Investing (as in life) is sometimes about timing. When I began writing this article, IRT was trading in the mid 8.50s and has subsequently rebounded to the high 8’s. Although still attractive for a LT holding if you agree with the thesis, I’ll cut short any in depth analysis for the sake of time…
IRT is an apartment REIT focusing on entry-level apartment housing in mid-market cities. If you think new entrants to the workforce and millennials will be forced to rent as opposed to buy then they are in the sweet spot. Personally, I don’t know any 20 somethings with enough saved for a 20% down payment and NYC housing affordability is a complete joke.
I don’t want to take up too much screen space as the investors presentation is fairly straightforward and easy to understand. The main website also includes a nice little map of the country with all the properties listed.
http://investors.irtreit.com/Cache/1001196690.PDF?Y=&O=PDF&D=&FID=1001196690&T=&IID=4235858
The important thing to consider is the stability of cash flow to finance the juicy 8% dividend yield (as of 5/7/15) and the distributions are paid monthly.
There is risk of further dilution as the company wants to expand by purchasing additional units. On May 4th, a number of FORM D registration statements have been filed for issuance of equity and the company sold off hard after missing earnings by a few pennies. I think Wall Street is worried about further dilution and the aggressive growth strategy by management.
Growth and equity issuance is OK as long as the capital is utilized properly. Something important to consider in the due diligence, one has to analyze their past transactions to gain confidence in management.
No matter what, with a REIT, interest rates are the bigger risk IMHO. I can only offer the opinion that interest rates won’t go too high as the economy is structurally weaker than it looks. You don’t have world wide QE on full tilt for show. Plus, sometimes real estate is a good hedge in case of inflation…sometimes. At least rents should rise alongside any potential inflationary scares?
Apologies for the brief write-up as I just want to get it out there, please feel free to ask any questions but to be honest, there is a pretty robust discussion on seekingalpha in the comments suggestion that I suggest anyone interested in the name to check out. The bottom line for me is good & steady yield in a thesis I like (lower end rental units diversified across the country)
Value Cap Trader 