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PROCEED WITH CAUTION - Evan Hennessy · Most REITs lost their cost of capital advantage . 8...
Transcript of PROCEED WITH CAUTION - Evan Hennessy · Most REITs lost their cost of capital advantage . 8...
January 2016
PROCEED WITH CAUTION
2
Who is Stifel?
Stifel Research:*
– Largest U.S. equity research platform
– 136 Senior analysts across 12 industry verticals
– 1,827 companies under coverage
– We are ranked 3rd globally in small-cap coverage and 13th overall in global coverage
Stifel is a market maker in roughly 3,700 U.S. domestic equities
Source: Stifel
*Includes KBW & UK
3
Stifel does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should
consider this report as only a single factor in making their investment decision.
All relevant disclosures and certifications appear on pages 133-135 of this report.
Analysts
John W. Guinee Office, Industrial
Matthew S. Heinz, CFA Data Centers & Towers
Nathan Isbee Retail
Rod Petrik Multifamily, Lodging
Chad Vanacore Healthcare
Simon Yarmak, CFA Triple-Nets, Lodging
Associates
Erin Aslakson Office, Industrial
Seth Canetto Healthcare
David Corak, CFA Multifamily
James Holmes Data Centers & Towers
Jennifer Hummert Retail
Kyle McGrady Office, Industrial
Elizabeth Moran Healthcare
Joseph van Bemmelen Triple-Nets, Lodging
Pricing as of December 30, 2015 unless otherwise noted.
Stifel REIT Team
4
REITs Up Modestly In 2015
Source: FactSet Research Systems, Stifel
5
2015 Relative Performance
Source: SNL Financial
1.5%
1.8%
2.0%
2.3%
2.5%
2.8%
-15.0%
-10.0%
-5.0%
0.0%
5.0%
10.0%
15.0%1
0-Y
ear Tre
asury Y
ield
Pe
rfo
rman
ce
RMZ 10-Year Treasury Yield
6
Storage Led The Way In 2015
Source: FactSet Research Systems, NAREIT, Stifel
7
2015 In Summary: Is It Over Yet?
10-Year Treasury was range bound 2.20% +/- 30 bps
Modest economic growth (GDP +2.1%)
REITs still modestly outperformed most major indices
Sector performance divergence (storage +42.4% vs. lodging -22.8%)
Quality largely outperformed
M&A occurred with minimal ripple effect
Most REITs lost their cost of capital advantage
8
Stifel’s 2015 Best Ideas
Source: FactSet Research Systems
Best Ideas from 2015 Stifel Rollout, January 2015
*QTS was not in the 2015 Rollout
-30.0%
-20.0%
-10.0%
0.0%
10.0%
20.0%
30.0%
40.0%
2015 Stifel Best Ideas Total Returns
Data Centers QTS* 38.1%
Industrial TRNO 14.3%
Triple-Net STOR 13.2%
Shopping Center EQY 11.3%
Industrial DRE 9.8%
Multi-Family CPT 8.8%
Malls GGP 0.0%
Office SLG -2.1%
Office VNO -2.7%
Healthcare NHI -7.0%
Lodging CLDT -24.8%
Healthcare SBRA -27.7%
Weighted Avg. Weighted Avg. 1.8%
RMS REIT Index RMS REIT Index3.4%
Alpha -1.6%
Sector StockTotal
Return
9
M&A Activity – Mostly Public To Private
Source: SNL Financial, Stifel estimates
Updated through 12/30/15
Buyer Seller
Blackstone Group Excel Trust Inc. (EXL)
Brookfield Asset Management Associated Estates Realty Corp. (AEC)
Lone Star Investment Advisors Home Properties Inc. (HME)
CyrusOne (CONE) Cervalis
QTS Realty (QTS) Carpathia
Digital Realty (DLR) Telx
Equinix (EQIX) Bit-isle
Chambers Street Properties (CSG) Gramercy Property Trust (GPT)
Blackstone Group Strategic Hotels & Resorts (BEE)
Blackstone Group BioMed Realty Trust (BMR)
Harrison Street Real Estate Capital Campus Crest Communities (CCG)
Weyerhauser Company (WY) Plum Creek Timber Co. (PCL)
American Homes 4 Rent (AMH) American Residential Properties Inc. (ARPI)
Equinix (EQIX) Telecity
2015 M&A Participants:
Announced:
0
5
10
15
20
25
$0
$10
$20
$30
$40
$50
$60
$70
$80
$90
$100
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Tran
sactio
ns
(in
billio
ns)
REIT M&A Activity 2004-2015
Equity Value Total Value
10
Interest Rates Important – But Not the Whole Story
Source: FactSet Research Systems, Stifel
-
100
200
300
400
500
600
700
800
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
Jan-8
6
Jan-8
7
Jan-8
8
Jan-8
9
Jan-9
0
Jan-9
1
Jan-9
2
Jan-9
3
Jan-9
4
Jan-9
5
Jan-9
6
Jan-9
7
Jan-9
8
Jan-9
9
Jan-0
0
Jan-0
1
Jan-0
2
Jan-0
3
Jan-0
4
Jan-0
5
Jan-0
6
Jan-0
7
Jan-0
8
Jan-0
9
Jan-1
0
Jan-1
1
Jan-1
2
Jan-1
3
Jan-1
4
Jan-1
5
Ind
ex P
rice
10-Year Treasury Yield vs NAREIT FTSE All Equity Price Index and S&P 500
10 Yr Treasury Yield NAREIT FTSE All Equity Index
9/30/198610-Yr. 6.92%NAREIT Index 220.86
9/30/198710-Yr. 9.59%NAREIT Index 219.59REITs -0.6%
10/31/199310-Yr. 5.33%NAREIT Index 241.95
11/30/199410-Yr. 7.96%NAREIT Index 204.46REITs -15.5%
10/31/199810-Yr. 4.53%NAREIT Index 264.26
5/31/200010-Yr. 6.44%NAREIT Index 243.55REITs -7.8%
6/30/200310-Yr. 3.28%NAREIT Index 298.98
6/30/200610-Yr. 5.14%NAREIT Index 511.55REITs +71.1%
4/30/13 10-Yr. 1.67% NAREIT Index 585.66
12/31/13 10-Yr. 3.04% NAREIT Index 510.33 REITS 12.9%
11
Outlook & Recommendations
2016
12
Wide gap between top and bottom tier stocks
Stocks with strong earnings growth and solid balance sheets continue
to outperform
NAV and FFO multiple discounts are not a catalyst
More sectors will experience a deceleration of fundamentals
NAVs being questioned by a lack of buyer depth for lower quality
assets
Interest rate volatility could remain an overhang
REIT sector performance driven by funds flow and the search for the
incremental investor
REIT sub-sectors and stock performance driven by REIT dedicated
investors
Proceed With Caution
13
Where are REITs and Real Estate?
10-year Treasury at 2.20%
with modest upward
incremental movements
Private market has
significant cost of capital
advantage
Cap rates have bottomed,
but with fewer bidders
Spread investing limited to
select REITs
Real estate is late in its cycle
for most property types
Generalist investors are the
incremental investor
10-year Treasury at 2.40%
with modest upward
incremental movement
Private market still has a cost
of capital advantage
Cap rates expected to
increase slightly
Spread investing still limited
Late in the real estate cycle
Generalist investors are still
the incremental investor
10-year Treasury at +/-
2.10% with range bound
forecast
Private Investors have cost
of capital advantage
Cap rates declining; all asset
quality levels
Spread investing perceived
as ‘difficult’
Risk-off trade globally; yield
matters
Generalists involved, but
reluctant
January 2016 January 2017 January 2015
Source: Stifel Research
14
Broader Markets – The REIT Fit?
Equity Markets
S&P 500
Bond Market
REIT Fit
All about growth
Risk on/off trade constantly changing
Multiple expansion likely finished
Projected earnings growth: 3% - 5%
Average dividend: 2%
Total annual return: 5% - 7%
Interest rate overhang
Sub-3% income
Principal risk
Investors want equity-like returns
Interest rate overhang
Top-down fundamentals
Source: Stifel estimates
15
Funds Flows Overview
Domestic REIT Dedicated Inflows
Domestic Institutional – REIT interest modest due to late real estate cycle and rising interest
rate perceptions
Global Institutional – flight to safety and principal protection-oriented
Global Individual – Japanese funds flows constant while flows from other nations remain
minor
Source: Morningstar, Stifel estimates
Assumes 50% of global funds flows invested domestically
($ in Billions) 2010 2011 2012 2013 2014
Thru Nov.
2015
Mutual Funds
Actively Managed $2.5 $3.2 $2.9 $3.4 $1.2 ($4.5)
Passive (Index) $0.7 $1.0 $2.2 $3.1 $3.2 $1.6
Exchange Traded Funds $1.5 $3.2 $8.1 $2.9 $6.4 $0.8
$4.6 $7.4 $13.2 $9.5 $10.8 ($2.1)
*Data above may not sum exactly due to rounding
16
Funds Flows – Absolute & Percentage
Source: Morningstar
1/29/10 12/31/10 12/30/11 12/31/12 12/31/13 12/31/14 11/30/15
RMZ Equity Market Capitalization ($ Billions) $212 $317 $363 $449 $531 $727 $757
Japan-Domiciled U.S. REIT AUM as a % of the RMZ Mkt. Cap 6.9% 8.4% 11.3% 10.3% 8.2% 7.3% 6.7%
U.S. MF/ETF AUM as a % of the RMZ Mkt. Cap 24.4% 23.2% 23.1% 25.0% 19.2% 21.4% 20.2%
Combined 31.3% 31.6% 34.4% 35.3% 27.4% 28.7% 26.9%
17
CMBS market is functioning properly and lenders are providing appropriate capital to markets
Debt Market Conditions
Source: Commercial Mortgage Alert, Stifel estimates
Spreads have widened
Source: FactSet
BBB Index Yield Spread to
10 Year Treasury Yield
1.5%
1.7%
1.9%
2.1%
2.3%
2.5%
CMBS Issuance ($B)
18
Investment Sales Market & Net Asset Value
Perceived late cycle risk
Fewer real bidders
Cap rates have bottomed
Debt costs on upward
trajectory
Still strength in core asset
sales
Public leads private market
valuations
Public REIT Private Investor
Leverage Level +/- 40% > 70%
Term 7 years (+/-) < 5 years
Debt Cost (weighted avg.)
3.4% < 4.0%
Equity Invested 60% < 30%
Initial Equity Return 6% – 8% 8% – 10%
Estimated Cost of
Capital (70% LTV, Private)
5.0% – 6.2% 4.8% – 5.4%
Private market has cost of
capital advantage:
Source: Stifel Research
19
Private Markets & Public REITs: Similar Attributes
Source: Stifel estimates
Capitalization Rates explicitly underwrite growth and value creation
REITs
Sub 5% - Expect NOI growth greater than inflation - Core - Coastal Multi-Family
- Meaningful barriers to entry - Global Pension Funds - Best Gateway City Office
- Sovereign Wealth Funds - Storage
- Best Malls
5%-6% - Expect Value Creation - Domestic Pension Funds - Other Multi-Family
- Rental rate increase likely - Other Gateway City Office
- Possible Barriers to Entry - Best Strip Centers
- Best NNN
- Best Industrial
6%-7% - Rents in place at market - Many Types of Investors - Private Pay Healthcare
- Few barriers to entry - Other Industrial
- Solid demand, sound fundamentals
Development in check
7%-8% - Primary component of return is levered NOI - Value-Add - Suburban Office
Average fundamentals - High Leverage - Gov't Reimbursed Healthcare
- Lower Quality NNN
Above 8% - Investment underwriting achieved - Opportunistic - B/C Malls
even with decrease in value - High Leverage
- Downside to income stream
- Principal or basis risk
Cap Rate Range Investment Attributes Private Investors
20
Multiple Levers For Growth & Value Creation
Internal Growth
− Positive leasing mark-to-market
− Annual/periodic rent bumps
− Occupancy gains
− Cost savings/operating margins
External Growth
− Accretive development/redevelopment
− Capital recycling that improves NAV
Cost of Capital Advantage
− Spread investing - Acquisitions
− Premiums to NAV
Leverage
− Never again
21
Sector Growth Drivers
Source: Stifel Research
SectorRental Rate
Growth
Annual/periodic
rent bumps
Operating Cost
Savings
Accretive
development/
redevelopment
Capital
recycling that
improves NAV
Spread
investing,
acquisitions
Premiums to
NAV
Multifamily C D C C C D C
Storage C D C C = D C
Lodging C D C D = D D
Gateway Office C C D C C C =Suburban Office D = D = C D D
Industrial C C D C C = =Malls C C = C D D D
Strips C C = C = = D
Data Centers C C = C D C D
Towers C C D D D D D
Healthcare = C D = C = D
Triple-net = C = D = C C
Internal Growth Cost of Capital AdvantageExternal Growth
22
Multifamily Storage Lodging Gateway Suburban Industrial Malls Strips Healthcare Triple-Net
Revenue 5.4% 6.6% 5.4% 7.0% 4.3% 4.1% 3.9% 3.3% 12.5% 3.0% 1.4%
SS NOI 6.0% 8.8% 11.6% 2.4% 3.3% 4.7% 4.4% 3.6% NA 3.5% 1.4%
Normalized FFO/sh 10.4% 11.1% 10.2% 4.9% 5.9% 1.6% 9.6% 5.7% 12.2% 8.9% 4.0%
FAD/sh 18.5% 12.2% 22.1% 11.2% 5.2% 7.6% 8.4% 13.9% 13.4% 8.9% 4.3%
Multifamily Storage Lodging Gateway Suburban Industrial Malls Strips Healthcare Triple-Net
Revenue 4.7% 6.0% 4.8% 4.0% 2.8% 2.5% 4.2% 3.1% 16.1% 3.0% 1.4%
SS NOI 5.0% 7.0% 7.1% 4.3% 2.5% 5.0% 4.6% 3.4% NA 3.0% 1.4%
Normalized FFO/sh 5.3% 12.9% 11.4% 5.2% 3.8% 6.6% 6.0% 5.0% 15.5% 6.9% 5.0%
FAD/sh 5.1% 13.0% 13.9% 8.9% 4.7% 4.7% 8.8% 5.6% 12.8% 8.1% 5.0%
Multifamily Storage Lodging Gateway Suburban Industrial Malls Strips Healthcare Triple-Net
Revenue 3.6% 5.1% 4.1% 4.4% 3.1% 5.9% 4.4% 3.2% 9.7% 3.0% 1.4%
SS NOI 3.8% 5.5% 4.2% 4.8% 3.4% 5.9% 4.6% 3.5% NA 2.5% 1.4%
Normalized FFO/sh 5.5% 8.2% 7.5% 7.6% 4.9% 6.9% 10.0% 6.6% 13.0% 4.3% 4.5%
FAD/sh 6.5% 8.0% 8.6% 12.7% 8.2% 10.5% 11.9% 7.4% 13.4% 5.5% 4.5%
Multifamily Storage Lodging Gateway Suburban Industrial Malls Strips Healthcare Triple-Net
NAV Premium/Discount 0.2% 31.8% (20.8%) 2.1% (11.2%) (7.3%) (12.2%) (3.6%) 2.9% (8.8%) 2.5%
2016E FAD Multiple 23.9x 25.1x 11.0x 29.5x 18.3x 21.8x 17.3x 16.9x 15.7x 13.7x 13.8x
Note - Revenue and NOI represent same-store estimates
Sources: Company data and Stifel estimates
Data
Centers &
Towers
Data
Centers &
Towers
Data
Centers &
Towers
Office Retail
Office Retail
Office Retail
Data
Centers &
Towers
Stifel NAV and Estimated 2016E FAD Multiples by Sector
Priced 12/30/15
2014-2015E Growth
Stifel Projected Growth by Sector
Stifel Projected Growth by Sector
2015E-2016E Growth
Stifel Projected Growth by Sector
2016E-2017E Growth
RetailOffice
Projected REIT Growth by Sector
23
Dividend Increase Deceleration Expected
Source: FactSet Research Systems, SNL Financial, Stifel estimates
2006 – 2015 Average growth: 2.7%
2010 – 2015 Average Growth: 10%
2016 – 2017 Estimated Average Growth: 7% - 9%
-43%-20%
-15%
-10%
-5%
0%
5%
10%
15%
2009 2010 2011 2012 2013 2014 2015 2016E 2017E
REITs Annual Dividend Increase / (Decrease)
24
Target Growth & Value Creation
Source: Stifel estimates
Green Light BXP KRC DRE TRNO FRT REG DOC HCN NNN O EQIX DLR PSA CUBE
SLG VNO DCT PLD HR HTA STOR EPR CONE QTS
LTC OHI
Yellow Light BDN CUZ FR EGP BRX KIM HST CLDT CTRE NHI ACC CTT
ESRT PKY KRG RPT
AHH DEI
Red Light LXP EQC DRH HT HCP MPW
WRE CLI SHO AHT SBRA SNR
FPO FSP LHO
Office Industrial Malls
REXR
SPG
GGP
HIW
PEI
SKT
MAC
EDR
OFC
VTR
GPT
PEBUDR
CPT
RSE
ESS
WRI
COR
OtherStrip Centers Apartments Data CentersTriple-NetLodging Healthcare
AVB
EQR
HPT
EQY FPI
PDM
LPT DFTVERCBL CDR PPS
25
2016 Performance Predictions & Assumptions
REIT Performance 0% - 5% − Earnings Growth 5% - 7%
− Dividend 4.0%
− Dividend Growth 7% - 9%
− Multiple Contraction Moderate
Stifel projects 2,100 S&P 500 or 5% – 7% total return
REITs slightly underperform the S&P 500
10-year Treasury at YE 2016 in the 2.2% – 2.4% range
Moderate economic growth – GDP growth of 2.6% in 2016
Significant interest rate increase may cause severe REIT correction
Source: Stifel estimates
26
2016 Sector Performance Predictions
Industrial
Gateway Office
Data Centers
“A” Malls
Shopping Centers
Multifamily
Storage
Triple-Net
Healthcare
Lodging
Suburban Office
“B” Malls
Overweight Equal-Weight Underweight
27
Catalysts – What Can Help REITs Out?
Positive
– Bear Market as REITs are more defensive
– More positive macroeconomic environment
– M&A could become a catalyst
– Reacceleration of fundamentals in key sectors
– Election cycle positive for REITs
– REITs will have their own Global Industry Classification System category (GICS)
– FIRPTA Reform
Negative
– Black Swan event
– Macro environment deteriorates
– Fundamentals decelerate faster than anticipated
– Increased regulatory oversight of lenders
– Interest rate shock
28
M&A Candidates by Sector
Office Equity Commonwealth (EQC)
Industrial Liberty Property Trust (LPT)
Apartment Post (PPS), Apartment Investment &
Management (AIV)
Hotel Host Hotels & Resorts (HST), Chesapeake
(CHSP), FelCor Lodging Trust (FCH)
Retail All Small-Cap Shopping Centers
Triple-Net
Four Corners Property Trust (FCPT),
Global Net Lease Inc. (GNL),
Spirit Realty Capital (SRC)
Healthcare Healthcare Trust of America (HTA)
Data Centers DuPont Fabros Technology (DFT),
CyrusOne (CONE)
Please note that we do not have any knowledge of any potential M&A activity or discussion.
Source: Stifel estimates
29
Stifel REIT Income List
*We can make no assurances that the REITs on this list will not change their dividend policies, reducing the dividend and/or paying a portion in stock.
For investors looking for income with lower risk, please contact the Stifel's Fixed Income Desk about investing in REIT preferred shares or REIT bonds.
Source: FactSet Research Systems, SNL, Stifel Stifel Investment Rating: B - Buy, H - Hold, S - Sell
Ticker Dividend
Yield (%)
Investment
Rating
Price
12/30/2015
Current
Dividend
Morgan Stanley Total Return REIT Index (RMS) RMS 3.9%
CBL & Associates Properties CBL 8.5% H $12.53 $1.06
Armada Hoffler Properties AHH 6.4% B $10.65 $0.68
EPR Properties EPR 6.2% H $58.80 $3.63
STORE Capital Corporation STOR 4.6% B $23.32 $1.08
Hospitality Properties Trust HPT 7.5% B $26.71 $2.00
Welltower, Inc. HCN 4.8% B $68.32 $3.30
LTC Properties LTC 5.0% H $43.62 $2.16
National Health Investors NHI 5.5% B $61.63 $3.40
Omega Healthcare Inv. OHI 6.4% B $35.25 $2.24
Ventas Inc. VTR 5.2% B $56.63 $2.92
Digital Realty Trust DLR 4.4% B $76.93 $3.40
Average Stifel REIT Income List Yield 5.9%
Stifel REIT Income List*
31
(25.0%)
(20.0%)
(15.0%)
(10.0%)
(5.0%)
0.0%
5.0%
10.0%
15.0%
SNL U.S. REIT Healthcare SNL U.S. REIT Equity S&P 500
YTD Index Price Performance(39.9%)
(32.2%)
(15.5%)
(12.2%)
(11.9%)
(9.8%)
(9.8%)
(9.7%)
(9.2%)
0.6%
1.0%
2.2%
3.5%
SNR
SBRA
MPW
HCP
NHI
VTR
OHI
HCN
CTRE
HTA
LTC
DOC
HRYTD Price
Performance
Interest rate panic (initial rise January 30th, jobs report February 6th)
NIC MAP data shows supply exceed absorption for first time this cycle (April 8th)
Beginning of S&P pullback (August)
3Q HCREIT earnings (October): managements indicate pull back in acquisitions,
clarify extent of seniors housing oversupply exposure
2015 – What Went Wrong?
Source: SNL Financial and FactSet
1
2
3
4
Increased cost of capital and reduced
growth expectations…
1 2
…Turned into a vicious cycle
for some (red light stocks)
For others, the story has not changed
much – but valuations have become more
attractive (yellow and green light stocks)
3 4
32
Headwinds from new seniors housing supply, higher cost of capital
paired with sticky cap rates, and uncertainty around the evolving health
system
Valuation metrics indicate HCREITs are undervalued relative to historical
on a P/FAD, implied yield, and discount to NAV basis
What’s driving Buy ratings?
– We believe MOBs will be resilient
– Access to capital at reasonable spreads to investment
– Low leverage
– High portfolio quality / diversification
– Well cushioned lease coverage
– Discounts to historical valuation
2016 Healthcare REITs Equal-Weight with Selective Picks
Source: Stifel Research
33 Risk (supply growth / healthcare demand / cap rate stability / reimbursement)
Medical Office
Demand driven development, virtually no spec
Higher healthcare utilization driving demand for space
No direct exposure to government reimbursement
Stable cap rates – 5.5% - 7.5%
Divergent Asset Class Fundamentals
Source: Company reports and Stifel estimates
>80% of NOI: DOC, HR, HTA
15% - 30% of NOI: HCN, HCP, VTR
Skilled Nursing / Post-Acute
Fragmented market ripe for consolidation
Risks related to evolving healthcare payment system
Overall stable supply
>50% of NOI: CTRE, LTC, OHI, SBRA
20% - 35% of NOI: HCN, HCP, NHI
Hospital
Hospitals have benefited from healthcare reform
via higher volumes and better payor mix
New patient criteria will put pressure on LTACHs
Signs of slowing volume growth and unfavorable
mix shift going into 2016
100% of NOI: MPW
5% - 20% of NOI: DOC, HCP, HR, HTA, SBRA, VTR
>50% of NOI: HCN, NHI, VTR
30% - 50% of NOI: HCP, LTC, SBRA
Seniors Housing
Expect 3%-4% SS NOI growth in 2016
Increasing risk of oversupply – adverse impact to
occupancy and rate growth could slow 2017 growth
Lease coverages thinner than we would like
Long term (7-10 year), demographics highly favorable
Gro
wth
(FA
D p
er
sha
re)
23.3% 19.4%
12.2% 10.7% 10.2%
8.3% 7.9% 7.6% 5.5% 5.3% 4.9%
3.3% 3.0%
DOC SNR HR CTRE LTC HCN OHI VTR NHI SBRA HTA MPW HCP
2016E FAD Growth
34
Valuation – Depressed vs Historical
Undervalued vs historical multiples and interest rates
– Price / 2016 FAD more than 1x below historical - we
believe the market is overestimating earnings growth
deceleration in 2016
– Implied yield spread to 10-year treasury is 50bps
wide of historical. Even after adjusting for 25-50bps
rate increase, still looks cheap
– HCREIT vs Equity REIT dividend yield spread 20bps
wide of historical
HCREITs trading at 3.5% median discount to NAV
…but all of this could reverse if interest rate fears and
fundamentals concerns prove overblown
(2.0%)
0.0%
2.0%
4.0%
6.0%
8.0%
BBB Spread 10yr Tr Spread
3.6% Historical
1.4% Historical Avg
10-year Avg Time Period: 3Q05 - 3Q15 Source: FactSet and Stifel estimates
12/30/15 HCREIT to 10Y Tsy: 4.4%
Div Yld Spread: Healthcare REITs vs Equity REITs
(1.5%)
(0.5%)
0.5%
1.5%
2.5%
3.5%
Mean Spread
Mean - 156 bpsCurrent Spread - 178 bps
Source: SNL Financial
Mean - 156 bpsCurrent Spread - 178 bps
Source: SNL Financial
HCREITs Implied Yield Spread to
10 Year Treasury and BBB Index Yields
12x
13x
14x
15x
16x
17x
18x
19x
20x
HCREIT 5 yr Average P/FAD - 12 mth fwd
HCREIT 5-yr Wtd Avg - 16.0xHCREIT 5-yr Median - 15.4x
HCREIT Current Wtd Avg- 14.9xHCREIT Current Median - 14.8x
Source: Company reports and Factset
HCREITs – P/FAD – 12 Month Fwd
35
Risks
Source: _____________________________
Acceleration of seniors housing supply growth in excess of demand growth
Competition for assets
HCREITs’ cost of or access to capital erodes, making accretive external growth more
challenging
Adverse reimbursement headlines and real impact of healthcare system evolution
Risk mitigation will be essential to counteracting negative sentiment: We believe
companies with lower leverage and higher lease coverage are better positioned in light
of the above risks
4.6x 4.8x 4.9x 5.0x 5.8x 6.0x 6.2x 6.3x 6.3x 6.3x 6.3x
6.9x
9.5x
Source: Company filings
Leverage – 2016 Debt / Adj. EBITDA SNF EBITDAR Lease Coverage Srs Hsg EBITDAR Lease Coverage
1.4x 1.4x 1.3x
1.1x 1.1x 1.1x 1.1x 1.1x
OHI LTC SBRA SNR VTR HCN NHI HCP
Source: Company filings
12 3 3
2.2x
1.8x 1.7x 1.6x 1.4x 1.4x
1.3x
0.9x
NHI CTRE LTC VTR HCN OHI SBRA HCP
Source: Company filings
133 2
1 Includes HCR ManorCare; ex-HCR SNR EBITDAR coverage is 1.48x, EBITDARM coverage is 1.95x2 Same-store3 Estimate; assumes 5% management fee; operating margin of 35% for AL/IL, 20% for SNF, 15% for hospital
36
Path to resolution for the troubled HCREITs
Four HCREITs ended 2015 stuck in a cycle of lower growth expectations and higher cost
of capital – HCP, MPW, SBRA, and SNR
Path to resolution is more clear for some than others due to the nature of the challenges
they face. We believe the following has to happen for these companies to recover:
– Come to a reasonable resolution with its Forest Park issues
Clarity to Resolution
– See seniors housing supply growth moderate
– Delever
– See improvement in HCR operations that would aid lease coverage
– SHOP operator Brookdale shows sustainable operational improvement
– Eliminate capital overhang by terming out the credit facility
– Implement capital recycling program of size
High
Medium
Low
Low
SBRA
SNR
HCP
MPW
Source: Stifel Research
37
HCREIT Tiering Where It All Shakes Out
HCREITs have largely lost their cost of capital advantage vs private buyers – but that does
not mean they can’t grow though external investment
Companies with ability to source a sufficient volume of non-marketed, relationship-
driven deals to meet external growth expectations do not need to compete with private
buyers for the lowest cap rate assets
Development capabilities supplement acquisitions for HCN, HCP, HR, LTC, MPW, and OHI
Internal Growth / External Cost of Capital
Fundamentals Growth Advantage Rating
DOC P P Buy
HCN P P P Buy
HR P P P Buy
HTA P P P Buy
LTC P P P Hold
OHI P P P Buy
CTRE P P Hold
NHI P Buy
VTR P P Buy
HCP Hold
MPW Hold
SBRA Hold
SNR Hold
Source: Stifel Research
38
HCREIT 2016 Best Ideas – DOC
Physicians Realty Trust (DOC – Buy – $16.97)
Differentiated strategy of growth through acquisitions of medical office buildings in less
competitive markets at relatively higher yields
– Current cost of capital is sufficient for accretive growth
Attractive 23.3% FAD growth expected in 2016
– Compares favorably to 6.2% average for peers HR and HTA and 7.1% for all HCREITs
Medical office currently has the best fundamentals in the HCREIT world, in our view:
low supply growth, high healthcare/demographics-driven demand, and no direct exposure
to government reimbursement risk
Low leverage at 4.3x pro forma net debt/EBITDA and 27% pro forma debt to market cap
Discounted risk-adjusted valuation relative to peers
– 16.0x 2016 FAD vs 18.3x average for peers HR and HTA, and vs 14.0x for all HCREITs
– 6.0% Implied yield vs 5.8% average for peers HR and HTA, and vs 6.4% for all HCREITs
Risks include REIT interest rate sensitivity, reliance on accretive acquisitions for growth
and normal course tenant credit risks
Source: Stifel Research
39
HCREIT 2016 Best Ideas – HCN
Welltower, Inc. (HCN – Buy – $68.32)
High-quality portfolio, diversified across asset classes
Lowest cost of capital among the HCREITs
– Implied yield 5.6% vs 6.4% HCREIT median
Active capital recycling program with over $1 billion in dispositions expected through 2015
Robust investment pipeline through existing tenant/operator relationships
Attractive 8.3% FAD growth expected in 2016
Strong balance sheet with 6.2x net debt/EBITDA and 47.4% debt to market cap
Risks include REIT interest rate sensitivity, exposure to government reimbursement (24% of
NOI from hospitals and SNFs), and seniors housing oversupply (33% of NOI from SHOP)
Source: Stifel Research
41
Overweight Regional Malls
Grind it out year
Perception vs. Reality
Further integration of omni-channel retailing
Weak U.S. apparel sales
Retailers retrenching in most profitable locations
Expect more store closures – will disproportionately affect “B” malls
Retailer demand healthy at “A” malls, extends to stable/make sense
“B” malls
Leasing leverage in landlord’s favor; occupancy costs are reasonable
Concerns about anchor closures
Redevelopment is concentrated on highest productivity assets
Will traditional “far-out” outlets survive?
Access to capital at attractive rates
42
2015 Mall Performance
Source: SNL Financial, Stifel
-40%
-35%
-30%
-25%
-20%
-15%
-10%
-5%
0%
5%
10%
15%
SPG SRG MAC TCO RMS GGP PEI SKT RSE CBL WPG
43
The Internet is Killing Malls
Clicks Defeat Bricks During U.S. Retailers’ Black Friday Weekend
(Bloomberg Nov 29, 2015)
RetailNext Reports Brick-and-Mortar Sales Down 4.7% over
Thanksgiving and Black Friday Weekend
Built For Yesterday’s Consumer: The Demise of Malls and Traditional
Distribution Networks (Talking Logistics Oct 21, 2015)
Internet Sales Threaten Shopping Mall Culture (NPR Aug 12, 2014)
The Shopping Malls Really Are Being Killed By Online Shopping
(Forbes Jan 4, 2015)
Shopping Malls In Crisis (Business Insider Jan 6, 2015)
Death of the Salesmen: Technology’s Threat to Retail Jobs (The
Atlantic June 2013)
44
Need to Analyze Online Sales Growth
In 2013, e-commerce growth outpaced in-store growth by nearly 5 to 1.
However, the 17% growth only represents $38 billion in sales whereas
the in-store growth of 3.5% represents $144 billion of sales
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
E-commerce growth In-store growth
$-
$20
$40
$60
$80
$100
$120
$140
$160
E-commerce growth In-store growth
Dollars in billions.
Source: U.S. Census Bureau, ICSC, Stifel
45
Consumers Spending Less on Apparel
$17,000
$22,000
$27,000
$32,000
$37,000
$42,000
$450
$500
$550
$600
$650
$700
$750
$800D
ispo
sable In
com
e per C
apitaA
pp
arel
Sp
end
ing
per
Cap
ita
Apparel Spending per Capita Disposable Income per Capita
(1.9)%
2.9%
Source: Bureau of Economic Analysis, U.S. Census Bureau, Stifel
46
Attitudes Shifting on Apparel
Source: Bureau of Labor Statistics, Stifel
1%
2%
3%
4%
5%
6%
7%
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Apparel Spending by Age as a % of Total Expenditures
Under 25 years 25-34 years 35-44 years 45-54 years
55-64 years 65 years and older 65-74 years 75 years and older
47
Expanding Retailers Outweigh Closings
Retailers Closing Stores
− Abercrombie & Fitch
− Aeropostale
− American Eagle
− Chico’s
− Christopher & Banks
− Children’s Place
− Claire’s
− Coach
− Express
− FYE
− GAP
− IZOD
− JC Penney
− Kmart/Sears
− Macy’s
− Wolverine World Wide (Stride Rite & Keds)
Expanding Retailers − & Other Stories − Art of Shaving − Apple − Arhaus Furniture − Brio Tuscan Grille − Carter’s − Cheesecake Factory − Clarks − COS − Crate & Barrel − Dick’s Sporting Goods − F&F − Foot Locker − Forever 21 − Fossil − Francesca’s − Free People − H&M − Johnston & Murphy − Kiehl’s − Lovesac − Lululemon Athletica
− Lush
− Mac Cosmetics
− Mango
− Merle Norman
− Michael Kors
− Microsoft
− New Balance
− The North Face
− Primark
− Seasons 52
− Sephora
− Skechers
− Starbucks
− TopShop
− TUMI
− Under Armour
− Urban Outfitters
− Vinyard Vines
− Williams Sonoma
− White Barn Candle
− Yellow Box Footwear
− Zara
Source: Stifel Research
48
Tenant Rosters Constantly Evolve
Top mall tenants for CBL, GGP, MAC, PEI, RSE, SPG, TCO, WPG
Data is as of year-end for 2000 and 2007 and 3Q for 2015
Highlighted companies are no longer operating
Source: Company reports, Stifel
49
Store Closures, Re-tenanting Activity Driving Sales Growth
0%
2%
4%
6%
8%
10%
12%
14%
SPG TCO GGP CBL WPG RSE MAC PEI
Y/Y Sales Growth
Source: Company reports, Stifel
50
Anchor Concerns Could Weigh in 2016
Data is as of 12/31 for both years.
Includes outlet centers.
Source: Company reports, Stifel
Belk Bon Ton
Burlington
Coat
Dick's
Sporting
Goods Dillards JC Penney Kohls
Lord &
Taylor Macy's
Neiman
Marcus Nordstrom Saks Sears Target
Von
Maur
# of
Malls
CBL 34 19 2 16 52 74 7 NA 46 NA 2 2 70 3 2 84
General Growth 10 16 3 NA 56 84 8 9 108 9 23 5 82 13 6 126
Glimcher 6 11 4 4 3 15 1 NA 11 NA 2 3 17 NA 1 24
Macerich 3 5 3 3 23 37 5 3 53 4 14 2 39 8 2 63
Pennsylvania REIT 6 11 6 6 3 29 2 1 25 NA 1 NA 27 2 NA 38
Rouse 1 6 3 NA 13 25 5 NA 14 NA NA NA 24 4 NA 30
Simon 18 15 20 25 68 121 13 9 163 31 34 42 129 16 5 256
Taubman 1 NA 1 2 7 7 NA 5 21 8 10 8 4 NA NA 25
79 83 42 56 225 392 41 27 441 52 86 62 392 46 16 646
Belk Bon Ton
Burlington
Coat
Dick's
Sporting
Goods Dillards JC Penney Kohls
Lord &
Taylor Macy's
Neiman
Marcus Nordstrom Saks Sears Target
Von
Maur
# of
Malls
CBL 29 21 1 16 47 59 7 NA 40 NA 2 3 55 6 2 82
General Growth 10 14 4 13 56 82 7 8 104 10 25 5 69 11 5 121
Macerich 2 4 1 11 14 27 4 3 44 4 15 3 25 5 2 50
Pennsylvania REIT 7 6 3 9 2 23 1 1 23 NA 3 NA 20 3 NA 30
Rouse 6 7 3 2 12 29 3 NA 18 NA NA NA 24 6 NA 36
Simon 11 9 14 27 41 75 10 10 126 33 33 49 80 13 4 207
Taubman NA NA 2 NA 3 4 NA 4 19 6 9 8 3 NA NA 19
Washington Prime Glimcher 11 21 6 13 27 48 5 NA 36 NA 1 1 52 4 2 69
76 82 34 91 202 347 37 26 410 53 88 69 328 48 15 614
2011
2015
51
Simon Property Group (SPG, $195.16, Buy)
‒ Well-positioned to generate 4.5%+ NOI growth in 2016
‒ Double-digit leasing spreads and annual rent bumps sustain above-
average internal growth
‒ Actively re-tenanting underperforming retailers
‒ High productivity portfolio is better positioned to withstand future store
closures, in our view
‒ Stronger retailer demand for higher productivity mall space
‒ Spending $1 billion annually through 2018 on development/redevelopment
activity concentrated at highest productivity centers
‒ Best in class balance sheet with over $6 billion of liquidity
‒ Investment risks include a broad-based economic downturn or recession,
interest rate movements, weakening real estate fundamentals and general
market risks.
Regional Mall Best Idea
52
Shopping Centers – Overweight
Healthy fundamental environment
Expect same-store NOI growth to decelerate modestly in 2016
Extremely limited anchor availability
Small-shop remains an opportunity even as REITs near full occupancy
Limited new supply coming online
Ability to push rents – expect rental rate spreads to accelerate
Executing on redevelopment/value creation opportunities to drive growth
Proactively reducing exposure to “at risk” retailers
Tough acquisition environment
Private market transactions provide favorable valuations
Access to capital at attractive rates
53
2015 Shopping Center Performance
Source: SNL Financial, Stifel
-10%
-5%
0%
5%
10%
15%
FRT ROIC EQY REG KIM BRX AKR WRI IRC RMS UE CDR DDR KRG BFS RPT UBA RPAI
54
How High Can Occupancy Go?
Source: Company reports, Stifel
92.5%
93.0%
93.5%
94.0%
94.5%
95.0%
95.5%
96.0%
96.5%
97.0%
97.5%
98.0%
FRT DDR KIM REG KRG WRI EQY RPT
Pre-recession Occupancy High 3Q15 Portfolio Occupancy
55
Limited Anchor Space Availability
Anchor occupancy as of 9/30/15.
Source: Company reports, Stifel
94.0%
95.0%
96.0%
97.0%
98.0%
99.0%
100.0%
EQY KRG REG FRT KIM WRI DDR RPT BRX RPAI
56
Small-Shops = Opportunity
Source: Company reports, Stifel
75%
80%
85%
90%
95%
100%
EQY REG WRI KIM RPT KRG
All-Time Small-Shop Occupancy High 3Q15 Small-Shop Occupancy
57
Limited New Development
Source: REIS, Stifel estimates
-30,000
-20,000
-10,000
0
10,000
20,000
30,000
40,000
50,000
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015E 2016E 2017E 2018E
SF (
in 0
00
s)
Shopping Center Supply vs. Demand
Completions Net Absorption
58
Limited Supply + Healthy Demand = Accelerating Leasing Spreads
Shopping Center REITs: BRX, CDR, DDR, EQY, EXL, FRT, KIM, KRG, REG, ROIC, RPAI, RPT, WRI
Source: Company documents, Stifel
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
2007 2008 2009 2010 2011 2012 2013 2014 2015 YTD
59
Upgrading Tenant Quality, Reducing Exposure to “at risk” Retailers
A&P has closed or sold its locations as part of bankruptcy filing subsequent to quarter-end.
Data is for shopping center REITs: DDR, EQY, FRT, KIM, KRG, REG, RPT, WRI . Data is as of year-end for 2009 and 2012 and 3Q for 2015.
Source: Company reports, Stifel
Retailer 2009 2012 2015
24 Hour Fitness 7 13 24
AMC Theatres 4 9 20
AT&T 0 0 138
Bed Bath & Beyond 166 229 265
Dick's Sporting Goods 40 55 76
DSW 20 49 69
Five Below 0 0 53
GAP 133 129 166
Hobby Lobby 18 41 56
Kohl's 71 81 77
LA Fitness 8 30 52
Mattress Firm 0 8 84
Michael's 158 170 182
Nordstrom 0 13 35
Panera 0 0 68
Party City 44 89 96
Petco 83 129 173
PetsMart 179 190 224
Ross Stores 167 203 225
Starbucks 88 78 120
Stein Mart 4 4 17
TJX Companies 305 343 408
Trader Joe's 0 19 25
Ulta Beauty 0 55 108
Whole Foods 28 36 54
Number of Leases
Retailer 2009 2012 2015
A&P Company 21 11 11
Barnes & Noble 72 50 55
GameStop 0 109 102
Hallmark 51 40 45
Kmart/Sears 118 92 44
Office Depot/Office Max 184 185 164
Rite Aid 100 62 33
Sports Authority 40 61 65
Staples 137 129 117
SuperValu 76 70 11
Tops Markets 24 16 12
Toys 'R' Us/Babies 'R' Us 71 68 59
Winn Dixie 9 8 7
Number of Leases
60
Bricks & Mortar Retailers Succeeding Online
Highlighted names operate “bricks & mortar” stores.
Source: Internet Retailer, Stifel
Amazon.com Inc. Target Corp.
Apple Inc. Newegg Inc.
Walmart.com GAP Inc.
Staples Inc. Nordstrom Inc.
Sears Holdings Corp. Williams-Sonoma Inc.
Netflix Inc. Sony Electronics Inc.
Macy's Inc. Kohl's Corp.
Office Depot Inc. Symantec. Corp
CDW Corp. Etsy Inc.
The Home Depot Inc. HSN Inc.
Costco Wholesale Corp. Liberty Ventures Group
Dell Inc. Google Play
W.W. Grainger Inc. L Brands Inc.
Best Buy Co. Inc. Amway
QVC Inc. Groupon Goods
Top 30 Retailers By Online Sales
61
Focus on Value Creation
Source: Company reports, Stifel
Nearly 200 properties identified as part of "Raising the Bar" initiative focused on strategic
BRX leasing and repositioning/redevelopment of anchor spaces to drive small shop occupancy
and rents.
EQY Plan to initiate $1 billion of redevelopment activity over the next 10 years on 12 large
assets.
FRT Potential total development/redevelopment pipeline is $3.5 billion -$4.5 billion over
the next 15 years.
KIM Identified redevelopment pipeline of $1 billion with a $2 billion plus shadow pipeline.
Targeting returns of 8%-13% on the redevelopment pipeline.
New developments - Holly Springs, Parkside Town Commons, and Tamiami Crossing
KRG should stabilize in 2016. Plan to spend $100 million on redevelopment activities every
18 months.
REG Expect to deliver an average of $200 million of developments and redevelopments
annually.
RPT Expect to deliver $65 million -$80 million of redevelopments annually.
New developments - Hilltop Village Center, Nottingham Commons, The Whittaker, and
WRI Wake Forest Crossing II stabilizing in 2016 and 2017. Walter Reed and Atlanta Civic Center
developments in shadow pipeline, $500 million development/redevelopment pipeline.
62
Private Market Provides Favorable Valuations
Cap rates for grocery anchored centers the trailing twelve months.
Source: Marcus & Millichap, Real Capital Analytics, REIS, Stifel
Top Quartile, "A" Centers "B"/"C" Centers
New York 4.5%-5.3% 6.9%-8.1%
Los Angeles 5.0%-5.8% 6.2%-7.5%
Chicago 5.1%-6.0% 7.0%-8.5%
Dallas Fort-Worth 5.7%-6.5% 7.0%-8.5%
Houston 5.0%-5.8% 7.0%-8.7%
Philadelphia 5.0%-6.0% 6.8%-7.8%
Washington DC, Northern VA 4.8%-5.6% 6.0%-9.0%
Miami 4.5%-5.5% 6.0%-7.9%
Atlanta 5.5%-6.5% 7.0%-8.5%
Boston 4.8%-5.5% 6.5%-8.5%
San Francisco 4.2%-5.0% 6.0%-7.5%
Phoenix 6.0%-6.6% 7.2%-8.5%
Riverside, San Bernadino 5.3%-5.9% 6.4%-8.4%
Detroit 6.0%-7.0% 8.0%-10.0%
Seattle 4.5%-5.5% 6.5%-8.0%
Minneapolis 5.8%-6.5% 7.0%-9.0%
San Diego 4.5%-5.2% 5.5%-8.0%
Tampa 6.0%-6.7% 7.3%-8.5%
St. Louis 6.2%-6.8% 7.3%-9.5%
Baltimore 5.0%-6.0% 7.0%-8.5%
Denver 5.5%-6.5% 7.0%-8.8%
Pittsburgh 6.0%-7.0% 7.5%-9.5%
Charlotte 5.0%-6.2% 7.2%-9.5%
Portland 5.0%-5.7% 6.5%-8.0%
San Antonio 6.5%-7.2% 7.5%-8.7%
Cap Rate Range
63
Equity One (EQY, $27.24, Buy)
‒ Expect same-store NOI growth above 3% for the foreseeable future
‒ Ability to push rents in most markets
‒ Embedded future growth as below market anchor leases are brought up to
market rents over the next few years
‒ Redevelopment activity a significant driver of future growth – expects to
start $1 billion of redevelopment over the next 10 years
‒ Redevelopment activity concentrated at larger assets with superior
demographics – enhancing future growth profile
‒ Investment risks include a broad-based economic downturn or recession,
interest rate movements, weakening real estate fundamentals and general
market risks.
Shopping Center Best Idea
65
Outperformed in 2015 (+18.0% vs. RMS +3.4%)
Best performing sector in 2014 (+41.1% vs. RMS +30.4%)
Multifamily supply increasing rapidly
Occupancies at all time highs
Rent growth re-accelerates in 3Q15 by 20bps to +5.6%
Single-family housing recovering slowly
Sector trading at 3.0% premium to NAV
Sector trading above historical multiples
Rising 10-year treasury could impact cap rates
M&A activity leading headlines (HME, TRSE, AEC)
Apartment Overview
66
Supply Rising But Sustainable
Source US Census Bureau, Stifel estimates
617
346359
389384
359
295
121135
177
285
341
382
430450
425
0
100
200
300
400
500
600
700
19
81
19
82
19
83
19
84
19
85
19
86
19
87
19
88
19
89
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15E
20
16E
20
17E
Nu
mb
er
of
Un
its
(0
00s
)
Multifamily Permits (5+ Units Not-Seasonally Adjusted)
67
Homeownership Falls as Renter Population Rises
Source: US Census Bureau, Stifel estimates
60.0%
61.0%
62.0%
63.0%
64.0%
65.0%
66.0%
67.0%
68.0%
69.0%
70.0%
30
32
34
36
38
40
42
44
46
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
E
20
17
E
Ho
me
ow
ne
rsh
ip R
ate
Mill
ion
of
Re
nte
r H
ou
seh
old
s
Renter Households vs. Homeownership
Renter Households Homeownership Rate
68
Occupancies Could Tick Down Next Year
Source: Company reports, Stifel estimates
93.5%
94.0%
94.5%
95.0%
95.5%
96.0%
96.5%4Q
06
2Q
07
4Q
07
2Q
08
4Q
08
2Q
09
4Q
09
2Q
10
4Q
10
2Q
11
4Q
11
2Q
12
4Q
12
2Q
13
4Q
13
2Q
14
4Q
14
2Q
15
4Q
15
E
2Q
16
E
4Q
16
E
Trailing 12-Month Apartment REITs Historical Occupancy
69
Apartments Tend to Outperform REITs During Acceleration
Source: SNL Financial, Company reports
Stifel Estimates
+5.6%
-25.00%
-20.00%
-15.00%
-10.00%
-5.00%
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
-7.0%
-6.0%
-5.0%
-4.0%
-3.0%
-2.0%
-1.0%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
1Q
98
3Q
98
1Q
99
3Q
99
1Q
00
3Q
00
1Q
01
3Q
01
1Q
02
3Q
02
1Q
03
3Q
03
1Q
04
3Q
04
1Q
05
3Q
05
1Q
06
3Q
06
1Q
07
3Q
07
1Q
08
3Q
08
1Q
09
3Q
09
1Q
10
3Q
10
1Q
11
3Q
11
1Q
12
3Q
12
1Q
13
3Q
13
1Q
14
3Q
14
1Q
15
3Q
15
Apartment SectorY/Yr S-S Revenue Growth vs. Apartment Spread over REIT Returns
Total Return Spread Same Store Revenue Growth
+6.6% +6.4%
-3.2%-4.1%
70
Trading Above Historical Multiples
Source: Factset, SNL Financial, Stifel estimates
85.0%
95.0%
105.0%
115.0%
125.0%
135.0%
3Q
94
1Q
95
3Q
95
1Q
96
3Q
96
1Q
97
3Q
97
1Q
98
3Q
98
1Q
99
3Q
99
1Q
00
3Q
00
1Q
01
3Q
01
1Q
02
3Q
02
1Q
03
3Q
03
1Q
04
3Q
04
1Q
05
3Q
05
1Q
06
3Q
06
1Q
07
3Q
07
1Q
08
3Q
08
1Q
09
3Q
09
1Q
10
3Q
10
1Q
11
3Q
11
1Q
12
3Q
12
1Q
13
3Q
13
1Q
14
3Q
14
1Q
15
3Q
15
Apartment REIT Relative FFO Multiple Premium/Discount
Avg. Apartment REIT MultipleRelative to Equity REIT Multiple Avg.
109.7%
Current Level:107.2%
Avg. Apartment REIT MultipleRelative to Equity REIT Multiple Avg.
109.9%Average
since 3Q99:113.8%
Current Level:123.3%
71
Camden Property Trust (CPT, Buy, $77.41)
– Largest discount (14.5%) to net asset value
– Exposure to high growth markets (West Coast and Sunbelt) and
late recovery markets outweigh oil concerns in Texas
– Second highest rent growth in sector
– Third largest development pipeline*
– Recent portfolio sale serves as a good benchmark
– Third highest dividend yield
– Risks include continued economic slowdown or recession and excess housing inventories that will negatively impact fundamentals and, by extension, asset values.
Apartment Best Idea
*Relative to enterprise value
73
Underperformed in 2015 (+1.1% vs. RMS +3.4% vs. Conventional +18.0%)
Fundamentals improving, but slightly lagging apartments
Supply growth flat in 2016
Improving demographic and enrollment trends drive demand
Rent growth is inflationary, less volatile than apartments
Price per bed trends at all time high
Overarching industry theme: Modernization
Trading at significant P/FFO discount to apartments
Sector trading at 2.2% NAV discount
Student Housing Overview
74
Student Housing vs. Conventional Multifamily
Source: SNL Financial, Company reports
-5.0%
-3.0%
-1.0%
1.0%
3.0%
5.0%
7.0%
1Q
05
2Q
05
3Q
05
4Q
05
1Q
06
2Q
06
3Q
06
4Q
06
1Q
07
2Q
07
3Q
07
4Q
07
1Q
08
2Q
08
3Q
08
4Q
08
1Q
09
2Q
09
3Q
09
4Q
09
1Q
10
2Q
10
3Q
10
4Q
10
1Q
11
2Q
11
3Q
11
4Q
11
1Q
12
2Q
12
3Q
12
4Q
12
1Q
13
2Q
13
3Q
13
4Q
13
1Q
14
2Q
14
3Q
14
4Q
14
1Q
15
2Q
15
3Q
15
Same-Store Revenue Growth: Student Housing vs. Conventional Multifamily
Conventional Multifamily Student Housing
10-Year Avg. Apartments: 3.44%
10-Year Avg. Student Housing: 2.77%
75
Valuation Appears Favorable
Source: SNL Financial, Stifel estimates
0.0
5.0
10.0
15.0
20.0
25.0
2016E P/FFO MultipleStudent Housing & Conventional Multifamily
76
American Campus Communities (ACC, Buy, $41.45)
– Largest student housing owner with top management team
– Portfolio of core-pedestrian assets at tier-1 universities.
– Supply growth down 15% in 2016 in ACC’s markets
– Accelerating fundamentals through 2017
– Leveraged for Modernization: Best in class on campus partner
– Large development pipeline will be accretive
– Inland portfolio will serve as a good benchmark
– Trading at significant P/FFO discount to peers
– Strong late cycle performer
– Risks include continued economic slowdown or recession and excess housing inventories that will negatively impact fundamentals and, by extension, asset values.
Student Housing Best Idea
78
Best performing sector in 2015 (+42.4% vs. REITs +3.4%)
Outperformed in 2014 (+31.4% vs. REITs +30.4%)
Occupancies at all time high levels
Rents up across the country, should have another strong year
New supply limited as development remains challenging
Sector trading above historical multiples
Sector trading at 33.1% premium to NAV
Many recent acquisitions have traded above replacement cost
Dividend yield (2.7%) below REIT average
Self-Storage Overview
79
Occupancy At All Time Highs
Source: REIS, Company reports, Stifel estimates
65.0%
67.5%
70.0%
72.5%
75.0%
77.5%
80.0%
82.5%
85.0%
87.5%
90.0%
92.5%
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015E
REIT vs. National Occupancy
National Occupancy REIT Occupancy Premium
10-Yr Avg Premium: 3.5%2015E Premium 1.7%
80
Sector Valuation Steep
Source: SNL Financial, Stifel estimates
70.0%
90.0%
110.0%
130.0%
150.0%
170.0%
Storage REIT Relative Historical FFO Multiple Premium/Discount
Avg. Storage REIT MultipleRelative to Equity REIT Multiple Avg.
112.6%
82
Underperformed in 2015 (-22.8% vs. Sector +3.4%)
Outperformed in 2014 (+32.5% vs. sector +30.4%)
Should benefit from an inflationary environment
2015-2017 RevPAR growth +4.0%-6.0%
Limited supply growth accelerating
Demand growth remains healthy, but decelerating
International visitation concerns, but remains positive
Headline risk in Airbnb could materialize
Group segment recovery underway
Middle-Late innings of cycle, which could be extended
Lodging REIT Overview
83
Where are We in the Cycle?
Source: SNL Financial, STR Research
-25.0%
-20.0%
-15.0%
-10.0%
-5.0%
0.0%
5.0%
10.0%
15.0%
Jan-90 Jan-92 Jan-94 Jan-96 Jan-98 Jan-00 Jan-02 Jan-04 Jan-06 Jan-08 Jan-10 Jan-12 Jan-14
National Y/Y RevPAR % Change
121 Months 56 Months 69 Months
0
20
40
60
80
100
Jan-90 Jan-92 Jan-94 Jan-96 Jan-98 Jan-00 Jan-02 Jan-04 Jan-06 Jan-08 Jan-10 Jan-12 Jan-14
SNL Hotel REIT Index - Price Change
64 Months 50 Months73 Months
84
Supply Accelerating
Source: STR Research
85
International Visitation Suffering
Source: Office of Tourism and Travel, Bloomberg
1
1.05
1.1
1.15
1.2
1.25
1.3
1.35
1.4
0.0%
2.5%
5.0%
7.5%
10.0%
12.5%
15.0%
Y/Y Growth of International Arrivals vs. EUR/USD
Y/Y Growth of International Arrivals EUR/USD
100
105
110
115
120
125
0.0%
2.5%
5.0%
7.5%
10.0%
12.5%
15.0%
Y/Y Growth of International Arrivals vs. USD/JPY
Y/Y Growth of International Arrivals USD/JPY
86
RevPAR Continues Strength, Decelerating
Source: STR Research
8.6%
-20.4%
0
50
100
150
200
250
300
350
400
450
500
-25.0%
-20.0%
-15.0%
-10.0%
-5.0%
0.0%
5.0%
10.0%
15.0%D
ec-0
6
Ma
r-0
7
Ju
n-0
7
Sep
-07
Dec-0
7
Ma
r-0
8
Ju
n-0
8
Sep
-08
Dec-0
8
Ma
r-0
9
Ju
n-0
9
Sep
-09
Dec-0
9
Ma
r-1
0
Ju
n-1
0
Sep
-10
Dec-1
0
Ma
r-1
1
Ju
n-1
1
Sep
-11
Dec-1
1
Ma
r-1
2
Ju
n-1
2
Sep
-12
Dec-1
2
Ma
r-1
3
Ju
n-1
3
Sep
-13
Dec-1
4
Ma
r-1
4
Ju
n-1
4
Sep
-14
Dec-1
4
Ma
r-1
5
Ju
n-1
5
Sep
-15
SN
L U
S R
EIT
Ho
tel
Ind
ex
Re
vP
AR
(Y
/Y %
Ch
an
ge
)
Industry RevPAR vs. Share Price Performance
RevPAR SNL US REIT Hotel Index
November RevPAR +4.3%
87
Pebblebrook Hotel Trust (PEB, Buy, $28.33)
– Trading in line with sector on EV/EBITDA, well below historical premium
– Sector-leading RevPAR and ADR demand premium
– Potential New York City portfolio disposition could be catalyst
– Best in class management
– Trades at $451K per room, 23.2% below replacement cost
Risks: Lodging is correlated to the overall health of the economy. The prolonged economic downturn could have an adverse effect on stock performance.
Lodging REIT Best Idea
89
Sector has lost multiple, likely not to come back this cycle
Negative investor sentiment, high short interest for the group
Airbnb impact
C-Corps have tougher comps than the REITs
Fundamentals are decelerating
Inbound international demand impacted by stronger USD
Global economic growth, geopolitical risks, and terrorism threats
Brands continue to grow market-share this cycle
Industry consolidation
HLT REIT spin-off
2016 Lodging C-Corps – Underweight
90
2015 C-Corps Performance
Source: FactSet, SNL, Stifel
2.4%
-40.0%
-30.0%
-20.0%
-10.0%
0.0%
10.0%
SP
X
CH
H
MA
R
HO
T
ST
AY
WY
N
HL
T H
VA
C
LQ
Lodging C-Corps 2015 Performance
91
Sector Has Lost Multiple, Not Coming Back
Source: FactSet, SNL, Company reports, Stifel estimates
-2.5x
-3.5x
-5.0x
-2.5x
0.0x
6.0x
8.0x
10.0x
12.0x
14.0x
16.0x
18.0x
WY
N
HO
T
ST
AY
HL
T H
CH
H
C-C
orp
sA
vera
ge
LQ
RE
ITs
Avera
ge
MA
R
VA
C
Ch
an
ge
In
Mu
ltip
le
NT
M E
V/E
BIT
DA
Mu
ltip
le
NTM EV/EBITDA Multiples
YE2014 YE2015 Multiple Change
92
Short Interest Relatively High
Source: FactSet, Company reports, Stifel estimates
0.0%
5.0%
10.0%
15.0%
20.0%
H
MA
R
WY
N
VA
C
LQ
CH
H
HL
T
HO
T
ST
AY
Lodging C-Corps Short Interest as % of Float
0.0%
5.0%
10.0%
15.0%
20.0%
H
MA
R
WY
N
VA
C
LQ
CH
H
HL
T
HO
T
ST
AY
Short Interest as % of Float, 2015
1Q15 2Q15 3Q15 4QTD
93
Airbnb
Note: Search volume index represents search interest relative to the highest point on the chart
Source: Google trends, InsideAirbnb.com (July 2015), PKF, Stifel estimates
5.0%
10.0%
15.0%
20.0%
25.0%
Au
sti
n,
TX
New
Yo
rk, N
Y
Lo
ng
Isla
nd
San
Fra
ncis
co
/San
…
Oa
kla
nd
, C
A
Lo
s A
ng
ele
s,
Lo
ng
Beac
h
Sac
ram
en
to,
CA
Po
rtla
nd
, O
R
Mia
mi, H
iale
ah
, F
L
Sea
ttle
, W
A
Bo
sto
n, M
A
San
Die
go
, C
A
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Orl
ean
s, L
A
San
Jo
se
/Sa
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Cru
z, C
A
Oa
hu
Is
lan
d,
HI
Nash
ville
, T
N
Ph
ila
delp
hia
, P
A
Ft.
La
ud
erd
ale
, F
L
Ch
arl
es
ton
, S
C
Airbnb Rooms as % of Hotel Rooms, Markets > 5.0%
0
20
40
60
80
100
120
Ja
n-0
7
Ja
n-0
8
Ja
n-0
9
Ja
n-1
0
Ja
n-1
1
Ja
n-1
2
Ja
n-1
3
Ja
n-1
4
Ja
n-1
5
Se
arc
h V
olu
me
In
de
x
Interest In Short-Term Rentals
Airbnb VRBO HomeAway FlipKey
94
EBITDA/RevPAR Growth
0.0%
5.0%
10.0%
15.0%
20.0%
MAR VAC H HLT CHH STAY HOT WYN LQ
EBITDA Growth
2015E 2016E 2017E 2014-2017E CAGR
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
STAY CHH MAR H HOT LQ WYN
RevPAR Growth
2015E 2016E 2017E 2014-2017E CAGR
Note: Company RevPAR adjusted for FX
Source: SNL, Company reports, Stifel estimates
95
Room Growth, Relative Pipelines
Note: YTD room growth and pipeline figures as of 9/30/2015
Source: Company reports, FactSet, Stifel estimates
-5.0%
0.0%
5.0%
10.0%
H HLT MAR LQ HOT WYN CHH STAY
Room Growth
2013 2014 2015 YTD 2012-2015 CAGR
0.0%
10.0%
20.0%
30.0%
40.0%
HL
T
MA
R H
MA
R-H
OT
AC
.PA
HO
T
IHG
Carl
so
n
LQ
WY
N
CH
H
ST
AY
Pipeline By % Of Existing Rooms
96
Lodging C-Corps 2016 Green Light Best Idea
Wyndham Worldwide Corporation (WYN, $72.88, Buy)
- Diversified asset-light fee business model (60.0% of revenue generated from fees)
- Defensive play in the C-Corp sector
- 15 brands (7,760 hotels) primarily in the mid-scale to economy segment
- Global timeshare leader
- World’s largest timeshare and rental exchange
- Significant annual free cash flow generation ~$7.00/share
- Returns cash to shareholders (over $5.3 billion of cash in the form of buybacks and dividends since 2006)
Risks: Lodging is correlated to the overall health of the economy. A prolonged economic downturn could have adverse effects on sector performance.
Source: FactSet, Company reports, Stifel estimates
97
Lodging C-Corps 2016 Yellow Light Best Idea
Note: We do not have any knowledge of any potential M&A activity or discussions
Source: FactSet, Company reports, Stifel estimates
La Quinta Holdings (LQ, $13.85, Buy)
- Over-levered balance sheet
- Searching for a permanent CEO
- BX stills owns almost 27.0% of shares outstanding
- Impacted by low oil prices & call center transition
- Losing RevPAR index
- Dramatic underperformer last year (-37.2% vs S&P 500 +2.4%)
- Trading below replacement cost, franchising business is receiving zero value
- Potential M&A candidate
- Pipeline has 221 hotels and 19,500 rooms
Risks: Lodging is correlated to the overall health of the economy. A prolonged economic downturn could have adverse effects on sector performance.
99
Sector outperformed in 2015, +6.3% vs. RMS +3.4%
However, performance was quite bifurcated
Companies are in a “have” and “have-not” situation
Sector trading at a 2.5% premium to NAV
Cost of capital disparity
Most non-traded REITs essentially out of business
Strong 1031 market
Spin-off legislation could create opportunities
Sector fundamentals are not that cyclical, defensive
Income investors still searching for yield, sector dividend 5.8%
Interest rate volatility
Source: FactSet, Stifel estimates
2016 Triple-Net – Equal-weight
100
3.4% 2.4%
-20.0%
-10.0%
0.0%
10.0%
20.0%
AD
C O
ST
OR
EP
R
NN
N
RM
S
SP
X
GT
Y
VE
R
SIR
WP
C
GP
T
SR
C
Triple-Net REITs 2015 Performance
Bifurcated Performance Last Year
Source: FactSet, Stifel estimates
101
Stifel NAV Analysis - Premium (Discount) to NAV
-37.1%
-12.2%
-11.2%
-9.0%
-8.7%
-8.4%
2.5%
3.2%
6.0%
14.7%
23.6%
-45% -35% -25% -15% -5% 5% 15% 25% 35%
Select Income REIT
Spirit Realty
W.P. Carey & Co.
VEREIT
Gramercy Property Trust
Agree Realty Corp.
NNN Weighted Average
EPR Properties
STORE Capital Corporation
National Retail Properties
Realty Income
$22.00
$32.00
$8.50
$37.50
$67.25
$57.00
$11.50
$8.75
$35.00
$42.00
Sector Trading Above NAV Large Disparity Between “Haves” And “Have-Nots”
Source: Stifel estimates for EPR, GPT, NNN, O, STOR, VER; rest of sector from SNL
102
0.0%
5.0%
10.0%
15.0%
O
NN
N
ST
OR
AD
C
EP
R
GP
T
WP
C
SR
C
VE
R
SIR
Initial Nominal Cost Of Capital
Cost of Equity Cost of Debt WACC
Cost Of Capital Remains Important
Note: WACC assumes 65% equity and 35% debt structure; GPT AFFO is adjusted to account for capital expenditures
Source: Company reports, Stifel estimates
-0.8x
-3.0x
-1.5x
0.0x
1.5x
0.0x
5.0x
10.0x
15.0x
20.0x
AD
C
VE
R O
Avera
ge
EP
R
NN
N
ST
OR
WP
C
SIR
GP
T
SR
C
Ch
an
ge
In
Mu
ltip
le
Pri
ce
/NT
M A
FF
O M
ult
iple
Price/Next Year AFFO Multiple
YE2015 YE2016 Multiple Change
103
Prudent Portfolio Growth Results In AFFO Growth
Note: Asset base is as of YE’14; acquisitions do not include GPT’s acquisition of CSG or SIR’s acquisition of CCIT; includes estimated 4Q15 acquisitions;
GPT AFFO is adjusted to account for capital expenditures
Source: FactSet, SNL, Company reports, Stifel
-15.0%
0.0%
15.0%
30.0%
45.0%
-25.0%
0.0%
25.0%
50.0%
75.0%
100.0%
125.0%
GPT STOR ADC EPR NNN SIR O WPC SRC VER
To
tal
Re
turn
Acq
uis
itio
ns/
Dis
po
siti
on
s
2015 Acquisitions vs. Dispositions (% Of Asset Base)
Acquisitions Dispositions Net Acquisition Activity 2015 Total Return
24.8%
8.9% 7.2% 6.4% 5.9% 5.6% 4.1% 3.6% 1.8%
-7.4%
-20.0%
-10.0%
0.0%
10.0%
20.0%
30.0%
GP
T
ST
OR
EP
R
NN
N
AD
C O
SR
C
SIR
WP
C
VE
R
AFFO Growth
2016E 2017E 2014-2017E CAGR
104
Implied Prices at Historical Highs
Source: FactSet, Company reports, Stifel estimates
$51.92
$55.54 $55.48
$58.07
$62.59
4.0%
5.0%
6.0%
$40.00
$50.00
$60.00
$70.00
Current OPricing
O All-TimePrice High
O LowestImplied
Cap Rate
Implied OPrice,
UsingImplied
Cap
Spread
Implied OPrice,
UsingLowestImplied
Cap Rate
Imp
lie
d C
ap
Ra
te
Sto
ck P
rice
Realty
Income (O) Event Date Price
Implied
Cap Rate
10-Yr
Treasury Spread
12/30/2015 Current Pricing $51.92 5.4% 2.3% 3.1%
1/28/2015 All-Time Price High $55.54 5.0% 1.7% 3.3%
5/22/2013 Lowest Implied Cap Rate $55.48 4.7% 2.0% 2.7%
$62.59 4.7% - -
$58.07 5.0% 2.3% 2.7%
Based on 5/22/13 Implied Cap Rate
Based on 5/22/13 Spread
National Retail
Properties (NNN) Event Date Price
Implied
Cap Rate
10-Yr
Treasury Spread
12/30/2015 Current Pricing $40.15 5.9% 2.3% 3.6%
1/27/2015 All-Time High $44.43 5.3% 1.8% 3.5%
5/22/2013 Lowest Implied Cap Rate $41.98 5.3% 2.0% 3.3%
$46.91 5.3% - -
$43.73 5.6% 2.3% 3.3%
Based on 5/22/13 Implied Cap Rate
Based on 5/22/13 Spread
$40.15
$44.43
$41.98
$43.73
$46.91
4.00%
5.00%
6.00%
7.00%
$30.00
$40.00
$50.00
CurrentNNN
Pricing
NNN All-Time Price
High
NNNLowest
ImpliedCap Rate
ImpliedNNN
Price,Using
Implied
CapSpread
ImpliedNNN
Price,Using
Lowest
ImpliedCap Rate
Imp
lie
d C
ap
Ra
te
Sto
ck P
rice
105
Dividend Yield Spreads Above Historical Averages
-2.0
0.0
2.0
4.0
6.0
8.0
10.0
12.0
Dec
-00
Dec
-01
Dec
-02
Dec
-03
Dec
-04
Dec
-05
Dec
-06
Dec
-07
Dec
-08
Dec
-09
Dec
-10
Dec
-11
Dec
-12
Dec
-13
Dec
-14
Dec
-15
Yie
ld (
%)
Triple-Net Dividend Yields vs. 10-Year, Bond & REIT Yields
US REIT Dividend Yield US 10-Year Treasury US Corp Bond BBB Yield
Avg. Triple-Net Yield: 6.5%
Spread to Triple-Net Dividend Yield
15-Year Average 12/30/15
REITs 1.64% 1.85%
BBB Bonds 1.02% 1.54%
10Y Treasury 2.96% 3.48%
Source: SNL Financial, Bloomberg, Company Reports, Stifel
106
-
100
200
300
400
500
600
700
800
0.00%
1.00%
2.00%
3.00%
4.00%
5.00%
6.00%
7.00%
8.00%
9.00%D
ec-9
4
Dec-9
5
Dec-9
6
Dec-9
7
Dec-9
8
Dec-9
9
Dec-0
0
Dec-0
1
Dec-0
2
Dec-0
3
Dec-0
4
Dec-0
5
Dec-0
6
Dec-0
7
Dec-0
8
Dec-0
9
Dec-1
0
Dec-1
1
Dec-1
2
Dec-1
3
Dec-1
4
Dec-1
5
FT
SE
NA
RE
IT P
rice
In
de
xe
s
10-Y
ea
r T
rea
sury
Yie
ld
10-Year Treasury Yield vs. FTSE NAREIT Free-Standing Retail Price Index
10 Yr Treasury Yield FTSE NAREIT Free Standing Retail Price Index FTSE NAREIT All Equity REITs Price Index
10/31/1993
10-Yr. 5.33%NAREIT Index 241.95
Triple-Net REITs 100.00
11/30/1994
10-Yr. 7.96%REITs -15.5%
Triple-Net REITs -20.5%
10/31/1998
10-Yr. 4.53%NAREIT Index 264.26
Triple-Net REITs 118.64
1/31/2000
10-Yr. 6.66%REITs -14.0%
Triple-Net REITs -13.1%
6/30/2003
10-Yr. 3.28%NAREIT Index 298.98
Triple-Net REITs 171.20
6/30/2006
10-Yr. 5.14%REITs +71.1%
Triple-Net REITs +33.9%12/31/2013
10-Yr. 3.04%REITs -13.4%
Triple-Net REITs -19.0%
4/30/2013
10-Yr. 1.67%NAREIT Index 578.80
Triple-Net REITs 385.40
Historical Rate Impact On The Sector
Source: Bloomberg, Stifel
107
National Retail Properties (NNN, $40.15, Buy)
– Underperformed (+6.5%) quality peers last year (O +14.0%, STOR
+13.2%)
– Non-investment grade tenants enable higher yield
– Portfolio fundamentals less cyclical
– Slow and steady portfolio earnings growth (7.0%-8.0%)
– Strong balance sheet, in our view
– Pays well-covered, consistent, and growing dividend yield
– Well-respected management team
Risks include a prolonged economic downturn or recession, interest rate movements,
and general market risk, including continued weakness in the mortgage-backed
securities market and commercial real estate fundamentals.
Triple-Net Sector 2016 Green Light Best Idea
Source: FactSet, Company reports, Stifel estimates
108
Gramercy Property Trust (GPT, $7.76, Buy)
– Focuses on office, industrial, and specialty properties
– Has grown rapidly since converting to net-lease company in 2012
– Underperformed last year (-9.8% vs. RMS +3.4%)
– Recently merged with CSG
– Portfolio repositioning plan to take place over next 12-24 months
– Will reset dividend payout to be more in line with peers
– Experienced management team, aligned with shareholder interests
– Opportunity in Europe through Gramercy European Property Fund
Risks include a prolonged economic downturn or recession, interest rate
movements, and general market risk, including continued weakness in the
mortgage-backed securities market and commercial real estate fundamentals.
Triple-Net Sector 2016 Yellow Light Best Idea
Source: FactSet, Company reports, Stifel estimates
110
Investment Themes - 2016
Secondary markets continue to emerge
as customers seek lower power costs
Wider variety of power densities and
redundancy offerings as customers seek
flexibility across different workloads
The “edge” continues to move further
away from traditional hubs due to
explosion in mobile, IoT, and M2M
Focus on services, connectivity, and
customer ecosystems to reduce churn
and drive MRR/kW
Wholesale continues to move downmarket
Ongoing consolidation as market matures
Strong M&A appetite likely resumes
following digestion of recent deals
Continued migration of the enterprise
data center to multi-tenant environments
Cloud provider and hyperscale demand
continue to provide growth tailwinds
Stable to increasing $/kW as market
supply remains rational
Data sovereignty concerns in Europe
create opportunity for providers with a
global footprint
Shift to distributed hybrid clouds makes
interconnection a key differentiator
111
QTS Realty Trust (Buy, $45.25)
See strong value creation potential as QTS continues to build out existing powered shell
at below average incremental cost
Estimate fully built-out NAV of $60-$65 per share (3-5 years) with no greenfield
development
Carpathia acquisition provides cross-selling opportunity of cloud & managed services to
legacy QTS customers (and vice-versa); and ongoing cost synergies as Carpathia
workloads are moved to QTS data centers
Book-not-billed backlog of $61.3M (17% of LQA revenues) provides low-risk and visible
growth path into 2016
Delivery of Chicago asset in 2H16 provides roadmap for continued revenue growth in
2017 as rates in the urban Chicago market remain strong
Data Center Best Idea: QTS
112
2016: Can the Outperformance Continue?
Percentages reflect total returns
Source: FactSet and SNL data
Data Centers have outpaced REITs by 19% annually since 2011
REIT investors have added to positions but remain underweight vs. benchmark
Strong fundamental trends likely to continue, but are valuations too rich?
Data Centers REIT Sectors
-0.2%
0.2%
2.4%
7.0%
10.5%
22.0%
38.1%
41.9%
42.0%
50.7%
-10% 0% 10% 20% 30% 40% 50% 60%
RMZ
SPX
DFT
COMP
INXN
DLR
QTS
CONE
EQIX
COR
-20.1%
-6.9%
-6.3%
-0.2%
0.1%
1.5%
2.7%
11.0%
12.1%
32.9%
-30% -20% -10% 0% 10% 20% 30% 40%
Hotel & Resort
Diversified
Health Care
RMZ
Retail
Office
Industrial
Residential
Specialized (ex-DC)
Data Center
113
Data Centers trading slightly above historical average at ~17x NTM AFFO
Discount to RMZ has narrowed from -3.5x to -0.5x during 2015
Organic growth and cost of capital advantage an offset to rising rates
Fundamental growth drivers in place to sustain higher valuations
AFFO Multiples Have Converged
-6.0x
-5.0x
-4.0x
-3.0x
-2.0x
-1.0x
0.0x
1.0x
2.0x
3.0x
12.0x
13.0x
14.0x
15.0x
16.0x
17.0x
18.0x
19.0x
20.0x
21.0x
22.0x
De
c-10
Feb
-11
Ap
r-1
1
Jun
-11
Au
g-1
1
Oct
-11
De
c-11
Feb
-12
Ap
r-1
2
Jun
-12
Au
g-1
2
Oct
-12
De
c-12
Feb
-13
Ap
r-1
3
Jun
-13
Au
g-1
3
Oct
-13
De
c-13
Feb
-14
Ap
r-1
4
Jun
-14
Au
g-1
4
Oct
-14
De
c-14
Feb
-15
Ap
r-1
5
Jun
-15
Au
g-1
5
Oct
-15
De
c-15
DC-RMZ Spread DC REITS 5-yr DC Average
Hist. Avg. = -1.6x Discount vs. RMZ
Source: FactSet and Stifel research
Relative P/AFFO Multiples
114
Growth & Value Creation Potential
Internal Growth
External
Growth/Development Cost of Capital
Advantage Rating
Implied
Cap Rate
2016E
AFFO
Multiple
QTS B 8.7% 17.0x
CONE B 8.1% 14.8x
EQIX* B 8.7% 17.6x
DLR B 7.1% 16.2x
COR H 7.0% 21.0x
DFT H 9.4% 11.8x
*This outlook is priced for 12/30/15. EQIX was upgraded on 1/5/16 with a closing price from 1/4/16. Please see our full note for additional information.
Source: Stifel Research
Internal growth prospects strongest for QTS, CONE, and COR
Interconnection provides internal growth tailwind for EQIX
Heavyweights DLR and EQIX will likely remain acquisitive
Cost of capital advantage likely to drive further public-private M&A
115
Net Asset Value
Note: DLR, CONE, and QTS figures have been adjusted to reflect recent acquisitions
Source: FactSet Research Systems and Stifel estimates
6.0%
6.5%
6.9%
7.3% 7.2%
8.4%
7.0% 7.0%
8.2% 8.2%
8.7%
9.2%
4.0%
5.0%
6.0%
7.0%
8.0%
9.0%
10.0%
COR DLR CONE EQIX QTS DFT
Implied Cap Rate
LQA NTM
9.3%
1.0%
11.8% 12.0%
4.6%
1.0%
-8.3%
-11.3% -10.8%
-3.4%
-16.6%
-10.5%
-20%
-15%
-10%
-5%
0%
5%
10%
15%
COR DLR CONE EQIX QTS DFT
Premium / Discount to NAV
LQA NTM
116
-2.0
-1.5
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
5.5
Dec-10 Jun-11 Dec-11 Jun-12 Dec-12 Jun-13 Dec-13 Jun-14 Dec-14 Jun-15 Dec-15
Spre
ad (
%)
Yie
ld (
%)
Spread vs. BBB (right) DC Yield (left) DC 5-YR Avg. Yield
Dividend Yield vs. BBB Index
Source: FactSet Research Systems and St. Louis Federal Reserve
117
Revenues by U.S. Metro
27%21%
66%
22%15%
4%
7%
17%
8%
22%
12%
12%28%
10%
17%
12%
8%
16%
13%
11%8%
27%10%
4%3%
19%
7%
14%
42%
4%
24%
4%10%
38%
6%
28%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
QTS COR CONE DFT* EQIX* DLR
NoVa NY Metro Silicon Valley Chicago LA Dallas Atlanta Houston Other
(1,500)
(1,000)
*451 Research estimates
Source: 451 Research, company reports and Stifel Research
119
423,500 SF Class A Industrial
Warehouse
63,263 SF Class B Flex
60K SF Flex Bldg.
40K SF 1-Story Office Bldg. 120K SF 4-Story Office Bldg.
with surface parking 60K SF 2-Story Office Bldg.
60,000 SF Class B Office Bldg 38,618 SF Class B Office Bldg 120,000 SF Class A Office Bldg
150K SF 4-6 Story Office Bldg.
with structured parking
152,242 SF Class A Office
655,000 SF Class A Office
350K SF+ 12-13 Story Office
534,918 SF Class A Office 1,561,277 SF Class A Office
768,000 SF Class A Industrial Warehouse
Source: CoStar data, Stifel estimates
216,752 SF Class B Industrial
Warehouse
Office &
Industrial
Continuum
Office Industrial
Flex
750K SF Industrial Bldg. 400K SF Industrial Bldg. Typical CBD Office Bldg. Trophy Office Tower
200K SF Industrial Bldg.
120
Major Investment Themes - 2016
Industry growth critical and few very good markets
Demand is very industry-driven and long term in nature
Strong rental rate growth needed to offset capital costs
CapEx costs very difficult to monitor, use value creation/destruction
methodology
Developmental risk overstated and functional obsolescence
understated
Platform value vs. collection of assets under-appreciated
121
2015 Office REITs – Total Returns
Source: FactSet Research Systems, SNL Financial and Stifel
B = Buy, H = Hold, S = Sell
Gateway City Low Barrier Averages
Overweight Underweight
B B H H S B H H B S B B H B H H H S H
122
Office Replacement Cost Analysis
12/30/2015 Inv (Debt+Pref'd)/ Total PSF Per Square Foot
Company Share Price Rating TEV TEV Gross RC Adjusted RC Prem/(Disc)
I. CORE OFFICE/INDUSTRIAL REITS
GATEWAY CITIES
KILROY REALTY KRC $63.94 H 32% $536 $566 $484 11%
VORNADO VNO $101.16 B 39% NA NA NA NA
EMPIRE STATE ESRT $18.06 B 25% $671 $1,317 $618 9%
DOUGLAS EMMETT DEI $31.50 H 40% $519 $648 $479 8%
BOSTON PROP. BXP $128.60 B 31% $780 $735 $589 32%
SL GREEN 1 SLG $114.03 B 47% $815 $1,357 $844 -3%
SUBURBAN MIXED
MACK-CALI CLI $23.82 B 46% $157 $362 $201 -22%
EQUITY COMMONWEALTH EQC $27.94 H 39% $185 $351 $232 -20%
CORP. OFFICE OFC $22.17 S 52% $225 $258 $213 6%
FIRST POTOMAC FPO $11.53 S 57% $179 $240 $188 -5%
FRANKLIN STREET FSP $10.41 H 47% $191 $285 $219 -13%
BRANDYWINE BDN $13.74 H 54% $201 $309 $232 -13%
PIEDMONT PDM $19.11 S 47% $250 $427 $338 -26%
SUNBELT OFFICE
COUSINS PROP CUZ $9.55 H 33% $210 $335 $237 -12%
HIGHWOODS HIW $44.08 H 41% $208 $251 $192 8%
PARKWAY PKY $15.90 B 47% $258 $337 $268 -4%
SPECIALTY
LEXINGTON LXP $8.07 H 49% NA NA NA NA
ARMADA HOFFLER AHH $10.65 B 51% NA NA NA NA
WASH REIT WRE $27.45 H 42% $315 $537 $342 -8%
1 (Manhattan only - RC)2 Forward NAV estimate used
Sources: Company data and Stifel estimates
Investment Rating: B -- Buy, H -- Hold, S -- Sell, NR -- Not Rated
123
Gateway City – Market Fundamentals
Stock Under Construction 2Q15 Vacancy 3Q15 Vacancy
Metro Companies (MM) SF Const. (MM SF) % of Stock 13Q14 3Q15 Chg 2
+ Construction + Construction Chg 2
New York City
Midtown South, NY SLG, VNO, ESRT 71 0.3 0.5% 7.5% 6.4% -1.1% 6.3% 6.9% 0.5%
Midtown, NY SLG, BXP, VNO, ESRT 294 9.1 3.1% 7.9% 7.8% -0.1% 10.6% 10.9% 0.3%
Uptown, NY SLG, VNO 8 0.6 7.8% 4.7% 3.9% -0.8% 10.8% 11.7% 0.9%
Downtown, NY CLI, SLG, VNO, PDM 113 2.9 2.6% 11.2% 10.4% -0.8% 13.3% 13.0% -0.3%
Manhattan Totals 486 12.9 2.7% 8.6% 8.1% -0.4% 10.6% 10.8% 0.2%
Washington DC, NoVA, Suburban MD 469 7.9 1.7% 14.8% 14.8% 0.0% 16.4% 16.5% 0.1%
(See Exhibit B)*
Los Angeles County
Burbank/ Glendale/ Pasadena, CA DEI, PDM 44 0.2 0.6% 12.0% 10.5% -1.5% 11.6% 11.1% -0.5%
West Los Angeles/Beverly Hills, CA KRC, DEI 65 0.6 0.9% 12.1% 11.2% -0.9% 11.2% 12.1% 0.9%
San Gabriel Valley, CA 21 0.1 0.4% 11.3% 12.2% 0.9% 11.4% 12.6% 1.1%
San Fernando Valley, CA DEI 29 0.1 0.4% 12.5% 13.6% 1.1% 14.4% 14.0% -0.4%
South Bay, LA, CA KRC, LXP 52 0.2 0.3% 16.8% 15.5% -1.3% 16.6% 15.8% -0.8%
CBD Los Angeles, CA 58 1.6 2.7% 14.9% 13.5% -1.4% 15.4% 16.2% 0.7%
Mid Wilshire Corridor/Hollywood, CA KRC 31 1.3 4.1% 14.6% 14.0% -0.6% 18.0% 18.1% 0.1%
Los Angeles County Totals 300 4.0 1.3% 13.7% 12.9% -0.8% 14.0% 14.2% 0.2%
Boston Area
Financial District, Boston, MA BXP, EQC, LXP 40 0.0 0.0% 12.1% 8.9% -3.2% 9.4% 8.9% -0.5%
Back Bay, Boston, MA BXP 16 0.4 2.7% 7.9% 9.6% 1.7% 11.0% 12.3% 1.3%
Cambridge, MA BXP, PDM, EQC 26 2.2 8.7% 9.3% 7.1% -2.2% 17.4% 15.8% -1.6%
Route 128 BXP, EQC, LXP 94 0.6 0.6% 11.5% 11.1% -0.4% 11.9% 11.8% -0.1%
Inner Suburbs BXP, EQC, LXP, PDM 46 2.6 5.7% 6.4% 6.5% 0.1% 11.2% 12.2% 1.0%
Route 495, MA PDM, LXP 54 0.2 0.4% 13.2% 14.2% 1.0% 14.4% 14.6% 0.2%
Boston Area Totals 276 6.1 2.2% 10.7% 10.2% -0.5% 12.3% 12.4% 0.1%
San Francisco Area
San Francisco CBD, CA BXP, VNO, KRC 55 3.2 5.9% 8.0% 6.6% -1.4% 12.5% 12.5% 0.1%
San Mateo County, CA BXP, LXP 40 1.9 4.8% 11.4% 9.8% -1.6% 14.9% 14.6% -0.3%
South Bay / San Jose, CA BXP, FSP, KRC 90 6.7 7.5% 10.6% 8.5% -2.1% 19.0% 16.0% -3.0%
Oakland, CA BDN 21 0.0 0.0% 13.2% 7.8% -5.4% 10.7% 7.8% -2.9%
Oakland, CA; I-80, I-880 Corridor BDN 18 0.1 0.7% 15.1% 14.2% -0.9% 15.2% 14.9% -0.3%
San Francisco Area Totals 224 12.0 3.8% 10.7% 8.7% -2.0% 13.7% 12.5% -1.2%
Totals / Weighted Averages 1,754 42.9 2.4% 11.7% 11.1% -0.6% 13.6% 13.6% -0.1%
1 Cells highlighted: for Construction % of Stock > 2.5%2 Cells highlighted represent Yr/Yr Vacancy Change and Q/Q Change in Vac. + Const. > 2% or >-2%
*The Washington DC/Northern VA/Suburban MD numbers include Class A, Class B & Class C Office Space
Source: CoStar data
Gateway Cities Office Markets
Third Quarter 2015 - Class A & BCurrent Vacancy plus Construction in Progress
Quarter/Quarter Vac. + Const. Change
Yr/Yr Vacancy Change
Sort
124
Growth & Value Creation Potential
Internal Growth External
Growth/Development
Cost of Capital
Advantage Rating
Implied
Cap Rate
2016 FFO
Multiple
BXP B 4.8% 22.7x
SLG B 4.7% 16.9x
HIW H 6.3% 13.8x
KRC H 5.4% 18.5x
VNO B 5.1% 19.2x
ESRT B 4.9% 17.2x
PKY B 6.5% 11.7x
AHH B 7.4% 10.3x
DEI H 4.7% 18.3x
BDN H 7.3% 10.5x
CUZ H 7.8% 10.2x
OFC S 7.8% 10.9x
CLI B 8.8% 11.6x
EQC H 8.1% 26.4x
WRE H 6.6% 15.8x
FSP H 7.5% 10.0x
LXP H 8.0% 8.6x
PDM S 7.2% 11.7x
FPO S 7.6% 11.1x
Source: FactSet Research Systems, Stifel estimates
125
Office Best Ideas
Empire State Realty Trust (ESRT, $18.06, Buy)
– Redevelopment of 2.2mm SF ($330 - $440mm investment basis) expected to yield 7% - 13%
– Stabilized Manhattan-only TEV of about $671/SF vs. gross/adjusted replacement cost estimates
of $1,317/$618SF, respectively
– Observatory earnings decline should be a ‘non-event’
– Value at 5.0% cap rate increased to $17.82/sh from $15.47 in 1Q14
– Risks include: greater than assumed visitation loss at the ESB observatory, re-leasing risk,
interest rate risk and macroeconomic risk
SL Green (SLG, $114.03, Buy)
– Value is created by this Opportunity Fund in a REIT structure. Platform value is under-
appreciated
– Downside projected at $815/SF, a 40%/3% discount relative to gross/adjusted replacement cost
of $1,357/$844/SF (Manhattan-only)
– Portfolio rents at an attractive price point for Manhattan office tenants at $50-$70/SF
– We think Manhattan is the best office market in the country for mid-term as well as long-term
– Risks include: company risk, market risk, interest rate risk and macroeconomic risk
127
Major Investment Themes - 2016
Mark-to-Market and same-store NOI growth: solid through 2016
Demand, driven by e-Commerce and small business, has been
surprisingly dependable
Development surprisingly in check
Development may not materially affect rental rates until demand
subsides
Functional obsolescence is a real risk
Supply limits in key markets provide long-term rental rate growth
potential – SoCal, NoCal & Seattle
128
2015 Industrial REIT Total Returns
Source: FactSet Research Systems, SNL Financial and Stifel
B = Buy, H = Hold, S = Sell
B B B B B B H S
129
Industrial Replacement Cost Analysis
12/30/2015 Inv (Debt+Pref'd)/ Total PSF Per Square Foot
Company Share Price Rating TEV TEV Gross RC Adjusted RC Prem/(Disc)
OFFICE/INDUSTRIAL
LIBERTY PROP. LPT $31.45 S 41% $61 $68 $63 -4%
DOMESTIC INDUSTRIAL
FIRST INDUSTRIAL FR $22.35 B 36% $61 $78 $62 -2%
EASTGROUP PROP. EGP $56.61 H 35% $78 $81 $70 11%
DUKE REALTY DRE $21.22 B 32% $65 $65 $60 10%
REXFORD INDUSTRIAL REXR $16.52 B 26% $113 $139 $112 0%
TERRENO REALTY TRNO $22.87 B 26% $121 $127 $106 14%
DCT INDUSTRIAL DCT $37.56 B 30% $75 $75 $70 7%
GLOBAL INDUSTRIAL
PROLOGIS INC PLD $43.24 B 36% $80 $82 $66 20%
Sources: Company data and Stifel estimates
Investment Rating: B -- Buy, H -- Hold, S -- Sell, NR -- Not Rated
130
Industrial – Market Fundamentals
1 Cells highlighted: for Construction % of Stock > 1.2%; Q/Q Change in Vac. + Const. > 2% or >-2%
Source: CoStar data
Total Stock Total Under Construction 3Q14 Vacancy Total Under Construction 3Q15 Vacancy
Metro Companies (MM) SF Const. (MM SF) % of Stock 1 + Construction Const. (MM SF) % of Stock 1 + Construction
1 Chicago, IL PLD,DRE,LPT,DCT,FR 1,159 14.7 1.3% 9.5% 10.2 0.9% 8.1%
2 LA Basin, CA PLD,KRC,DCT,EGP,TRNO,DRE,FR,REXR 988 1.8 0.2% 3.9% 2.4 0.2% 3.1%
3 Philadelphia/ Eastern PA PLD,LPT,DCT,FR 899 9.4 1.1% 9.2% 10.8 1.2% 8.6%
4 Dallas/Fort Worth, TX PLD,DRE,DCT,EGP,FR 816 15.7 2.0% 8.9% 14.4 1.8% 9.0%
5 North/Central New Jersey, NJ PLD,DRE,DCT,TRNO,FR 804 2.7 0.3% 8.6% 2.3 0.3% 8.0%
6 Atlanta, GA PLD,DRE,DCT,FR 668 9.6 1.5% 11.3% 14.3 2.1% 10.2%
7 Inland Empire, CA PLD,DCT, FR,REXR 551 13.6 2.6% 8.2% 17.6 3.2% 8.4%
Totals / Weighted Averages 5,886 67.6 1.2% 8.4% 72.0 1.2% 7.7%
Total Stock Total Under Construction 3Q14 Vacancy Total Under Construction 3Q15 Vacancy
Metro Companies (MM) SF Const. (MM SF) % of Stock 1 + Construction Const. (MM SF) % of Stock 1 + Construction
1 Boston, MA PLD 506 0.1 0.0% 8.6% 1.1 0.2% 8.5%
2 Long Island, NY PLD 350 0.1 0.0% 5.2% 0.4 0.1% 3.9%
3 Seattle / Puget Sound, WA PLD,DCT,TRNO,FR 308 3.1 1.0% 6.2% 1.9 0.6% 5.3%
4 Orange County, CA PLD,DCT,FR,REXR 302 0.6 0.2% 4.0% 1.1 0.4% 3.3%
5 East Bay / Oakland, CA DCT,EGP 263 2.2 0.8% 8.2% 2.6 1.0% 6.8%
6 Baltimore, MD PLD,DRE,DCT, FR 238 3.2 1.4% 10.3% 1.3 0.5% 10.0%
8 Miami / Dade County, FL PLD,LPT,DCT,TRNO,FR 233 0.8 0.3% 6.0% 0.6 0.3% 5.0%
7 Washington DC/ Suburban MD/ North VA PLD,DRE,LPT,DCT,TRNO,FR 216 1.5 0.7% 10.6% 2.7 1.2% 10.1%
9 South Bay / San Jose, CA PLD,DCT,TRNO 200 0.4 0.2% 8.8% 0.3 0.2% 7.5%
10 San Diego, CA DCT,EGP,FR, REXR 190 0.0 0.0% 7.2% 1.4 0.7% 6.2%
11 Palm Beach/ Broward County, FL PLD,DRE,EGP 186 1.1 0.6% 7.6% 1.2 0.7% 6.4%
Totals / Weighted Averages 2,990 13.1 0.4% 7.4% 14.6 0.5% 6.6%
Totals / Weighted Averages 1,413 13.8 1.0% 6.6% 19.3 1.4% 6.7%
Totals / Weighted Averages 3,957 31.8 0.8% 9.0% 32.7 0.8% 8.1%
Third Quarter 2015
Third Quarter 2015
Third Quarter 2015
Third Quarter 2015
Energy Driven Secondary Markets
Secondary Industrial Markets
Third Quarter 2014
Third Quarter 2014
Third Quarter 2014
Primary Distribution Markets
Barrier to Entry Industrial Markets
Third Quarter 2014
131
Growth & Value Creation Potential
Internal Growth External
Growth/Development
Cost of Capital
Advantage Rating
Implied
Cap Rate
2016 FFO
Multiple
DRE B 6.1% 17.7x
DCT B 5.3% 18.2x
TRNO B 5.3% 20.2x
PLD B 5.6% 17.9x
FR B 6.4% 15.9x
REXR B 5.7% 18.6x
EGP H 6.3% 14.0x
LPT S 7.4% 12.6x
Source: Stifel estimates
132
Industrial Best Ideas
Duke Realty Corp. (DRE, $21.22, Buy) – Implied cap rate of 6.1% for industrial only, and it is also 6.1% when we bifurcate the office
portfolio (valued at 7.5% cap rate) and the MOB portfolio (valued at 5.5% cap rate)
– The aforementioned industrial cap rate is 50 bps higher than Prologis, 80 bps higher than DCT
Industrial, 20 bps lower than EastGroup and 30 bps lower than First Industrial
– The asset recycling program and development have been accretive to value creation
– The embedded mark-to-market is strong through YE2016
– Reasonable $65/Industrial SF relative to Gross/Adjusted Replacement Cost of $65/$60
– Risks include: development risk, company-specific risk, interest rate risk and macroeconomic risk
Rexford Industrial Realty Inc. (REXR, $16.52, Buy) – We think SoCal is the best industrial market in the country
– At $113/SF, low basis and downside-protected at a (19%)/0% discount to gross/adjusted
replacement cost
– At a 5.7% implied cap rate, cap rate compression is likely
– Rental rate growth likely given low vacancy and minimal new supply
133
Important Disclosures & Certifications
We, John Guinee, Matthew Heinz, Nathan Isbee, Rod Petrik, Chad Vanacore and Simon Yarmak, certify, that our respective views expressed in this research report
accurately reflect our respective personal views about the subject securities or issuers; and we, John Guinee, Matthew Heinz, Nathan Isbee, Rod Petrik, Chad Vanacore and
Simon Yarmak, certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendations or views contained in this research
report. Our European Policy for Managing Research Conflicts of Interest is available at www.stifel.com
For applicable current disclosures for all covered companies please visit the research page at www.stifel.com or write to the Stifel Research Department at the following address.
US Research
Stifel Research Department
Stifel, Nicolaus & Company, Inc.
One South Street
16th Floor
Baltimore, Md. 21202
The equity research analyst(s) responsible for the preparation of this report receive(s) compensation based on various factors, including Stifel’s overall revenue, which includes
investment banking revenue.
Our investment rating system is three tiered, defined as follows:
BUY – We expect a total return of greater than 10% over the next 12 months with total return equal to the percentage price change plus dividend yield.
HOLD – We expect a total return between -5% and 10% over the next 12 months with total return equal to the percentage price change plus dividend yield.
SELL – We expect a total return below -5% over the next 12 months with total return equal to the percentage price change plus dividend yield.
Occasionally, we use the ancillary rating of SUSPENDED (SU) to indicate a long-term suspension in rating and/or target price, and/or coverage due to applicable
regulations or Stifel policies. SUSPENDED indicates the analyst is unable to determine a “reasonable basis” for rating/target price or estimates due to lack of publicly
available information or the inability to quantify the publicly available information provided by the company and it is unknown when the outlook will be
clarified. SUSPENDED may also be used when an analyst has left the firm.
Of the securities we rate, 54% are rated Buy, 40% are rated Hold, 1% are rated Sell and 5% are rated Suspended.
Within the last 12 months, Stifel or an affiliate has provided investment banking services for 19%, 7%, 5% and 5% of the companies whose shares are rated Buy,
Hold, Sell and Suspended respectively.
134
Important Disclosures & Certifications
Additional Disclosures
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Important Disclosures & Certifications
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