Market Overview

UBS Hedge Fund Takes REIT Chips Off The Table: Keeps High-Yielding ARCP Stake

UBS Hedge Fund Takes REIT Chips Off The Table: Keeps High-Yielding ARCP Stake

After the bell on August 20, 2014, Bloomberg reported that the $5.6 billion hedge fund, UBS O'Connor LLC, a unit within Swiss banking giant UBS, had sold off more than $900 million of shares in U.S. REIT holdings, according to filings last week with the SEC.

The sell-off was across the board, realizing profits from REITs that are invested in sectors including: offices, mortgage bonds, communication towers, hotels and especially apartments.

The biggest reductions were reported to be in Avalon Bay Communities (NYSE: AVB), Equity Lifestyle Properties (NYSE: ELS) and Mid-America Apartment Communities (NYSE: MAA).


REITs Have Continued To Outperform

Since June 30, the REIT sector has advanced 2.8 percent versus a 1.3 percent increase in the S&P 500. The Bloomberg REIT Index -- comprised of 141 publicly traded landlords -- is yielding 3.5 percent, compared to 10-year Treasury Notes yielding ~2.4 percent.

Related Link: High-Yielding Health Care REIT Ventas Has Upward Guidance Helped By Acquisition

New Red Lobster Landlord ARCP Looks Like A Keeper

According to data compiled by Bloomberg, O'Connor still owns a portfolio of REIT shares valued at $292 million. Reported holdings include lumber and forestry REITs (sounds like a bet on a continued recovery in housing), as well as high-yielding single-tenant net-lease giant $12 billion cap American Realty Capital Properties (NASDAQ: ARCP), commonly referred to as ARCP.

Show Me The Money

It doesn't take a REIT expert to notice that ARCP is paying out a dividend with a very high yield compared to its better known single-tenant triple-net lease peer, Realty Income (NYSE: O).


In addition to the monthly rent, ARCP and Realty Income tenants also pay taxes, insurance and almost all of the property maintenance. Typical tenants include banks, dollar stores, casual dining, fast food, drug stores and more.

Realty Income is also known as "The Monthly Dividend Company." In June 2014, $10 billion cap Realty Income announced its 67th consecutive quarterly dividend increase, the 76th increase in its dividend since being listed on the NYSE in 1994.

ARCP Has Grown From An Acorn To An Oak In Record Speed

Compared to Realty Income, ARCP is the new kid on the block -- a new kid that has grown exponentially from its September 2011 IPO of just under $70 million to its current market capitalization of about $12 billion in less than three years!

Posted-In: BloombergLong Ideas REIT Hedge Funds Top Stories Trading Ideas General Real Estate Best of Benzinga


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