Iri 1114 PDF

NOVEMBER 2014 | VOLUME 18
IREITINVESTOR.COM
margin of safety means sleeping well at night

IREITINVESTOR.COM
REITs ARE BECOMING A MAIN

STREAM ASSET CLASS
ratios, whereas REITs are commonly valued

using price-to-FFO ratio (or P/FFO). I explain
FFO (Funds from Operations) in more detail in
this newsletter.
It's great news for dividend investors as S&P

Dow Jones announced the plan to add Real
Estate Investment Trusts (REITs) as a dedicated sector. Currently, REITs are lumped into the
Financials sector and 1999 was the last time
that S&P has added a new category.
You obviously purchased this newsletter because

you have an interest in the REIT sector and the
latest news (that S&P Dow Jones is adding REITs
as its own sector code) is validation that REITs
have matured, are strong, healthy, and well-positioned to add long-term value.
Currently, Real Estate is classified as part

of the Financials sector under GICS, along
with Banks and Insurance companies and
by adding REITs as an eleventh sector more
attention and focus will move new capital in
the space, making the sector more liquid
and diverse.
Mark Decker, vice chair of BMO Capital

Markets, explains the significant impact of
having REITs as a standalone category:
By becoming their own category, REITs will

benefit because they will be much less sensitive to shocks in the Financials sector. For
example, when there is a selloff in Banks,
REITs oftentimes get dragged down due to the
large Exchange Traded Funds (ETFs) that are
tied to the Financials sector.
As we all know, REITs are certainly sensitive to
changes in interest rates, like Banks, however they shouldn't move in lockstep with them.
Having REITs exist in their own separate
sector should reduce volatility, which would
bring additional diversification benefits.
In addition, the valuation process for REITs is
entirely different for financial companies they
are commonly valued using price-to-earnings
(P/E) ratios or price-to-book value (P/BV)
Designating public equity REITs as a

distinct class of investment will help investors understand and get better acquainted
with the many public, liquid REITs they have
to choose from in a diversified investment
portfolio. This proposal, by S&P, appears
to be global and recognizes the importance that public equity REITs play today in
equity capital markets.
S&P Dow Jones didnt announce that theyre
considering the new REIT category: they
announced that theyre doing it. The only
remaining decision is the effective date which
is likely to be early 2016.
Protect Your Principal at ALL Costs

Not too many surprises in REIT-dom in the third
quarter. Most REITs hit their forecasted earnings targets and the only outliers seemed to be
the companies that we're seeing cracks forming.
Notably, American Realty Capital Properties
BRAD THOMAS
EDITOR
WHAT'S IN THIS EDITION?

INTRO: REITS ARE BECOMING
A MAIN STREAM ASSET CLASS . . . . . . . 1
REITS THAT PAY MONTHLY . . . . . . . . . . . 7
A BIG BET ON CASINO REITS . . . . . . . . . 10
HOTEL REITS . . . . . . . . . . . . . . . . . . . . . 13
UNDERSTANDING FFO . . . . . . . . . . . . . . 17
UNITED DEVELOPMENT Q&A . . . . . . . . . 18
OMEGA HEALTHCARE Q&A . . . . . . . . . . 22
PREFERRED REIT PICKS . . . . . . . . . . . . . 25
THE MOST IMPORTANT THING . . . . . . . . 27
GLOSSARY . . . . . . . . . . . . . . . . . . . . . . . 35
If you tell the

truth you dont
have to remember
anything.
MARK TWAIN
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(ARCP) and Campus Crest (CCG) have both

experienced substantial price declines in the
third quarter; however, the selloff was spotted
early because of the tight dividend coverage
for these companies.
I previously owned both of these REITs and
while I wont credit my psychic powers for
getting out early, I will credit my value investor instincts for following the dividend trail. As I
have written many times now, dividends speak
louder than earnings and while analyzing dividend safety should not be the only metric to
consider, following the dividend trail can be a
useful tool providing valuable clues for underlying corporate performance.
Accordingly, I was able to exhibit discipline-like investing by adhering to the most important rule on the
planet PROTECTING MY PRINCIPAL AT ALL COSTS and
selling out of these two weak REIT hands. As Kenny Rogers sang
(in the Gambler), you have to know when to hold em, and know
when to fold em'."
Finally, I think its critical to examine a companys management
team. I plan on writing more on that topic in the future. Although I
was able to avoid catastrophic losses by selling out of the abovenamed REIT positions early (before prices crashed), I believe that
management ultimately caused the market valuations to collapse
and its my goal to stay tuned into corporate performance and
provide you with any value clues that could be the difference
between a winner and a loser.
Now lets check out some 3rd Quarter Results
Regency Practicing Disciplined Management

Regency (RET) management raised outlook again in Q3-14.
That makes several quarters of solid, SSNOI and leasing spreads
that should continue to deliver above average results given the
companys recycling and repositioning over the past few years.
REG was pursuing AMREIT (AMRE) but I believe REGs management was prudent in backing off the deal that resulted in an
aggressive sale (cap rate of close to 5%) and proposed sale to

EDENS. REG raised its core FFO 2014 guidance to $2.80 2.83
from $2.75 2.80, previously.
REG purchased one property in Q3, a $19 million shopping center
located in the Lincoln Park area of Chicago (strong demographics
of over 500,000 households and over $100,000 in household
income within 3 miles). At $60.74 and a P/FFO multiple of 21.9x,
Im not a buyer today; however, Im moving entry (BUY) price
from $49 to $55. See graph above.
Sun Communities a Compelling BUY

In the previous newsletter I wrote an article on Sun Communities
(SOI) and I now have included the manufactured housing REIT in
my SALSA portfolio. (See last section of newsletter).
As referenced in the previous article, SOI has announced the
acquisition of America Land Lease a $1.32 billion portfolio
that will double the size of the current portfolio. Although I expect
moderate integration risk with the upcoming acquisition, the
fundamentals for SOI and its core-operating model are sound.
Q3 operating metrics are strong, with same store property
NOI increasing at a 9.2% rate and occupancy nearing 93%,
a level not achieved in a very long time. SOI trades at 17.3x
2015 AFFO, a 6% discount to the closest peer (ELS at 18.4x).
IREITINVESTOR.COM
I consider the shares reasonable to buy

today. Current price is $60.74. See graph
to the right.
ROIC a strong BUY

Retail Opportunity Investment Corp. (ROIC)
continues to demonstrate consistent value
creation.
The company pure-play West Coast shopping center investment strategy has become
a beacon of opportunity acquiring well
below replacement cost assets and leasing
up for enhances profits.
The portfolio continues to perform very well,
pushing occupancy to record highs (97.4%)
and optimizing leasing opportunities. With no
new supply of space and increasing demand,
rent growth dynamics remain positive for wellstocked retail landlords.
For most shopping center REITs I would argue
acquisitions could prohibit growth; however,
ROIC has a stellar reputation for scoring new
deals, and I believe its rolodex provides meaningful alpha. While ROIC trades at a moderate
2015 AFFO multiple (19.5x), the peer group is
much higher, and I believe an $18.00 target
price in 2015 (using 21.4x implied AFFO) is
reasonable. My current entry (BUY) price is
$15.00, not too far from the current share price
of $16.24. See graph to the right.
Home is a HOLD
Home Properties (HME) continues to trade at an attractive valuation of 14.4x P/FFO. However, Im not convinced that the companys
focus suburban, B/B- apartments will boost profitability in 2015.
Challenging supply/demand conditions across HMEs predominantly Mid-Atlantic focused footprint should restrain relative
revenue/NOI growth. Im also concerned with HMEs consider-
able exposure in DC metro (HMEs largest market) that could

drag growth for 2015. Although the price today ($62.73) may
seem attractive, I would wait for shares to pullback to $60.00
(my target/buy price).
Highwoods Solid Performer

My BUY recommendation for Highwoods Properties (HIW) is
predicated on favorable Sunbelt fundamentals and strong operating performance.
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Highwoods is the only pure office REIT that did not cut its dividend
during the Great Recession and the companys healthy leasing
growth supports strong earnings potential.
Highwoods has continued to recycle assets i.e. selling the office
portfolio in my hometown (of Greenville, SC) while continuing to
improve the balance sheet by maintaining moderate leverage
(target D+PE/EBTDA of 5.6-6.3x).
Highwoods also has a healthy development pipeline of around
$349M of projects (9.0$ GAAP yield). In
addition, HIW has a land bank capable of
supporting over $800M of new development.
On an AFFO basis (22.1x based on 2015)
HIW is moderately expensive (peer group
20.4x); however the slight premium can be
explained by the high-quality balance sheet
and healthy balance sheet.
My BUY target (2015) for HIW is $44.00 and I
believe the current price of $41.61 is attractive.
The P/FFO multiple of 14.4 and dividend yield
of 4.1% also suggests it may time for me to
invest in Highwoods. My suggested entry price
is $42.00, so shares are inside of that now.
Essex Property Trust Not Cheap

In terms of business models, Essex Property
Trust (ESS) has one of the best geographic
platforms in the world. The strength in the
differentiated model lies in the West Coast
markets of N.CA, S.CA and Seattle.
In Q3-14 ESS exceeded expectations by
delivering strong rent growth and lease-up
activity. The companys total portfolio NOI
exceeded forecasts by $.04/share.
Essex is still trading at health valuations
levels (24x P/FFO) and while I would like to own this stalwart
REIT, I will wait for a better price. Shares are trading today at
$199.07 with a dividend yield of 2.6%. Yikes!
STAG Growing Steady

STAG Industrial (STAG) continues to deliver strong growth as the
Boston-based REIT acquired 18 properties (3.5M SF) in Q3-14
for $173.7M.
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In addition, STAG acquired one property in October and has 17

more assets under contract (or LOI) for $254M.
today (P/FFO is 26.8x). My BUY price is $100.00 so stay true to

the margin of safety principle and wait for a market pullback.
On the capital markets front, STAG raised $44M through its

ATM in Q3-14 and in October it raised another $128.2M via
follow-on offering.
A Net Lease REIT That Flies Under the Radar
STAG doesnt provide guidance but it does appear 2014 will

exceed 25% growth, indicative of strong growth ahead. STAGs
Q3 core FFO/share was $0.36, adequate profits to cover the
dividend. STAG also bumped its monthly
dividend by 2.3%. The current yield is 5.7%.
STAG is trading at $23.73 and I recommend
buying shares at $21.00 (closer to a 6% dividend yield).
Federal Boosts Dividend 12%

While Federal Realty (FRT) is one of the
most expensive blue-chips in REIT-dom, the
company continues to execute an impressive growth platform.
In Q3-14 Federal racked up 4.4% samestore NOI growth as well as introducing
2015 FFO guidance that implies FFO growth
of 7.5%. Federal continues to offer strong
operating fundamentals: 95.6% occupancy, and 108 signed leases. With modest
acquisitions (none in Q3) Federal leases its
external growth strategy by way of its robust
development pipeline.
Youve heard me say before, The safest
dividend is the one thats just been raised
and Federal proves its blue-chip status again
by boosting its dividend by 12% (to $0.87).
No need for alarm as Federal maintains a
conservative payout ratio of 80% (in 2015).
Federal is trading at its 52-week high (of
$131.09) so I wouldnt rush to BUY shares
With the considerable headline drama associated with American Realty Capital Properties (ARCP) its easy to forget about
Agree Realty (ADC).
Some have argued that a management team is not as critical
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for a net lease REIT; however, the success of Realty Income (O)
proves that it is critical. Agree has a skilled management team
that has been in the net lease business for over two decades.
In addition, Agree boasts an attractive development pipeline
where it produces organic higher-yield investments to drive
earnings.
In Q3 Agrees occupancy was an impressive 98.5% with 58% of rents coming from
investment grade tenants. Agree reported
(in Q3) FFO of $0.55 per share with annual
FFO mid-point of $2.20. Agree is trading
at a discount today (P/FFO is 13.5x) and I
target shares to hit $34.00 in 2015. The
current dividend yield is 5.7%. I like Agree
at $30.00 (my suggested entry price) and
the dividend yield today is 5.7%.
Kimco Pure Play Paying Off

For most of 2014 Mr. Market has not paid
much attention to Kimco Realty (KIM). I
purchased shares in the NY-based shopping
center REIT earlier in the year hoping to see
robust share price appreciation.
Now with less than two months left in the
year, Kimco is finally starting to move up.
Perhaps Q3-14 results signal the tipping
point as Kimcos core portfolio growth
was strong which led to slightly increased
NOI growth. Q3-14 FFO/share was $0.36
with annualized guidance at $1.38/share.
The companys anchor tenant occupancy
was 98.2% while non-anchor occupancy
was 87%.
Kimco increased the dividend by 6.7% to $0.24/share maintaining a conservative payout ratio of 82% (based on 2015). Im
glad to see Kimcos share price move and while I was fortunate
to get in under $20 I would like to see you wait for a modest pullback (look for an entry price of $24.00 or less). Kimco is now
trading at $24.46 with a dividend yield of 3.9%.
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REITS THAT PAY MONTHLY

More and more REITs are now paying monthly dividends. The
logic is simple: retail investors enjoy the benefits of owning shares
that make paying bills easy. However, the benefits don't end there.
Companies that pay quarterly or semi-annually almost always
announce the payment of their next dividend payment at the
time of the payment period. However, companies that pay
monthly provide more frequent communication to investors and
if the company increases, reduces, or suspends a payment, the
shareholder can react quickly to the good or bad news.
Another advantage is that investors who reinvest dividends will
return almost 1% more yearly than quarterly payers. That's due
to the laws of compounding. As Marc Lichtenfeld explains in
Get Rich with Dividends:
Compounding takes a while to get started, but once it does,
it's like a runway train going downhill, picking up momentum
REITS THAT PAY MONTHLY
TICKER
Gladstone Land Corporation

Chatham Lodging Trust
each year. If you're an investor who doesn't need the income

right now and can put off instant gratification for long-term
benefits, reinvesting your dividends can generate the kinds
of returns you probably thought were possible.
See table below.
The Benefits of Monthly Paying Dividends

Besides having professional management, there are many
other reasons that I prefer to invest in REITs the most essential being liquidity and diversification.
Liquidity is simple I can get my money back at anytime. REITs
are publicly traded and that means that there are buyers and
sellers 24 hours a day. In terms of diversification, there are over
140 U.S. equity REITs and around 36 mortgage REITs, providing a tremendous ocean to find the best fish.
In terms of REITs that pay monthly, I have included a list of 19
companies. Although all of these REITs do pay monthly, I would
not necessarily recommend that you buy all of them.
PRICE
MAR-CAP
LAND
10.89
CLDT
25.77
New York REIT
NYRT
Realty Income
LTC Properties
LTC
Inland Real Estate Corporation
IRC
STAG Industrial
STAG
EPR Properties
EPR
Chambers Street Group

WPT Industrial
Independence Realty Trust
P/FFO
DIV-YLD
S&P
0.084
37.9
3.3
NA
0.876
13.2
3.7
NA
11.01
1.786
22.5
4.2
NA
47.1
10.489
18.1
4.7
BBB+
41.86
1.459
16.3
4.9
NA
10.65
1.066
11.3
5.4
NA
24.29
1.565
16.5
5.6
NA
57.48
3.285
14.3
5.9
BB+
CSG
8.17
1.936
11.9
6.2
BBB-
TSX: WIR.U
10.45
0.308
10.4
6.7
NA
IRT
9.79
0.252
14.1
7.4
NA
ARCP
8.5
7.718
12.1
11.8
BBB-
Whitestone REIT
WSR
15.05
0.344
13.2
7.6
NA
Gladstone Commercial Corporation
GOOD
18.17
0.356
11.6
8.3
NA
UDF
19.34
0.592
15.7
8.5
NA
WHLR
4.37
0.039
19
9.6
NA
American Realty Capital Properties
United Development Funding

Wheeler Real Estate Investment
Orchid Island Capital
ORC
13.8
0.181
na
15.7
NA
Armour Residential
ARR
3.99
1.426
na
15.0
NA
Agellan Commercial
TSX: ACR.UN
7.94
0.186
7.8
8.6
NA
SOURCE: SNL FINANCIAL(11-11-14)

IREITINVESTOR.COM
Based on Market Capitalization (in $US billions)

12
10.489
10
7.718
8
6
4
3.285
2
1.459 1.565 1.786 1.936
0.876 1.066 1.426
0.592
0.181 0.186 0.252 0.308 0.344 0.356
0 0.039 0.084
WHLR
LAND
ORC
TSX:
ACR.UN
IRT
TSX:
WIR.U
WSR
GOOD
UDF
The advantages of a monthly dividend payment is 1) it makes

bill paying easy, 2) it reduces the volatility of the shares when
going "ex-dividend", because the companies that pay frequently
usually communicate more often (than the quarterly payers),
and so if the monthly payer increases, reduces, or suspends
the dividend, the shareholder can respond faster to the good
or bad news, and 3) you just make more money. If you don't
rely on the monthly income, you take can take advantage of the
power of compounding.
The wonder of compounding transforms your investable money
into a highly powerful income-generating tool. Compounding
is simply the process of generating earnings on an asset's
reinvested earnings. To work, it requires two things: the reinvestment of dividends and time. The more time you give your
investments, the more you are able to accelerate the income
CLDT
IRC
ARR
LTC
STAG
NYRT
CSG
EPR
ARCP
potential of your original investment.
19 REITs That Pay Monthly

The list of REITs that pay monthly include: American Realty
Capital Properties (ARCP), Armour Residential (ARR), Chatham
Lodging Trust (CLDT), Chambers Street (CSG), EPR Properties (EPR), Gladstone Commercial (GOOD), Gladstone Land
(LAND), Inland Real Estate (IRC), LTC Properties (LTC), Realty Income (O), STAG Industrial (STAG), Wheeler Real Estate
(WHLR), WPT Industrial (TSX:WIR.U), Whitestone Real Estate
(WSR), New York REIT (NYRT), United Development Funding
(UDF), Orchid Island Capital (ORC), and Agellan Commercial
(TSX: ACR.UN).
Above is a snapshot of these REITs based on market capitaliza-
Based on P/FFO
40.0
37.9
35.0
30.0
25.0
22.5
20.0
19
18.1
16.5
16.3
15.0
15.7
14.3
14.1
13.2
13.2
10.0
12.1
11.9
11.6
11.3
10.4
CSG
GOOD
IRC
TSX:
WIR.U
7.8
5.0
0.0
LAND
NYRT
WHLR
STAG
LTC
UDF
EPR
IRT
CLDT
WSR
ARCP
TSX:
ACR.UN

IREITINVESTOR.COM
Based on Dividend Yield

15.0 15.7
16
14
11.8
12
10
8
6
4
3.3
3.7
LAND
CLDT
4.2
4.7
4.9
5.4
5.6
5.9
NYRT
LTC
IRC
STAG
EPR
6.7
7.4
TSX:
WIR.U
IRT
6.2
7.6
8.3
9.6
8.5
8.6
UDF
TSX:
ACR.UN
2
0
tion (in $US billions):

On the bottom of the previous page is a snapshot of
these REITs based on Price to Funds from Operations
(P/FFO):
CSG
WSR
GOOD
WHLR
ARCP
ARR
ORC
United Development Funding IV Stock Price

21.5
21
Above is a snapshot of these REITs based on dividend yield:
20.5
I own a number of monthly paying REITs in my portfolio including CSG, O, STAG, and UDF. I sold ARCP a
few weeks ago. I am continuing to accumulate more
shares in all four of these on market weakness. I have
included Q&A with UDFs CEO in the newsletter this
month. To the left is a snapshot of the companys
share price performance since listing
19.5
19.34%
Dividend Yield (%)
20
19
18.5
18
Jun 15
2014
Jun 29
2014
Jul 13
2014
Jul 27
2014
Aug 10
2014
Aug 24
2014
Sep 07
2014
Sep 21
2014
Oct 05
2014
Oct 19
2014
Nov 02
2014
United Development Funding IV Dividend Yield (%)
Below right is a snapshot of UDFs dividend yield

history:
9.2
If you dont drive your

business, you will be
driven out of business.
BC FORBES
Dividend Yield (%)
8.8
8.5%
8.6
8.4
8.2
Jun 15
2014
Jun 29
2014
Jul 13
2014
Jul 27
2014
Aug 10
2014
Aug 24
2014
Sep 07
2014
Sep 21
2014
Oct 05
2014
Oct 19
2014
Nov 02
2014
10
IREITINVESTOR.COM
A BIG BET ON CASINO REITS
Pinnacle's spinoff announcement comes on the heels of news

that Boyd Gaming Corp. is evaluating a spinoff of its own.
During the company's third-quarter earnings call, CEO Keith
Smith said the company has already invested $3 million in the
evaluation process.
By: John Yellig / SNL Financial

Pinnacle Entertainment Inc.'s recently announced plan to spin
off its real estate into a REIT garnered mixed reactions in the
analyst community and sent the company's shares sliding,
thanks to a number of unanswered questions about the deal.
"While we still have extensive analysis to conduct, initial indications would suggest the forming a REIT is achievable and
attractive under certain circumstances," Smith said on the
Oct. 30 call.
Perhaps the most significant of the unknowns surrounding the

spinoff is its timing, which is subject to the company overcoming numerous hurdles, many of which are out of its control, as
management repeatedly stressed on Pinnacle's Nov. 6 earning call.
While Pinnacle is further along in the process, having already

evaluated the spinoff and made the decision to pursue it, the
company nevertheless has much in common with Boyd. Both
are highly levered, with Pinnacle's debt-to-EBITDA ratio standing at 7.37x at the end of the third quarter and Boyd's ratio
clocking 6.91x, compared to an average gaming-industry ratio
of 4.25x, according to SNL data.
Chief among these obstacles is the receipt of a private-letter

ruling from the IRS approving the company's REIT plan. The
company expects to submit its application by the end of the
year; the length of the IRS review process is anyone's guess,
although most observers put it between six months and a year.
Also weighing heavily on the company's proposal are plans
to raise about $1 billion in equity in 2015 to help deleverage
its balance sheet ahead of the separation. Additional matters
to be settled are the receipt of approvals from state gaming
regulators, execution of a master lease between Pinnacle and
the REIT, the appointment of the REIT's senior leadership and
certain debt-financing transactions.
Boyd and Pinnacle both operate regional casinos and have significant exposure to the Midwest. Pinnacle's heaviest geographic
exposure, thanks in large part to its $2.8 billion acquisition of
Ameristar Casinos, is in Missouri. It also has significant assets
in Louisiana. Boyd also has a significant footprint in Louisiana,
but its heaviest concentration of properties is in Las Vegas,
where it caters to the so-called locals market. See map top of
next page.
Boyd's 21 casinos aggregate about 1.2 million square feet
Average debt/EBITDA (x)

12.0
Boyd Gaming Corp.
10.5
Pinnacle Entertainment Inc.
9.0
7.5
6.0
4.5
3.0
1.5
0
2012Q1
2012Q2
2012Q3
2012Q4
2013Q1
2013Q2
2013Q3
Data as of Nov. 10, 2014. Data not presented for periods with negative EBITDA values. Source: SNL Financial.
2013Q4
2014Q1
2014Q2
2014Q3
11
IREITINVESTOR.COM
On the other hand, CLSA Americas analysts Jon Oh and Rich

Cleary applauded the plan, noting that the deal "will crystallize"
approximately $1 billion in tax shields. See map below.
During Pinnacle's earnings call, CFO Carlos Ruisanchez said
the post-spin operating company would be able to avoid paying
income taxes "for a substantial period of time" and unpacked
the savings. Pinnacle ended 2013 with $554 million of net
operating losses, not including a roughly $150 million loss the
company will book from the sale of the Lumiere Place Casino
in St. Louis. The amount of tax protection reaches $1 billion
when approximately $300 million of tax-deductible goodwill is
included, Ruisanchez said.
of floor space, while Pinnacle's 14 casinos contain 860,500

square feet of gaming space.
Nomura analysts Harry Curtis, Kevin Wong and Brian Dobson
questioned the viability of the Pinnacle spinoff, given the
company's leverage, which they deemed "the single biggest
hurdle in the spinoff transaction."
"Management's ambiguous response to the equity raise-related questions implies that there is no clear solution to
deleverage PNK's balance sheet, so the viability of the spinoff
is still questionable," the team said in a Nov. 7 note, referring
to comments made during Pinnacle's earnings call.
Barclays Capital analysts Felicia Hendrix and Demetri Typadis
downgraded shares of Pinnacle to "equal weight" from "neutral"
on the spinoff announcement, stating that the ambiguous timeline, dilution from the equity raise and other uncertainties are
risks that could weigh on any further price appreciation in the
near to medium term.
"There is no master lease agreement, financing and capitalization of the OpCo/PropCo are unknown, management of the
PropCo hasn't been announced and the earnings and profit
purge have yet to be definitively defined," the analysts said.
While the CLSA analysts acknowledged the headwinds the

company faces, namely the uncertain timing, which they
pegged at 12 to 18 months, and dilution from the equity raise,
the team nevertheless upgraded Pinnacle's stock to "underperform" from "sell," citing the "critical milestones" along the path
to REITdom as opportunities for upside.
The track record for gaming REITs is short and mixed. While Penn
National Gaming Inc.'s spinoff of Gaming and Leisure Properties
Inc. can be considered an initial success, thanks to the dividend
and short-term share-price appreciation, Telsey Advisory Group
analyst Christopher Jones told SNL, the performance of the
gaming operator and its REIT have since been mediocre.
12
IREITINVESTOR.COM
Gaming and Leisure Properties Inc. total return (%)

20
Gaming and Leisure Properties Inc. (-3.4%)
SNL US REIT Equity (18.2%)
15
10
5
0
-5
-10
-15
1 Nov
2013
1 Dec
2013
1 Jan
2014
1 Feb
2014
1 Mar
2014
1 Apr
2014
"Since the actual listing of both of those equities, both of

those equities have not been all that successful," Jones said.
Also disappointing has been Gaming and Leisure's ability to
complete property deals, a critical component of growing its
FFO, Jones said.
Since its IPO, the company has only completed one acquisition,
the purchase of the Casino Queen in East St. Louis, Ill., for $140
million. The company's $465 million acquisition agreement for
the Meadows Racetrack and Casino in Washington, Pa., has
been tied up in a lawsuit filed against the seller, Cannery Casino
Resorts LLC. See graph above.
1 May
2014
1 Jun
2014
1 Jul
2014
1 Aug
2014
1 Sep
2014
1 Oct
2014
1 Nov
2014
Regardless of the track record of Penn National and Gaming

and Leisure, analysts and other observers expect that the
companies' trailblazing of the casino-REIT process should pave
the way for Pinnacle, shortening the time it will take the IRS and
gaming regulators to evaluate the transaction.
Nevertheless, as the Barclays analysts noted, when Penn
National announced its spinoff intention, it had already settled
many of the unknowns that bedevil Pinnacle.
"As a reminder, when PENN announced its tax-free REIT spin
in November 2012, the company had IRS approval of its PLR
letter, a defined and executed master lease agreement and
Penn National Inc. total return (%)

20
Gaming and Leisure Properties Inc. (-3.4%)
SNL US REIT Equity (18.2%)
15
10
5
0
-5
-10
-15
1 Nov
2013
1 Dec
2013
1 Jan
2014
1 Feb
2014
1 Mar
2014
1 Apr
2014
1 May
2014
1 Jun
2014
1 Jul
2014
1 Aug
2014
1 Sep
2014
1 Oct
2014
1 Nov
2014
13

IREITINVESTOR.COM
rent coverage calculation, a clearly articulated dividend and

timeline for closing," the analysts said.
Further, as Union Gaming Group analyst Robert Shore noted to
SNL, Penn National enjoyed much lower leverage when it opted
for a spinoff, making its transaction much simpler to execute.
SUPPLY AND DEMAND ATTRACTIVE FOR

HOTEL REITS
In the last section of my newsletter, the portfolios, you will see
that I have two Hotel REITs that I recommend. One is Chatham
Lodging (CLDT) and the other one is Pebblebrook Hotel Trust
(PEB). Both of these REITs avoided dividend cuts during the
Great Recession because they did not list until the real estate
recovery had commenced (PEB went public in December 2009
and CLDT went public in April 2010).
The company's debt/EBITDA ratio was 3.34x at the end of

the 2012 third quarter, the period immediately preceding the
company's November 2012 spinoff announcement. See graph
bottom of previous page.
Source: SNL Financial
will continue to exert pricing power and aggregate demand will

continue to be robust. See graph below.
The Lodging/Hotel REITs are performing fairly well year-todate as Total Returns for the sector are 26.45%. I expect to
see continued demand overall in the space as the supply and
demand fundamentals continue to unfold. See graph at the
bottom of the page.
Supply remains in check

6%
Lodging Industry: Room Supply Yr/Yr Growth Rates

(Through March 2014)
5%
The Lodging/Hotel sector is performing well as demand for

product continues to exceed supply. In fact, new hotel supply is
still below historic levels and until that changes, the hotel chains
RJ&A Estimates:
2013A: 0.7%
2014E: 1.2%
2015E: 1.7%
2016E: 2.2%
Average since 1988:
4%
3%
Current: 0.8%
2%
1%
0%
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
I was hoping to purchase shares in either of these REITs;

however, the prices have moved up and I am waiting for a
better margin of safety. (I have a target entry price for PEB of
$36 and CLDT of $22.50).
YTD Total Return (%)

40.0
34.1
35.0
30.0
25.0
0.0
Malls
Lodging
27.7
28.9
29.4
17.3
15.0
5.0
26.5
22.5
20.0
10.0
25.9
5.9
Free-Standing
Industrial
Office
Health Care Shopping Centers Self Storage
Apartments
14

IREITINVESTOR.COM
REIT NAME
TICKER
PRICE
MAR-CAP
P/FFO
DIV-YLD
BEE
12.85
3.179
18.9
0.00
FelCor Lodging Trust
FCH
10.45
1.299
17.0
0.80
Ashford Hospitality Prime
AHP
17.40
0.442
14.0
1.10
Sunstone Hotel Investors
SHO
15.69
3.223
13.6
1.30
Pebblebrook Hotel Trust
PEB
41.84
2.988
22.0
2.20
DiamondRock Hospitality
DRH
14.22
2.783
16.4
2.90
SoTHERLY Hotels
SOHO
7.58
0.08
6.6
3.40
Chesapeake Lodging Trust
Strategic Hotel Properties
CHSP
33.86
1.858
16.7
3.50
Host Hotels & Resorts
HST
22.67
17.168
15.2
3.50
Chatham Lodging Trust
CLDT
26.36
0.896
13.5
3.60
RU
32.01
4.226
13.5
3.70
RU Lodging Trust
Hersha Hospitality Trust
HT
7.26
1.457
14.9
3.90
LaSalle Hotel Properties
LHO
38.96
4.055
15.4
3.90
Summit Hotel Properties
INN
11.54
0.992
12.3
4.10
Ashford Hospitality Trust
AHT
10.05
0.899
9.9
4.80
SOURCE: SNL FINANCIAL
Above is a list of Hotel REITs and as you can see, I added a new
name SoTHERLY Hotels (SOHO) to the list (in the portfolio).
I will warn you that SOHO is a small-cap REIT with higher leverage levels than most other Hotel REITs. Im not recommending
SOHO at the current pricing level ($7.57) but I did add the
Virginia-based REIT to my SALSA list. See table on the top of
the next page.
On the top of page 16 is a list of Hotel REITs based on Price to

Funds from Operations (P/FFO):
On the bottom of page 15 is a list of Hotel REITs based on
dividend yield:
On the top of page 16 is a list of Hotel REITs based on average
3-year dividend growth:
Below is a list of Hotel REITs based on Market Capitalization:
Based on Market Capitalization (in $US billions)

20.00
18.00
16.00
14.00
12.00
10.00
8.00
6.00
4.00
2.00
0.00
17.168
0.080
0.442
0.896
0.899
0.992
1.299
1.457
1.858
SOHO
AHP
CLDT
AHT
INN
FCH
HT
CHSP
2.783
2.988
3.179
3.223
DRH
PEB
BEE
SHO
4.055
4.226
LHO
RLI
HST

IREITINVESTOR.COM
Based on P/FFO
25.0
22.0
20.0
18.9
17.0
16.7
15.0
16.4
15.4
15.2
14.9
14.0
13.6
13.5
13.5
12.3
10.0
9.9
6.6
5.0
0.0
PEB
BEE
FCH
CHSP
HST
HST
HST
HT
AHP
SHO
CLDT
RLI
INN
AHT
SOHO
In the middle of page 16 is a list of Hotel

REITs based on average 2014 dividend
growth:
As I mentioned above, I like PEB and CLDT
but Im waiting on a market pullback. Since
SOHO is a new add to my BUY-REC list I
have included the FASTGraph below. If
you would like a copy of the article I wrote
recently on SOHO, message me (brad@
theintelligentreitinvestor.com) and I will send
you a copy of the article.

5.00
4.80
4.00
3.40
3.50
3.50
3.60
3.70
SOHO
CHSP
HST
CLDT
RLI
3.90
3.90
HT
LHO
4.10
2.90
3.00
2.20
2.00
0.80
1.00
0.00
1.10
1.30
0.00
BEE
FCH
AHP
SHO
PEB
DRH
INN
AHT
15
16

IREITINVESTOR.COM
Average Annual Dividend Growth 3 Years

160%
137%
140%
120%
100%
73%
80%
60%
40%
20%
0%
0%
4%
6%
6%
9%
BEE
HT
INN
AHT
DRH
10%
15%
CLDT
CHSP
43%
48%
RLI
LHO
84%
26%
PEB
HST
SOHO
SHO
Supply 2014 Average Dividend Growth

450%
410%
400%
350%
300%
300%
250%
200%
150%
100%
50%
0%
0%
BEE
0%
2%
8%
11%
AHT
INN
HT
CLDT
20%
21%
27%
44%
47%
50%
53%
CHSP
DRH
RLI
PEB
LHO
HST
SOHO
My experience in real estate has taught me that the greatest

opportunities exist when economic times are at their worst.
DONALD TRUMP
FCH
SHO
17
IREITINVESTOR.COM
WHY USE FFO AND AFFO FOR REITS?

Book value is not a good method to value a stock because its
based on historical cost, less depreciation, and thus doesnt reflect
the current market value of the company assets. Accordingly, most
investors have continued to value stocks on the basis of net income,
along with supplemental measurements such as earnings before
interest, taxes, depreciation, and amortization (EBITDA).
In the REIT world, steady rising earnings normally indicate not only
that a REIT is generating higher income from its properties, but may
also suggest that it is making favorable acquisitions or completing profitable developments. Of course, higher income is usually a
precursor of dividend growth.
However, investors should be careful not to use net income as a key
measure for profitability, but instead utilize the Funds from Operations (or FFO) method. The big difference with FFO versus Net
Income is the concept of depreciation.
However, FFO is not perfect in that there are several deficiencies

that dont provide REIT investors with the truest form of profitability.
Thats why we use Adjusted Funds from Operations (or AFFO). This
method is a much more accurate way for a REIT to measure operating performance. Heres a simple way to view these terms:
1. All revenues (including capital gains), less operating expenses, write-offs, depreciation, amortization, interest expense and
general and administrative expenses = NET INCOME.
Its easy to be confused because most REITs report Net Income

since it is the generally accepted accounting principle (GAAP)
terminology; however, net income figures are less meaningful as
a measure of operating success because real estate depreciation is always treated as an expense. In the real world though,
most properties retained value (and most have appreciated
substantially). Why?
2. Net Income, less capital gain from real estate sales, plus real
estate depreciation expense = FFO.
Generally due to a combination of rising land prices and due to inflation and increasing construction costs. In addition, rents generally
increase and properties are upgraded.
One problem with AFFO is some REITs dont disclose it and it is

frequently calculated differently. However, it is a reasonably effective
tool for approximating a REITs true free cash flow.
3. FFO, less normal and recurring capital expenditures, amortization of tenant improvements and leasing commissions, and
adjusting to remove rent straight-lining and any gains or loss on
the early extinguishment of debt = AFFO.
Finally, its important not to use P/E for REITs, or to compare P/E for
REITs with P/E for non-REIT stocks. By utilizing price to FFO (P/FFO)
valuation, analysts and investors can determine the trading history
of each REIT by itself and relative to the entire REIT sector.
Accordingly, payout ratios are based on AFFO (adjusted funds
from operations) because it more accurately measures cash flow
when compared to net income (due to depreciation), and given the
contractual nature of lease payments today, earnings growth rates
are higher than the S&P.
18
IREITINVESTOR.COM
THE INSIDE SCOOP ON UNITED

DEVELOPMENT FUNDING
Earlier this year (June 4) United Development Funding IV
(NASDAQ:UDF) listed its common shares on Nasdaq under
the ticker symbol UDF. The company started a tender offer to
purchase up to $35 million in value of common shares for a
purchase price of $20.50 per share, net to the seller in cash.
On the first day of trading, UDF opened trading at $21.04 with
around 212,000 share traded. UDF recently closed at $19.42.
Several newsletter subscribers have asked me for an update on
UDF so I decided that the best way to provide that insight was
to reach out to the companys CEO, Hollis M. Greenlaw. So, as
you requested, heres an exclusive iREIT Investor interview
BT: Can you give us a broad overview of the home construction
market today?
HG: We continue to see many catalysts that fuel the continued recovery of housing including continued job creation and
rising consumer sentiment which climbed to 89.4, its highest
levels since the middle of 2007 according to the University of
Michigan/Thomson Reuters consumer-sentiment index. What
has lagged significantly from a national perspective is growth
in household formation. Historical averages have household
formations at 1.21 million per year. Through the third quarter
of 2013 it is estimated that approximately 542 thousand new
households were formed. This presents a tremendous opportunity for housing and new home demand.
Additionally, now that we have restored price stability to housing markets, expanded mortgage lending has the potential to
accelerate new home demand. Homebuilders, such as D.R.
Horton, have successfully introduced new product types like
Express Homes to foster entry-level home sales in the
absence of expanded mortgage lending.
Further, the U.S. housing market shows continues growth and
recovery. According to the Census Bureau, the number of new
home starts increased by 7.1%, from 165,000 in the third

quarter 2013 to 176,700 in the same quarter 2014. In total,
636,700 new homes were started in the twelve months ending
September 30, 2014. Likewise, new home sales increased by
16.8% from 95,000 in the third quarter 2013 to 111,000 in
third quarter 2014, with a total of 434,000 new home sales
over the same period.
The number of U.S. single family housing units authorized
by permits in September were at a rate of 624,000, a 1.1%
increase from September 2013. The Census Bureau Annual
Permits Release, represents homebuilding markets ranked by
single family permits. The granting of single-family permits is a
key indicator of growth in a housing market. An increase in the
number of permits granted indicates an increase in future new
homes, which in turn raises demand for the finished lots and
construction loans we finance.
Other indicators that point to an increasingly healthy U.S. housing
market are the steadily decreasing unemployment rate and the
growth in job creation. The national unemployment rate was down to
5.9 in September 2014 from 6.1 in August 2014, and has decreased
by 1.3 percentage points from the September 2013 rate of 7.2.
Nonfarm employment grew by 248,000 jobs between August and
September 2014, rising 0.8% from the pre-Recession peak.
BT: More specifically, what markets are you originating loans
and why?
HG: UDF targets the largest homebuilding markets in the country that demonstrate affordable and stable home prices, strong
demand fundamentals, balanced supplies, and strong economies.
UDFs identified markets are Texas, Florida, North Carolina and
South Carolina, with a continued heavy concentration in Texas.
UDF continues to evaluate markets such as Georgia, specifically
Atlanta, and will monitor select MSAs in Arizona and California.
The new home market continues in the gradual recovery and
the stronger regions for the recovery remain those areas where
there is strong job creation and wage growth such as Texas.
Texas remains the largest market for new home construction
measured by single family housing permits, accounting for
19

IREITINVESTOR.COM
UDF V Target States Are Among the Most Active in the U.S. Based on Single-Faintly Permits
STATE
UNIT
RANK
UNIT
RANK
UNIT
RANK
Texas
90,832
79,332
65,506
Florida
55,385
42,178
31,874
California
37,034
27,736
21,705
North Carolina
35,316
29,345
24,863
Georgia
24,810
17,297
13,817
Virginia
20,895
17,496
15,625
South Carolina
20,247
15,288
12,852
Washington
18,396
16,508
13,159
Arizona
18,386
16,189
10,306
10
Pennsylvania
15,505
10
13,432
10
11,790
SOURCE: CENSUS BUREAU, ANNUAL PERMITS RELEASE
According to the Census Bureaus Annual Permits Release,

UDF target markets are among the most active in the U.S.
based on single family permits. In 2013, Texas led the states
90,832 permits, Florida came in second with 55,385 permits
and North Carolina landed fourth place with 35,316. A high
number of single-family permits granted in a market area
indicates high levels of homebuilder activity, and therefore
increased demand for the types of financing provided by UDF.
See table above.
BT: How does UDF compete with banks and other construction
lenders?
HG: The two primary challenges facing homebuilders today are
access to land and capital. According to the FDIC, lending for
construction and development loans has contracted by approximately 75% since the crisis began in 2007. Banks are either
Nonfarm Employment (in Millions)

US
Texas
140
11.6
11.4
138
11.2
11.0
136
10.8
134
10.6
10.4
132
10.2
10.0
130
9.8
9.6
SOURCES: UDF COMPILED FROM BLS, U.S. CENSUS BUREAU
Dec 2013
Jun 2013
Sep 2013
Mar 2013
Dec 2012
Mar 2012
Jun 2012
Sep 2012
Sep 2011
Dec 2011
Mar 2011
Jun 2011
Dec 2010
Jun 2010
Sep 2010
Mar 2010
Sep 2009
Dec 2009
Mar 2009
Jun 2009
Dec 2008
Sep 2008
128
Dec 2007
Mar 2008
Jun 2008
In addition, the job growth in Texas continues to outpace that of

other states. Since December 2007, the United States has lost
almost a million jobs while Texas has created over a million for the
same period. In the past twelve months, 15.7% of the new jobs
Texas Scale
Texas, in particular, demonstrates the strong fundamentals

needed for successful housing market growth. Texas has
ranked the number one state in single-family housing permit
authorization for three consecutive years, from 2011 to 2013.
See graph to the right.
created within the United States were created in Texas. According to the Bureau of Labor Statistics, metro area employment
levels have risen well above the pre-Recession peak: Dallas-Fort
Worths employment levels have increased by 7.9%, Austin by
15.9%, Houston by 11.8% and San Antonio by 9.1%.
U.S. Scale
nearly 15% of the activity in the United States. And this activity remains concentrated in the Texaplex Dallas-Fort Worth,
Houston, Austin and San Antonio. Nearly 98% of our portfolio is
in Texas. And the housing recovery continues to emerge in the
Southeast, where there is also strengthening job creation, in the
Carolinas and Florida. We have entered those markets earlier
this year and will continue to originate loans in those markets.
20

IREITINVESTOR.COM
Total Construction & Development Loans

Outstanding
Annual Change in Banks Construction &

Development Loan Portfolio
US Construction & Development Loans Outstanding ($000s)
TX Year over Year Change
40
2Q14
4Q13
2Q13
4Q12
2Q12
4Q11
2Q11
4Q10
2Q10
4Q09
2Q09
4Q08
2Q08
4Q13
2Q14
4Q09
2Q10
4Q10
2Q11
4Q11
2Q12
4Q12
2Q13
2Q08
4Q08
2Q09
4Q07
4Q04
2Q05
4Q05
2Q06
4Q06
2Q07
2Q03
4Q03
2Q04
4Q02
4Q01
2Q02
-60%
4Q07
-40%
2Q07
4Q06
100
-20%
2Q06
10
0%
4Q05
15
200 FDIC
SOURCE:
20%
2Q05
20
300
TX, FL Millions
25
400
40%
4Q04
30
2Q04
500
4Q03
35
2Q03
600
FL Year over Year Change
60%
4Q02
700
U.S. Millions
US Year over Year Change
TX Construction & Development Loans Outstanding ($000s)

FL Construction & Development Loans Outstanding ($000s)
Notwithstanding the improving trends and strong fundamentals in housing, local

and regional banks remain unable or unwilling to significantly increase lending to
developers and homebuilders.
According to FDIC data, during the housing recession banks significantly reduced
their portfolios of construction and development loans and have only recently begun to
increase their construction and development lending.
unable or unwilling to lend in the acquisition and development

space. This lack of available financing has created an opportunity for UDF to fill the void. Private builders are suffering due to
the lack of access to capital that had been traditionally provided by local and regional banks. This increases dependency on
other financial institutions such as UDF to provide financing.
REIT status, we are required to distribute 90% of our taxable

income. UDF IV is currently paying base distributions monthly to
yield an annual distribution of $1.64 per share.
With over 70% of this countrys homebuilding done by private

homebuilders not public companies, UDF is uniquely positioned to provide the capital solutions as well as access to land
for homebuilders and developers.
BT: UDF IV is currently paying base distributions monthly to yield
an annual distribution of $1.64 per share and projected to payout
$1.75 per share in 2015. How safe is the dividend payout?
HG: Our current quarter earnings per share (GAAP earnings, not
pro forma, AFFO or some other non-GAAP measure) of $0.44
cents per share compared to the $0.41 cents per share declared
and paid in the same quarter. Our guidance for next year EPS was
$1.80 to $1.90, compared to the distribution of $1.75, so we
expect to cover that from GAAP earnings as well. On an adjusted
basis, adding back our listing costs and eliminating the benefit
of an accrual reversal, our earnings are covering our distribution
for the year-to-date period (see table next page). To maintain our
UDF IV has historically paid special distributions in addition to

the base distribution rate. Eight special distributions totaling
$4.3 million have been paid to shareholders since inception.
Our portfolio growth, earnings growth, leverage growth and
distribution growth demonstrate the strength of our business,
our clients and our business execution.
BT: Your companys loan portfolio has grown dramatically since
2010. How are you sourcing new deals?
HG: Our expansion into these markets is both strategic and deliberate. UDF has been monitoring the market fundamentals and
believes Florida and the Carolinas continue to demonstrate strong
consistent grow with Texas, Florida and the Carolinas representing approximately 1/3 of all single family housing permits.
Driving our success is the proactive expansion of our asset
management team. UDF is unique in that our asset management team are seasoned and accomplished developers and
homebuilders with deep relationships in the homebuilding
industry in the markets we operate in.
21
IREITINVESTOR.COM
BT: How is the pipeline for new deals?
QUARTER
ENDED
9/30/2014
HG: As of September 30, 2014 we had 131 loans outstanding

with an average balance of $4.6 million. Our gross portfolio is
$601.5 million. 98% of the portfolio are in Texas with approximately 69% in the Dallas Forth Worth Metroplex.
UDF funded its first transaction in Tampa, Florida in the March
quarter and added transactions Orlando and Fort Mills, South
Carolina in the current quarter. We expect to enter the North
Carolina market by year end and continue investing in Florida
and the Carolinas. As evidenced by data from the Bureau of
Labor Statistics, the U.S. Census Bureau, and the Texas A&M
Real Estate Center, since bottoming out in 2009, the markets
of Tampa, Orlando, Charlotte, and Raleigh-Durham have shown
strong increases in employment and a rising consumer confidence.
According the U.S. Census Bureau, over 75% of the new
homes sold in 2013 were under $399,000, which is the market
that we focus our lending and investing activities. This segment
supports conforming loans and serves the new home buyer.
Being the largest segment of the market should provide more
demand for our services and a broader range of exit strategies
and repayment sources. Private builders account for over 70%
of new home sales. The private builders are challenged the
lack of access to capital and land for future growth to expand
their operations. These are our primary borrowers to whom we
intends to lend.
BT: Can you tell us about your background?
HG: I served as our Chief Executive Officer and Chairman of our
board of trustees since our formation in May 2008. I also has
served as Chief Executive Officer of UMTH Land Development,
Net Income
$13,375.00
$36,564.60
77.00
5,115.20
(2,160.00)
$13,452.00
$39,519.80
Cash
$12,484.60
$29,968.10
DRIP
69.20
8,703.80
$12,553.80
$38,671.90
107.2%
102.2%
Listing expenses
Acquisition & origination fee expense
reduction1
Net income plus listing expenses, less
acquisition & origination fee expense
reduction (non-recurring items)
Distributions paid:
Total Distributions paid

Net Income plus listing expenses and
acquisition & origination fee expense
reduction, divided by total distributions paid
Reduction in general and administrative expense - related parties is from the reversal of an accrued
liability for acquisition and origination fees that will no longer be paid to the Trusts advisor
1
$'s in thousands
L.P. (UMTH LD), our asset manager, since March 2003 and
served as its President from March 2003 until July 2011. I
served as partner, Vice Chairman and Chief Executive Officer of
UMT Holdings, L.P. (UMTH) and as President, Chief Executive
Officer and a director of UMT Services, Inc. (UMT Services)
since March 2003.
I am also the co-founder of United Development Funding, L.P.
(UDF I), United Development Funding II, L.P. (UDF II), United
Development Funding III, L.P. (UDF III) and United Development Funding Land Opportunity Fund, L.P. (UDF LOF). UDF
I, UDF II, UDF III and UDF LOF are affiliated real estate finance
companies that provide custom financing, including transactions involving real estate development and construction loans
and credit enhancements, and make opportunistic purchases
of land for residential lot development and home construction.
Too many people overvalue what they

are not and undervalue what they are.
MALCOLM FORBES
NINE MONTHS
ENDED
9/30/2014
22

IREITINVESTOR.COM
EXCLUSIVE iREIT INTERVIEW WITH

OMEGA HEALTHCARE INVESTORS' CEO
For AVIV its payout is ~80% with a yield appreciably under 5%

prior to the merger announcement. With AVIVs portfolio representing around 30% of the merged entity, how will that impact
the payout ratio?
A few days ago Omega Healthcare Investors (OHI) announced

its was accelerating its footprint by combining (merging)
with Aviv REIT (AVIV) in a $3 billion deal that will result in a
combined portfolio of 874 properties in 41 states. I was glad
to see this deal announced, because in my opinion, it solidifies
Omegas position as a best-in-class REIT with a premier $10
billion portfolio of skilled nursing assets.
Pickett: As we previously announced we are maintaining our

current dividend policy. With Omegas relatively larger size, I
would anticipate the payout ratio will remain where it has been
historically.
According to SNL Financial, analysts calculated the capitalization rate on the AVIV transaction somewhere above 6.0%, and
the proposed deal follows a string of aggressively priced transactions, including Ventas Incs (VTR) $2.9 billion acquisition
ofAmerican Realty Capital Healthcare Trust Inc. (HCT) at
a roughly 6% cap rate, andSabra Health Care REITs (SBRA)
$550.0 million purchase of an independent living portfolio at an
even lower yield.
Pickett: We add 33 new operators and four new states. No,

there are no overlapping risks that we are concerned about.
The pricing on the Omega-Aviv deal is noteworthy, in part

because unlike the Ventas and Sabra transactions, it is centered
on skilled nursing properties, which have been regarded by many
in the healthcare space as less desirable than seniors-housing
properties. Jake Mooney with SNL Financial explains:
The difference is that while the seniors-housing facilities
that REITs typically buy are private-pay, with more affluent
tenants, skilled nursing properties mostly depend on government reimbursement through Medicare and Medicaid, adding
a layer of risk in an era of uncertain federal policy.
Recently I caught up with OHIs CEO, Taylor Pickett, to weigh in
on the latest merger news as well as to get an update on the
performance of the company. Heres an exclusive iREIT Investor
newsletter interview:
Thomas: Congratulations of on the proposed AVIV merger. I
have a few questions about the transaction. OHI has a healthy
payout of ~75% and has been yielding something like 5.5%.
Thomas: How will the AVIV portfolio complement OHIs? Are

there any overlapping risks that concern you?
Thomas: How about the balance sheet. Will OHI be stronger as

a result of the merger? I was hoping to see OHI hit investment
grade soon. Will the merger delay that?
Total Market Cap.
$7.3Bn
$3.0Bn (1)
$10.3Bn
Equity Market Cap.
$5.0Bn
$2.2Bn
(1)
$7.2Bn
Debt / Total Market Cap.
31.5%
28.0%
(1)
30.5%
# of Total Facilities(2)
562
312
874
EBITDAR Coverage
1.4x
1.4x
1.4x
Operator
(3)
% of Revenue
Operator
% of Revenue
Ark
10.5%
Daybreak
11.7%
Genesis
10.3%
Saber
11.4%
Communicare
8.7%
EmpRes
10.8%
Ciena
7.9%
Maplewood
9.5%
HHC
6.9%
Fundamental
7.6%
Guardian
6.0%
Preferred Care
5.7%
Signature
5.6%
Sun Mar
4.9%
Airamid
5.3%
Diversicare
4.8%
S&F
4.5%
Providence
2.8%
Diversicare
3.8%
Deseret
2.6%
Top 10% of Total
69.4%
Top 10% of Total
71.7%
23

IREITINVESTOR.COM
Number of SNF Properties

789 (1)
259
369
302
243
102
530
Pickett: We have received positive feedback from the rating

agencies. We are hopeful that Moodys will join S&P and Fitch
who currently rate our bonds investment grade.
Thomas: How do you feel about the cap rate of the AVIV deal?
It seems to be much lower than the cap rates OHI has been
aggregatingDo you feel as though the premium for consolidating the AVIV portfolio is justified?
Pickett: We do not view the transaction as an acquisition, but
rather as a merger. We are combining the best people assets
from both businesses and expanding our tenant platform. When
you think about the model, which relies on tenant relationships
for growth, weve expanded that model and the human resources that drive that model. So, from our perspective, its strategic,
it puts in a position that no one can parallel. If we were just
buying facilities, then I think the cap rate discussion would be
Name
Current Title
Years Experience
101
72
71
45
more relevant.
Thomas: Can you tell us how the AVIV management team will
fit into the mix?
Pickett: Steven Insoft has agreed to join our senior management team. He will lead our new Chicago-based business
development team, which will augment our existing accomplished and highly successful merger and acquisition team in
Hunt Valley. Stevens Chicago staff includes four senior officers
and related support personnel, bringing added redevelopment
capabilities that can be applied to the entire portfolio.
Thomas: How will the merged entity create a lower cost of
capital?
Pickett: Our addition size and expanded diversification should
Name
Current Title
Years Experience
Taylor Pickett
CEO
21
Steven Insoft
Dan Booth
COO
25
Sam Kovitz
CFO
19
Steve Levin
SVP, Nursing Home Operations
35
Jeff Marshall
CAO
13
Josh Kochek
SVP, Investment
14
SVP, Operations
14
Bob Stephenson
Lee Crabill Jr.
Mike Ritz
Megan Krull
President / COO
25
EVP, General Counsel
21
SVP, Real Estate
34
SVP, Asset Management
32

IREITINVESTOR.COM
reduce our debt costs and may ultimately

increase our equity value/multiple.
Thomas: Is OHI still actively buying? Also,
what is the expected closing date on the
merger?
Pickett: We continue to have active acquisition pipelines in Hunt Valley and in Chicago. A big component of our business model
is acquisition growth. The closing date is
subject to filing an S-4 with the SEC, clearing SEC comments, if any, and a shareholder
vote. As of now, we are targeting February
or March 2015.
Thomas: Thank you for your time today.
The most important things for a young man is

to establish a credit- a reputation, character.
JOHN D. ROCKEFELLER
24
25

IREITINVESTOR.COM
REIT PREFERRED PORTFOLIO
United Kingdom. Their portfolio of assets is diversified across

all key measures asset type, tenant/manager mix, revenue
source, operating model and geography. Approximately 74%
of Ventas NOI is derived from private pay, non-government
sources.
This months Intelligent REIT Investors preferred section

contains all new names.
UMH Properties (UMH) is a real estate investment trust that

owns and operates manufactured home communities in seven
states throughout the northeast. These states include New
Jersey, New York, Ohio, Pennsylvania, Tennessee, Indiana and
Michigan. Manufactured home communities provide long-term
appreciation, recession resistant qualities, and stable income
streams. UMH has been in business since 1968, operating as a
public company since 1985. They own a portfolio of 88 manufactured home communities, housing approximately 15,000
home sites. In addition, they own over 810 acres of land for the
development of new sites.
This month, we will be adding:

1. Inland Real Estate Corp.
2. Ventas Inc.
3. UMH Properties Inc.
Inland Real Estate Corp (IRC) is a real estate investment trust
that owns and operates shopping centers in strong geographic
markets. With $2.9 billion in total assets under management,
the company has a strong presence within the Central U.S.
that includes the largest shopping center portfolio in Chicago and Minneapolis/St. Paul. IRC has been expanding into the
Southeast. Inland Real Estate Corporations diversified portfolio includes neighborhood, community and power shopping
centers as well as single-tenant retail assets.
A fundamental snapshot of this months selections is below:

As the table below shows, two of the selected REITs are consistent with prior months REIT selections in that they have moderate financial profiles, reasonable leverage and dividend payout
ratios that afford the REITs financial flexibility - prerequisites
for intelligent REIT preferreds. The third REIT, UMH Properties
has a payout ratio that may not be sustainable for the equity,
making the preferred the optimal segment of the capital struc-
Ventas (VTR) is a real estate investment trust with a highly

diversified portfolio of more than 1,500 seniors housing and
healthcare properties in the United States, Canada and the
November 2014 REIT Preferred Portfolio Additions Fundamental Snapshot

COMPANY
Inland Real Estate Corp
Ventas Inc
UMH Properties Inc
MKT CAP
NO. OF
PROP
P/B
P/FFO
FFO
PAYOUT
FFO/SH
GROWTH
DIV YLD
DEBT /
EBITDA
$1,059,288,073
157
2.5
11.9
59.9%
5.32%
9.0
58%
$20,322,683,725
1500
2.4
16.5
66.4%
4.20%
6.2
$228,442,784
74
2.1
19.9
136.4%
7.45%
9.3
2.30
16.12
88%
5.7%
8.17
54%
Average
MTG DEBT / DEBT / RE

TOT DEBT
ASSETS
62%
49%
27%
51%
45%
77%
66%
28%
60%
41%
November 2014 REIT Preferred Portfolio Additions Recommended Securities

REIT NAME
SECURITY
SERIES
SYMBOL
PAR
PX
CY
SY
CALL DATE
YTC
RANK
Inland Real Estate Corp
IRC 6.95
IRCpB
$25.00
$25.76
6.76%
6.79%
10/16/2019
6.30%
Preferred
Ventas Inc
VTR 5.45
VTRB
$25.00
$24.81
5.49%
5.56%
3/7/2018
6.02%
Sr Unsecured
UMH Properties Inc
UMH 8 1/4
UMHpA
$25.00
$26.28
7.88%
7.89%
5/26/2016
4.62%
Preferred
$25.62
6.71%
6.74%
Average
5.65%
26

IREITINVESTOR.COM
ture to invest in, The addition of Ventas brings the largest

player in the healthcare space into the portfolio with senior
unsecured debt (sometimes known as baby bonds due to
their $25 par).
November 2014 Preferred Portfolio Breakdown

SECTOR
EXPOSURE
COUPON
CHG MOM
Apartments
Exposure
Coupon
Chg MoM
Diversified
4.76%
7.44
-0.37%
The details of the preferred selections on the bottom of the

previous page:
Hotels
19.05%
7.07
1.10%
As the table to the right shows, the above preferreds do

not trade at a significant premium, again, the only exception being UMH. The additions dampen the portfolio yield to
7.16% from 7.19%, but serve to further diversify the portfolio. The average yield of this months selections is 6.74% at
current prices on a stripped yield basis.
Manufactured Homes
7.14%
7.75
-0.55%
Office Property
4.76%
6.94
-0.37%
Regional Malls
16.67%
7.25
-1.28%
Shopping Centers
9.52%
6.88
-0.73%
Single Tenant
19.05%
7.04
1.10%
Storage
4.76%
6.63
-0.37%
Warehouse/Industr
4.76%
7.06
-0.37%
Mortgage
2.38%
8.88
-0.18%
Grand Total
100%
7.167
Graphically, the composition looks like the pie chart to the

right:
The portfolio continues to have a solid yield greater than 7%
while having strong underlying fundamentals and a diverse
income stream which should help investors outperform in
this uncertain and pricey market environment. Over the next
few months, the portfolio will be looked at in terms of optimization for current yields and the expectation that rates will
face upward pressure.
2.38% 2.38%
4.76%
4.76%
4.76%
19.05%
4.76%
7.14%
19.05%
4.76%
9.52%
In looking for people

to thrive, you look
for these qualities:
integrity, intelligence
and energy. And if they
dont have the first, the
other two will kill you.
WARREN BUFFET
REITS-Apartments
REITS-Diversified
REITS-Hotels
REITS-Manufactured Homes
REITS-Office Property
REITS-Regional Malls
16.67%
REITS-Shopping Centers
REITS-Single Tenant
REITS-Storage
REITS-Warehouse/Industr
REITS-Mortgage
REITS-Healthcare
27

IREITINVESTOR.COM
THE MOST IMPORTANT THING

As the editor of The Intelligent REIT Investor, its my goal to provide
you with research and insight that will enable you to make sound
investment decisions. Although I may come across an exciting
bargain, I will continually remind you to diversify your holdings
whether it is REIT stocks or other valuable portfolio equities.
Its true that diversification is a risk management tool which
embodies the maxim dont put all of your eggs in one basket.
Its widely held within the investment world that company-specific risk can be reduced by holding somewhere between 15
- 50 stocks. Industry-specific risk can be reduced by holding
stocks from varying industries, country-specific risks can be
reduced by holding stocks from varying countries and so on.
Diversification is good when it reduces risk without inhibiting
returns. Diversification is bad when a portfolio becomes so
diversified that mathematically it becomes difficult to outperform a benchmark or achieve a desired level of return. The
more money you have to invest obviously the bigger your average position size is going to be, particularly if you are trying
to achieve an optimally concentrated portfolio. For really large
portfolios this means many small cap stocks become un-investable. Essentially, your flexibility is reduced.
As some of you know, I have started to build my own REIT portfolio. Yes, that means I have skin in the game and although
Im starting small, I intend to build a REIT portfolio that provides
durable income for years to come. So I believe I have a tremendous advantage over ordinary investors because I study REITs
on a daily basis, not for the purpose to be a day trader, but
more so to stay actively engaged with the REIT sector and
make the most intelligent picks. At the end of the newsletter I
have provided you with my portfolio of REITs to date.
My Bullish Picks:
Every month I will include three different REIT portfolios and
each portfolio is geared for different investor profiles:
(1) SWAN The sleep well at night portfolio is aimed to
benefit the conservative investor, often a retiree, who is interested in Rule #1 DONT LOSE MONEY AT ALL COSTS. This
portfolio will include blue chip REITs and other REITs that have
demonstrated exceptional risk management attributes.
(2) SALSA The SALSA portfolio is not a portfolio of speculative
companies but more of a growth portfolio that is aimed to produce
higher total returns (than the SWAN). There will be some REITs in
the SALSA portfolio that you many not own individually (like a hot
pepper); however, the hot ingredients in the SALSA portfolio will
enable investors to take on medium risk for higher returns.

14.0
12.0
11.45
10.0
8.0
6.0
4.0
2.0
2.68 2.84
2.20 2.34 2.63
3.25 3.42
3.47 3.47 3.63 3.80 3.95
4.78
4.09 4.57 4.60 4.63 4.68 4.68
5.41 5.49 5.52 5.72
5.74 6.10
7.01 7.42
6.19 6.22 6.42
8.31
0.0
PEB GPT GGP SKT TCO EXR DDR ARE SOHO CLDT BRX ROIC HIW HCN SUI HME HTA BMR DLR IRC EXL OHI STAG DOC EPR LXP MPW CSG BXMT UMH UDF ARCP
28

IREITINVESTOR.COM
(3) Three D (3D) The 3D portfolio only includes REITs that

have NEVER cut a dividend; hence the name (Disciplined and
Durable Dividends).
First, let me tell you about the SALSA portfolio. This is my list
of potential REIT picks that are deemed to be suited for growth
and income. Im not necessarily describing these REITs as risky
but I have labeled them as SALSA because of their enhanced
growth potential.
This month Im pleased to tell you about a few good
SALSA opportunities but remember, the key for a
successful value investor is to buy with a margin
of safety. Thats why I created a filtering system to
assist you with spotting the winners. Also, I added
a few new items to the newsletter this month.
Some have asked for an ex-dividend list so I added
that to the master list (in the back), Also, I added a
chart with star ratings. I have provided each REIT
with a rank with * being the weakest in dividend
safety and ***** being the best.
This month there are six REITs that are possible
BUYs. They are all within 5% or less of my Target
BUY prices. These six REITs are labeled in GREEN.
I would recommend buying any of these today:
HIW, UDF, EXL, IRC, CSG, and LXP.
Also, there are quite a few near buys meaning
these companies are priced between 5% to 10%
above my target and I am monitoring closely. Im
not recommending that you buy them today but
they could easily be added with a modest sell-off.
Some of these on my watch list include EXR, TCO,
DDR, SUI, BMR, and BRX. Also, I recently decided
to add SoTHERLY Hotels (SOHO) to the SALSA list.
This is the 3rd Hotel REIT that I have added and
I intend to continue adding more to my research
coverage. SOHO is also a SALSA to watch as I
have targeted $7.00 as my additional entry price.
See the SALSAs dividend yields graph on bottom of previous

page.
You can review the complete list of SALSA REITs at the end of
this article and also the star rating chart.
Now lets drill down to the SWAN (sleep well at night) opportunities. As you can see, I have 3 REITS on the BUY list this month:
SALSA PORTFOLIO
CURRENT
+/11/18/14 TARGET
TICKER
PRICE
Health Care REIT
HCN
60.00
72.17
20.3%
Moved Target to $60.00
Alexandria Real Estate
ARE
70.00
82.94
18.5%
Moved Target from

$63.28 to $70.00
Physicians Realty
DOC
13.25
15.68
18.3%
Chatham Lodging
CLDT
22.50
26.44
17.5%
General Growth
GGP
22.00
25.85
17.5%
Medical Properties Trust
MPW
11.50
13.51
17.5%
Digital Realty
DLR
60.00
69.41
15.7%
SOLD due to poor share

price performance
Moved Target from
$58.00 to $60.00
STAG Industrial
STAG
21.00
23.59
12.3%
NEAR BUY TARGET
Tanger Factory Outlets
SKT
32.00
35.87
12.1%
NEAR BUY PRICE
EPR Properties
EPR
50.00
56.02
12.0%
NEAR BUY TARGET
Omega Healthcare Investors
OHI
34.00
37.71
10.9%
Moved Target to $34

(dividend increase)
Peeblebrook Hotel Trust
PEB
38.00
41.85
10.1%
BXMT
26.00
28.55
9.8%
GPT
5.50
5.99
8.9%
Retail Opportunity Investment Corp. ROIC
15.00
16.20
8.0%
UMH Properties
9.00
9.70
7.8%
Blackstone Mortgage
Gramercy Property Trust
NOTE
Moved Target from

$4.50 to $5.50
HealthCare Trust of America
HTA
11.50
12.39
7.7%
SOLD due to poor share

price performance
Moved Target from
$10.50 to $11.50
BrixMor Properties
BRX
22.00
23.68
7.6%
NEAR BUY TARGET
SoTHERLY Hotels
SOHO
7.00
7.49
7.0%
NEAR BUY Target

(Warning: Small-Cap)
BioMed Realty
BMR
20.00
21.37
6.9%
NEAR BUY TARGET
Sun Communities
SUI
53.00
56.51
6.6%
NEAR BUY TARGET
DDR Corp.
DDR
17.00
18.12
6.6%
NEAR BUY TARGET
Taubman Centers
TCO
72.00
76.04
5.6%
NEAR BUY TARGET
Home Properties
HME
60.00
63.12
5.2%
NEAR BUY TARGET
Extra Space
EXR
55.00
57.79
5.1%
NEAR BUY TARGET
Highwoods Properties
HIW
40.00
41.55
3.9%
BUY NOW
United Development Funding
UDF
19.00
19.73
3.8%
BUY NOW
Excel Trust
EXL
12.50
12.74
1.9%
BUY NOW
Inland Real Estate
IRC
10.75
10.53
-2.0%
BUY NOW
Chambers Street Group
CSG
8.68
7.95
-8.4%
RECENT ADD (CEO

Retiring)
LXP
12.23
10.98
-10.2%
BUY NOW
ARCP
12.00
8.73
-27.3%
HOLD (Warning: High

Risk)
Lexington Realty Trust

American Realty Capital Properties
n Near Buy n Buy Now
UMH
29

IREITINVESTOR.COM
ACC, O, HCP, and WPC. While attending REITWorld a few days ago I interviewed ACCs CEO,
Bill Bayless. I was impressed with his knowledge of the campus sector and his record for
driving shareholder value. I also recently moved
my target for WPC up to $65 as I believe the
New York-based REIT will continue to grow its
global footprint driven by opportunistic sale/
leaseback deals.
I have 5 REITs on the NEAR BUY list (shaded
in yellow): HTA, BMR, TCO, HCP, and EXR. I
already own several of these REITs; however, I
have been looking at adding BMR when I see a
pullback in price. Theres a good chance that I
will be adding more shares in EXR as I believe
the fundamentals have given me more confidence that dividends will continue to rise.
Now here are the SWANs including their
respective dividend yields.
You can review the complete list of SWAN
REITs at the end of this article and also the star
rating chart.
The Three-D Portfolio
TARGET CURRENT
+/PRICE
9/18/14 TARGET
SWAN PORTFOLIO
TICKER
Essex Property Trust
ESS
145.00
Health Care REIT
HCN
55.00
72.17
31.2%
Regency Centers
REG
49.00
60.44
23.3%
Moved Target from $46.00

to $49.00
Weingarten Realty
WRI
30.00
35.93
19.8%
Near BUY Target
Simon Property
SPG
150.00
178.48
19.0%
Omega Healthcare Investors
OHI
32.00
37.71
17.8%
National Retail Properties
NNN
32.00
37.62
17.6%
Digital Realty
DLR
60.00
69.41
15.7%
Monmouth REIT
MNR
9.50
10.93
15.1%
Kimco Realty
KIM
22.00
24.75
12.5%
Tanger Factory Outlets
SKT
32.00
35.87
12.1%
Ventas
VTR
62.00
68.80
11.0%
HealthCare Trust of America
HTA
11.50
12.39
7.7%

to $11.50
BioMed Realty
BMR
20.00
21.37
6.9%
Near BUY Target
Taubman Centers
TCO
72.00
76.04
5.6%
Near BUY Target
Extra Space
EXR
55.00
57.79
5.1%
Near BUY Target
HCP, Inc.
HCP
42.00
44.04
4.9%
Near BUY Target
American Campus Communities
ACC
37.00
38.76
4.8%
BUY Now
44.00
46.07
4.7%
BUY NOW
WPC
65.00
66.05
1.6%
Moved to $65.00
Realty Income
WP Carey
200.52
NOTE
38.3%

to $32.00

to $60.00
HOLD - Waiting on FFO Growth
and Better Dividend Coverage
n Near Buy n Buy Now

TICKER
TARGET
CURRENT
+/-
BioMed Realty
SWAN RANKED BY +/- TARGET
BMR
21.25
55.22
159.9%
Digital Realty
DLR
58.00
63.02
8.7%
Realty Income
44.00
64.17
45.8%
HCP
42.00
38.65
-8.0%
HCP, Inc.
As you all know, we all buy REITs for one thing:

Dividends. Why? Numerous studies have shown
that companies that raise dividends outperform the companies
that dont pay dividends. Historically, the S&P Dividend Aristocrat Index has outperformed the S&P 500: Since inception
in 1990, the Aristocrats have returned 901% versus the S&P
500, which returned 469%.
Today I am providing you with three sound blue chip recommendations. These REITs are very highly rated and based upon
their successful track record of increasing dividends, they all
are ideal candidates for long-term investing. I find these 3
REITs soundly valued and thats the reason that I wanted to put
them on the bullet proof blue chip list.
I also included a list of FFO/share and dividend/share payouts

for these REITs. OHI recently declared a $0.52/share quarterlydividend,2% increasefrom prior dividend of $0.51 ($2.08
annualized).
Heres a snapshot of their dividend history (number of years of
increased dividends)
Blue Chip of the Month

W.P. Carey is my blue-chip pick of the month. Heres a FAST
Graph that illustrates the sustainable track record of the companys earnings and dividends. See graph middle of next page.
30

IREITINVESTOR.COM

6.0
5.49 5.52 5.69
5.0
4.0
3.11 3.25
2.91
2.94
3.0 2.59 2.68
3.62
4.22
3.88 3.92
4.77 4.78 4.94

4.47 4.57 4.68 4.68
2.0
1.0
0
ESS
SKT
TCO SPG REG
EXR
WRI
Now lets examine WPCs recent performance

and remember that the black line represents
the price and the orange line is intrinsic value.
My suggested entry price for Carey is $65.00.
See graph bottom right.
Minimize Risk and Protecting Your

Nest Egg At All Costs
Ben Graham wrote, you are neither right nor
wrong because the crowd disagrees with you.
You are right because the data and reasoning
are right. As Graham defined it, the margin
of safety constitutes a favorable difference
between price on the one hand and indicated or appraised value on the other. While it
is impossible to eliminate all investment risk,
Grahams methods greatly minimize such risk
by filtering out disadvantageously positioned
securities from the outset. That is the primary
reason why they have proven to be successful.
After all, it takes only a few large losses to decimate overall investment performance, even if
many other investments prove successful.
Each month I attempt to provide you with the
raw data and research to enable you to make
the best decisions. I am glad that this news-
KIM
ACC
VTR
NNN HCN BMR HTA
DLR
HCP MNR
OHI
WPC

IREITINVESTOR.COM
STAR RATING MODEL

STAR RATING
COMMENTS
Residential
American Campus Communities (ACC)
***
Best in Class Campus REIT/

Fundamentals prove it
Essex Property Trust Inc. (ESS)
****
High Quality Assets / West Coast
Kimco Realty Corp. (KIM)
****
My Top S/C pick - Excellent

mgt team
Regency Centers Corp. (REG)
***
Necessity-proof tenants
Weingarten Realty Investors (WRI)
***
Focused mgt team / strong

insider alignment
Simon Property Group (SPG)
****
Proven platform and strong mgt
Tanger Factory Outlet Centers (SKT)
****
Fortress Balance sheet and

desirable brand
Taubman Centers Inc. (TCO)
***
Steady dividend history
***
Best in class and fundamentals

prove it
National Retail Properties (NNN)
****
Realty Income Corp. (O)
****
W. P. Carey Inc. (WPC)
***
very predictable dividend history /

strong balance sheet
best in class - fortress balance
sheet
durable platform with global
exposure
****
Solid Performance / Strong

Balance Sheet
Healthcare Trust of America (HTA)
***
HCP Inc. (HCP)
****
Ventas Inc. (VTR)
****
Improved Balance Sheet / Occupancy Solid

Solid performer and steady
dividend
Best in CEO with durable income
history
BioMed Realty (BMR)
***
Better Buy Than ARE
Omega Healthcaree Investors (OHI)
***
Pending Merger / Steady Dividend

Growth
Health Care REIT (HCN)
****
Strong Balance Sheet
Shopping Centers
Mall
Self Storage
Extra Space Storage Inc. (EXR)
Triple Net
Data Sector
Digital Realty Trust Inc. (DLR)
Healthcare
Industrial
Monmouth Real Estate (MNR)
**
Bond-like income / Should cover

dividend in 2015
letter is a part of the research process and Im always glad to

provide assistance if you have specific requests (brad@theintelligentreitinvestor.com). Much of the power of the margin of
safety concept lies in its wide applicability. It is something of an
all purpose risk minimization tool with which one can proceed
with a fair degree of certainty that, regardless of day-to-day
price fluctuations, ones principal is likely to be secure.
See You Again Soon
A sense of humility is a
quality I have observed
in every leader I have
deeply admired.
DWIGHT D. EISENHOWER
31
32

IREITINVESTOR.COM
TICKER
DIV/
SHARE
FFO/
SHARE
PAYOUT
RATIO
Federal Realty (FRT)
FRT
3.30
4.93
67%
HCP, Inc. (HCP)
HCP
2.18
3.02
72%
Universal Health Realty (UHT)
UHT
na
na
na
NNN
1.65
2.04
81%
Essex Property Trust (ESS)
ESS
5.11
8.38
61%
Tanger Factory Outlets (SKT)
SKT
0.95
1.95
49%
2.20
2.61
84%
THREE D PORTFOLIO
Realty Income (O)

Urstadt Biddle Properties (UBA)
UBA
1.01
1.13
89%
WP Carey (WPC)
WPC
3.60
4.34
83%
Omega Healthcare Investors (OHI)
OHI
2.08
2.76
75%
National Health Investors (NHI)
NHI
3.08
4.21
73%
Senior Housing Property Trust (SNH)
SNH
1.56
1.75
89%
Equity Lifestyle (ELS)
ELS
1.30
2.73
48%
Digital Realty (DLR)
DLR
3.32
4.9
68%
HCN
3.18
4.13
77%
Medical Properties Trust (MPW)
MPW
0.85
1.06
80%
Ventas, Inc. (VTR)
VTR
2.97
4.42
67%
Monmouth Real Estate Corp. (MNR)
MNR
0.60
0.56
107%
Taubman Centers (TCO)
TCO
2.16
3.67
59%
THREE D PORTFOLIO
A successful man is
one who can lay a
firm foundation with
the bricks others have
thrown at him.
DAVID BRINKLEY
RECENT PRICE
% FROM
TARGET
DIV-YLD
P/FFO
NA
5.54
16.7
NA
NA
7.15
13.3
BBB-
27.9%
2.77
27.3
BBB
24.3%
2.85
24.8
A-
24.1%
4.71
17.8
BBB
17.7%
4.76
18.3
NA
17.0%
2.94
17.5
NA
5.03
14.6
NA
4.51
18.6
BBB+
14.9%
5.48
14.8
BB+
13.2%
5.59
17.9
NA
5.27
13.1
BBB
6.31
33.3
BB
TICKER
MY TARGET
Universal Health Realty (UHT)
UHT
NA
48.10
Senior Housing Property Trust (SNH)
SNH
NA
22.32
Essex Property Trust (ESS)
ESS
145.00
201.21
Federal Realty (FRT)
FRT
100.00
132.13
HCN
55.00
72.43
Urstadt Biddle Properties (UBA)
UBA
18.00
21.87
Equity Lifestyle (ELS)
ELS
40.00
48.22
National Health Investors (NHI)
NHI
55.00
66.24
17.0%
NNN
32.00
37.78
15.3%
OHI
32.00
37.59
Monmouth Real Estate Corp. (MNR)
MNR
9.50
10.95
Digital Realty (DLR)
DLR
60.00
69.01
13.1%
MPW
12.00
13.53
11.3%
S&P
Tanger Factory Outlets (SKT)
SKT
32.00
35.94
11.0%
2.81
18.2
BBB+
Ventas, Inc. (VTR)
VTR
62.00
69.03
10.2%
4.38
15.5
BBB+
Taubman Centers (TCO)
TCO
72.00
76.30
5.6%
2.91
23.2
NA
HCP, Inc. (HCP)
HCP
42.00
44.04
4.6%
5.12
14.6
BBB+
Realty Income (O)
44.00
46.11
4.6%
5.00
17.2
BBB+
WP Carey (WPC)
WPC
65.00
66.53
2.3%
5.86
15.9
BBB
5.41
3.25
11.45
18.12
35.87
76.04
25.85
57.79
6,513
3,440
4,815
22,854
6,723
6.22
5.72
4.09
2.20
10.98
5.99
69.41
12.39
37.71
82.94
21.37
72.17
15.68
13.51
23.59
7.95
41.55
2,550
744
9,406
3,060
4,805
5,972
4,219
23,648
743
2,330
1,520
1,884
3,792
3.47
8.31
7.49
19.73
28.55
79.18
604.15
1646.75
7.01
3.63
41.85
26.44
2,989
898.91
6.42
5.74
4.57
4.68
3.47
5.52
4.68
4.78
2.34
6.19
6.10
8.73
56.02
7,927
3,202
2.63
2.84
2.68
3.42
3.80
3.95
5.49
16.20
12.74
779
23.68
10.53
1,054
4.63
7,022
63.12
3,621
4.60
7.42
DIVIDEND YIELD (%)*
1,506
9.70
56.51
MARKET CAPITALIZATION
($M)*
229
CLOSING PRICE
($)*
2,713
DIVIDEND GROWTH RATE

(%)
NM
-0.79
42.86
14.29
43.75
0.00
-16.00
8.33
5.00
NM
3.92
6.38
10.77
8.51
0.00
6.41
NM
13.33
8.24
10.70
17.50
25.00
8.00
6.67
14.81
NA
6.67
2.94
0.00
4.29
3.17
0.00
NA
FFO PAYOUT (%)1

NA
NA
20.00
NA
34.85
60.71
74.12
NA
87.50
NM
78.71
62.50
60.00
69.86
84.56
68.03
87.50
60.71
85.50
125.00
65.28
NA
62.07
46.15
50.00
42.55
72.73
125.00
59.38
64.60
71.43
EX-DIVIDEND DATE
9/26/14
12/12/14
12/11/14
11/25/14
9/26/14
11/13/14
3/27/15
3/27/15
12/2/14
10/15/14
9/26/14
9/26/14
10/29/14
12/24/14
12/11/14
9/26/14
9/26/14
10/29/14
11/5/14
9/11/14
12/11/14
9/11/14
10/28/14
12/12/14
1/2/15
12/11/14
12/29/14
10/29/14
11/6/14
9/26/14
11/13/14
NA
PRICE/ FFO (X)1

NA
NA
7.8
NA
14.1
13.9
11.1
NA
12.8
57.2
15.4
12.6
15.4
11.7
17.1
12.8
36.0
8.7
12.7
15.7
17.9
NA
21.0
15.7
13.5
11.8
16.7
21.0
10.3
12.9
13.9
TOTAL DEBT/ TOTAL

CAPITALIZATION (%)1
61.10
NA
70.96
37.65
17.14
35.15
43.48
33.11
43.44
17.93
32.04
40.95
38.00
34.57
34.70
32.82
39.07
47.16
33.41
42.66
25.66
42.96
27.98
30.43
44.96
49.15
32.67
39.90
44.22
38.62
34.40
45.03
NA
NA
12
78
31
285
132
238
111
64
1,228
110
185
508
295
131
117
235
231
3,972
810
140
24
45
385
522
58
40
136
121
184
88
NUMBER OF PROPERTIES
(ACTUAL)1
* DATA AS OF 11/17/2014 | YEAR-OVER-YEAR GROWTH AS OF THE MOST RECENT QUARTER ENDED. | 1DATA AS OF MOST RECENT QUARTER ENDED. | NA EQUALS DATA NOT AVAILABLE AND NM SIGNIFIES NON-MEANINGFUL DATA SOURCE: SNL FINANCIAL
Residential
UMH Properties Inc. (UMH)
Sun Communities (SUI)
Home Properties (HME)
Shopping Centers
Inland Real Estate Corp. (IRC)
Excel Trust Inc. (EXL)
Retail Opportunity Investments (ROIC)
BrixMor (BRX)
DDR Corp. (DDR)
Mall
General Growth Properties (GGP)
Self Storage
Triple Net
American Realty Capital Ppts (ARCP)
EPR Properties (EPR)
Lexington Realty Trust (LXP)
Gramercy Property Trust (GPT)
Data Sector
Healthcare
Alexandria Real Estate (ARE)
BioMed Realty (BMR)
Physicians Realty (DOC)
Industrial / Office
STAG Industrial Inc. (STAG)
Chambers Street Group (CSG)
Highwoods Properties (HIW)
Hotels
Peeblebrook Hotels (PEB)
Chatham Lodging (CLDT)
SoTHERLY Hotels (SOHO)
Mortgage REITs
United Development Funding (UDF)
Blackstone Mortgage (BXMT)
SALSA List
IREITINVESTOR.COM
82.20
OCCUPANCY RATE (%)1

NA
NA
73.10
NA
90.00
91.00
97.30
94.80
NA
95.40
NA
90.20
94.00
NA
91.80
93.00
99.00
97.60
99.00
98.80
NA
95.60
89.20
97.70
95.60
92.70
97.40
90.80
94.30
94.50
92.50
21.93
NA
44.28
32.54
42.12
18.43
0.44
12.16
9.35
35.95
25.40
16.63
32.88
24.67
22.59
53.59
32.98
6.74
15.35
-28.52
39.68
27.68
16.84
9.00
13.24
20.73
14.51
15.58
6.30
20.88
42.16
10.54
1-YR TOTAL RETURN (%)*
189.22
NA
274.12
187.57
143.20
65.36
NA
175.66
73.38
NA
71.36
38.07
39.48
166.86
NA
25.54
119.56
74.91
54.31
6.25
177.59
109.38
35.66
39.53
77.71
NA
57.10
36.27
75.70
31.47
85.84
25.93
3-YR TOTAL RETURN (%)*
33
3.25
4.47
35.93
178.48
35.87
76.04
57.79
4,393.3
55,468.4
3,439.9
4,815.1
6,722.8
4.78
4.68
66.05
69.41
6,870.2
9,405.9
10.93
617.3
5.52
37.71
72.17
4,805.3
21.37
4,219.3
23,648.2
4.68
68.80
20,249.1
5.49
4.57
4.22
4.94
12.39
44.04
3,059.7
20,285.7
5.69
4.77
37.62
46.07
4,961.7
10,259.2
2.84
2.68
2.91
3.62
3.11
3.88
24.75
60.44
5,635.7
2.59
3.92
DIVIDEND YIELD
(%)*
10,182.8
38.76
200.52
4,074.4
CLOSING PRICE
($)*
12,821.7
DIVIDEND GROWTH
RATE (%)
0.00
3.92
8.51
6.38
8.21
3.81
0.00
6.41
7.14
0.69
3.70
17.50
8.00
6.67
13.04
6.56
1.62
7.14
7.44
5.56
EX-DIVIDEND DATE
11/13/14
10/29/14
9/26/14
9/10/14
11/6/14
12/24/14
12/11/14
9/26/14
10/30/14
10/29/14
9/11/14
9/11/14
10/28/14
11/12/14
12/4/14
11/17/14
12/30/14
9/26/14
11/10/14
88.37
FFO PAYOUT (%)1

100.00
78.71
69.86
62.50
70.39
66.46
84.56
68.03
104.65
85.68
80.77
65.28
62.07
46.15
68.42
62.50
67.14
57.69
62.50
PRICE/ FFO (X)1

16.7
15.4
11.7
12.6
15.0
12.1
17.1
12.8
18.5
15.9
16.6
17.9
21.0
15.7
21.6
15.1
19.2
14.0
21.5
21.2
31.07
32.04
34.57
40.95
36.33
33.19
34.70
32.82
36.02
34.40
27.42
25.66
27.98
30.43
26.16
32.33
27.36
31.85
30.69
42.66
TOTAL DEBT/ TOTAL

CAPITALIZATION
(%)1
* DATA AS OF 11/17/2014 | YEAR-OVER-YEAR GROWTH AS OF THE MOST RECENT QUARTER ENDED. | 1DATA AS OF MOST RECENT QUARTER ENDED. | NA EQUALS DATA NOT AVAILABLE AND NM SIGNIFIES NON-MEANINGFUL DATA
Residential
American Campus Communities (ACC)
Essex Property Trust Inc. (ESS)
Shopping Centers
Kimco Realty Corp. (KIM)
Regency Centers Corp. (REG)
Weingarten Realty Investors (WRI)
Mall
Simon Property Group (SPG)
Self Storage
Triple Net
Realty Income Corp. (O)
W. P. Carey Inc. (WPC)
Data Sector
Healthcare
HCP Inc. (HCP)
Ventas Inc. (VTR)
BioMed Realty (BMR)
Omega Healthcaree Investors (OHI)
Industrial
Monmouth Real Estate (MNR)
SWAN Portfolio
IREITINVESTOR.COM
MARKET
CAPITALIZATION
($M)*
163
NUMBER OF
PROPERTIES
(ACTUAL)1
81
1,228
508
110
1,468
1,191
295
131
692
4,284
2,038
810
24
45
367
248
318
NA
246
OCCUPANCY RATE
(%)1
94.30
NA
NA
90.20
NA
NA
91.80
93.00
98.10
99.10
98.80
NA
89.20
97.70
NA
94.90
95.90
NA
NA
93.50
21.37
1-YR TOTAL
RETURN (%)*
28.66
25.40
24.67
16.63
17.87
16.97
22.59
53.59
7.87
18.86
16.21
39.68
16.84
9.00
27.42
25.66
27.01
21.81
29.62
52.58
71.36
166.86
38.07
52.08
36.65
NA
25.54
93.84
59.92
65.73
177.59
35.66
39.53
69.78
96.08
83.72
79.21
68.04
10.68
3-YR TOTAL
RETURN (%)*
34
35
IREITINVESTOR.COM
GLOSSARY OF TERMS:
Adjusted Funds from Operations (AFFO): FFO, less normalized recurring expenditures that are capitalized by the REIT and
amortized, and which are necessary to properly maintain and
lease the property (e.g. new carpeting and draperies in apartment units, leasing expenses, and tenant improvement allowances); adjustments are also made to eliminate the straight-lining of rents; which is an accounting convention.
Market Cap: The total market value of a REITs (or other companys) outstanding securities and indebtedness. For example, if
20 million shares of a REIT are trading at $20 each, 1 million
shares of the REITs preferred stock are trading at $25 each,
and the REIT has $100 million of debt, its market cap would
be $525 million ($400 million in common stock, $25 million in
preferred stock, and $100 million in indebtedness).
Beta: The extent to which a stocks price moves with an index

of stocks, such as the S&P 500.
Payout Ratio: The ratio of a REITs annual dividend rate to its

FFO or AFFO, on a per share basis. For example, if FFO is $1
per share and the current dividend rate is $0.80 per share, the
FFO payout ratio would be 80%. Sometimes investors will use
coverage ratio rather than payout ratio; the former measures
the extent to which the current dividend is being covered by
FFO or AFFO. In this calculation, investors divide FFO or AFFO
by the dividend rate; that is, if the dividend is $0.80 per share
and FFO is $1 per share, the FFO coverage ratio is $1 divided
by $0.80, or 1.25x.
Cash Flow: With reference to a property (or group of properties), the owners rental revenues from the property minus all
property operating expenses, including property management
expenses, utility costs and property taxes. The term ignores
depreciation and amortization expenses and income taxes,
as well as interest on loans obtained to finance the property.
Sometimes used interchangeably with net operating income or
EBITDA.
Cost of Capital: The cost to a company, such as a REIT, of
raising capital in the form of equity (common or preferred stock)
or debt. The cost of equity capital should take into account
the dilution of the interests of the existing equity holders in
the company. The cost of debt capital is merely the interest
expense on the debt incurred.
Real Estate Investment Trust Act of 1960: Legislation

passed by Congress and signed into law in 1960 authorizing
the formation of REIT organization, for the purpose of allowing
individuals (and institutions) to make investments in real estate
and receive benefits similar to those they would receive from
direct ownership.
Funds from Operations (FFO): Net income (determined in accordance with GAAP), excluding gains or losses from debt restructuring and sales of property, plus depreciation of real property, and
after adjustments for unconsolidated entities, such as partnerships
and joint ventures, in which the REIT holds and interest.
Total Return: A stocks dividend income plus capital appreciation, before taxes and commissions. For example, if a stock
rises 4% in price and provides a 4% dividend yield during the
measurement period, the investors total return would be 8%.
Interest Coverage Ratio: In REIT world, the ratio of a REITs operating income (before amortization, depreciation, income taxes and
interest expense) to total interest expense for any particular period. This ratio measures the extent to which interest expense on
outstanding debt is covered by existing cash flow.
Volatility: The extent to which the market price of a stock tends

to fluctuate from day to day, or even hour to hour. The volatility
of a REIT stock, or all REIT stocks, will vary over time. It is likely
that the shares of REITs with modest debt leverage and more
secure cash flows will be less volatile than others during most
market periods.

IREITINVESTOR.COM
DRIVE FOR SHOW, PUTT FOR DOUGH
Pictures from Trump International, Scotland
36
37
IREITINVESTOR.COM
THE DEFINITIVE SOURCE OF REIT NEWS
Real Estate Investment Trust Intelligence

www.ireitinvestor.com
This newsletter is intended to provide information to interested parties. As I have no knowledge of your individual circumstances, goals and/or portfolio
concentration or diversification, readers are expected to complete their own due diligence before purchasing any stocks mentioned or recommended.
Brad Thomas is a financial columnist and REIT expert with more than 25 years of experience in the investment industry. He is ranked
#1 in both REITs and Finance on the Seeking Alpha website (Seeking Alpha is the leading website and social network for business
analysis, vibrant investment discussion, and financial opinion. Reaching over 10 million monthly uniques, and published more than
250 opinion articles daily, giving a voice to over 7,000 contributors, while connecting executives and financial experts from around
the world). He also contributes frequently for The Street, The Motley Fool, and Forbes.com. He is also published in Forbes Magazine,
Kiplinger, Barrons, and The Institutional Investor. He has many quoted in many leading publications and he has been seen on Fox
Business. Thomas is also editor of The Intelligent REIT Investor, a subscription-based newsletter.
DISCLOSURE: BRAD THOMAS AND/OR HIS FAMILY OWNS THE FOLLOWING REIT SECURITIES: O, DLR, VTR, HTA, STAG, CSG, GPT, ROIC, HCN, OHI, LXP, KIM, DOC, EXR.

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NOVEMBER 2014 | VOLUME 18

margin of safety means sleeping well at night

REITs ARE BECOMING A MAIN

ratios, whereas REITs are commonly valued

It's great news for dividend investors as S&P

You obviously purchased this newsletter because

Currently, Real Estate is classified as part

Mark Decker, vice chair of BMO Capital

By becoming their own category, REITs will

Designating public equity REITs as a

Protect Your Principal at ALL Costs

WHAT'S IN THIS EDITION?

If you tell the

NOVEMBER 2014 | VOLUME 18

(ARCP) and Campus Crest (CCG) have both

Regency Practicing Disciplined Management

aggressive sale (cap rate of close to 5%) and proposed sale to

Sun Communities a Compelling BUY

NOVEMBER 2014 | VOLUME 18

I consider the shares reasonable to buy

ROIC a strong BUY

able exposure in DC metro (HMEs largest market) that could

Highwoods Solid Performer

NOVEMBER 2014 | VOLUME 18

Essex Property Trust Not Cheap

STAG Growing Steady

NOVEMBER 2014 | VOLUME 18

In addition, STAG acquired one property in October and has 17

today (P/FFO is 26.8x). My BUY price is $100.00 so stay true to

On the capital markets front, STAG raised $44M through its

A Net Lease REIT That Flies Under the Radar

STAG doesnt provide guidance but it does appear 2014 will

Federal Boosts Dividend 12%

NOVEMBER 2014 | VOLUME 18

Kimco Pure Play Paying Off

NOVEMBER 2014 | VOLUME 18

REITS THAT PAY MONTHLY

Gladstone Land Corporation

each year. If you're an investor who doesn't need the income

The Benefits of Monthly Paying Dividends

New York REIT

Inland Real Estate Corporation

Chambers Street Group

Gladstone Commercial Corporation

American Realty Capital Properties

United Development Funding

SOURCE: SNL FINANCIAL(11-11-14)

NOVEMBER 2014 | VOLUME 18

Based on Market Capitalization (in $US billions)

The advantages of a monthly dividend payment is 1) it makes

potential of your original investment.

19 REITs That Pay Monthly

NOVEMBER 2014 | VOLUME 18

Based on Dividend Yield

tion (in $US billions):

United Development Funding IV Stock Price

Above is a snapshot of these REITs based on dividend yield:

Dividend Yield (%)

United Development Funding IV Dividend Yield (%)

Below right is a snapshot of UDFs dividend yield

If you dont drive your

Dividend Yield (%)