Key Takeaways From The REITWeek 2015 Specialty REIT Panel Discussion

Panel Members:

• $27.5 billion cap, 4 percent yield.

• $8.8 billion cap, 5.2 percent yield.

• $87 million cap, 4.1 percent yield.

• $5.7 billion cap, 4.7 percent yield.

• $3.2 billion cap, 4 percent yield.

Panel Discussion Insights

• CCI's benefits from the secular growth of wireless traffic, averaging 17 percent CAGR over the past 10 years, with video growth now a huge driver.
• Notably, CCI is generating double digit returns with an average of just over two carriers per tower; Moreland described CCI as being "only 50 percent occupied," with four potential lessees in most markets.
• CCI leases with wireless carriers are typically 10 to 15 year term with annual increases of ~3 percent.
• Local zoning restrictions help to create a competitive moat for existing tower masts.
• While anticipation of rate increases can weigh on share prices, CCI's double digit growth rate trumps any interest rate concerns.

• CalPERS was the first investor in Digital and from 2001 through 2006 received a 66 percent net IRR on its investment.
• DLR generated the "highest return in the REIT space" from 2004 to 2014.
• Stein made the point that DLR owns "four walls and a roof" along with HVAC and electrical, which makes its assets closer to "traditional real estate" than other panelists.
• A high percentage of DLR shares are owned by "dedicated REIT investors."
• Notably, there has been "M&A chatter," good sized deals that represent the biggest real estate opportunity for DLR in the next 12 months.

• Family farmers have an average age of 55+ and "a desperate need for capital;" however, almost every FPI acquisition is triggered by some form of "intergenerational change."
• FPI will pay "agricultural value" for land, averaging under $5,000 per acre, typically used for traditional row crops such as corn, wheat and soybeans; specialty vegetables and tree fruits are higher risk and leases are priced accordingly. Utility easements, mineral rights and future development represent upside potential.
• There is effectively "zero vacancy" for family farmland, with global demand for food being the key driver; FPI leases are typically about 3 years, paid in advance.
• There is ample low cost financing available for U.S. farmland, including two GSE's; and FPI OP units can be used for acquisition currency as well.

• Lamar is the second largest outdoor advertising company, with 45,000 tenants which generate ~$1.35 billion of revenue; $4.45 of AFFO per share, from which LAMR pays a $2.75 annual dividend per share.
• Reilly mentioned that AFFO is slated to increase by 10 percent in 2015, with a 10 percent dividend hike in store for shareholders, as well as 10 percent increases foreseen for 2016 and 2017.
• Notably, in over 80 percent of its markets Lamar has at least an 80 percent market share, (100 percent in some markets), which combined with restrictive billboard zoning, makes for high barriers to entry for competition.
• Lamar tenant leases are short-term and although in many respects "tethered to GDP," are less cyclical than many investors realize.
• Digital billboards are highly complementary to other social media advertising, with the advantage of local targeting, and as Reilly quipped, "thankfully people are still stuck in traffic."

• Institutional investors are attracted to the long-term risk/return profile of timber, (especially when manufacturing is removed from the equation).
• Notably, cut logs usually travel less than 100 miles, which makes for multiple local U.S markets and limits competition.
• Forest products demand tracks the GDP, with homebuilders being a big driver for solid wood products.
• About 20 to 30 percent of RYN Pacific Rim timber is exported to China and Korea; while ~40 percent of New Zealand timber is exported to those markets, as well as India.
• While timber REITs enjoy good access to capital; potential risks during the next 12 months include: legislation challenging capital gains, REIT status and EPA water regulations.