.12 5.45 P/EBITDA 14.4116 13.04 12.22 11.36
Valuation
Recommendation
Recommendation Recommendation Buy Data center Infrastructure Retail - High End Hold Industrials Office Avoid Health Care Retail - Low End
Questions?