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Local REITs charge ahead of pack in bull market

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Indiana’s real estate investment trusts are hitting new highs during the stock market’s bull run.

Shares of Duke Realty Corp. hit a 52-week high in March. Simon Property Group shares are trading near an all-time high of $164. And Kite Realty Group Inc. is on a tear, with shares rising nearly 20 percent since Jan. 1, including a 52-week high in March.

Overall, the S&P Developed REIT Index, which measures the performance of more than 200 real estate investment trusts, has risen 15 percent during the past 52 weeks, compared with a 11.9 percent gain for the S&P 500. Year-to-date, the REIT index is up 6.8 percent, trailing the S&P 500’s performance of 9.65 percent.

The three largest REITs based in Indianapolis—Simon, Duke and Kite—are more than holding their own against the competition.

An Indianapolis financial planner said local REITs are benefiting from certain moves made by the Federal Reserve to keep the economy afloat, such as keeping interest rates low, but which could lead to increased inflation.

“They’re investing in physical land, the physical building and future cash flows,” said Todd Guthrie of Guthrie Financial Group. “If inflation is turning higher, the view is that the land and buildings are valued higher, demanding higher rent.”

A real estate investment trust is a company that owns and often operates income producing real estate, such as office buildings or shopping malls, that produces lease revenue from tenants. Advantages to investors include high dividends and the potential for stable, long-term increases in asset value.

Duke Realty specializes in developing and leasing office and industrial properties. Shares of Duke Realty are up 22 percent since the first of the year, hitting a 52-week high of $17.02 on March 15 after bottoming out at $12.71 in November. A few days before the developer hit its high, analysts at Milwaukee-based Robert W. Baird & Co. Inc. raised their price target on Duke Realty’s shares from $16 to $18.

Duke last announced quarterly results in January, reporting earnings per share of 27 cents for its last quarter and meeting analysts’ estimates. The company had revenue of $220.9 million for the quarter, beating the consensus of $210.8 million.  

“Moreover, Duke Realty’s recent move of strengthening its fundamentals through a public offering of senior unsecured notes worth $250 million acted as a major growth driver [for its stock price],” Chicago-based Zacks Equity Research said in a report.

Zacks also reaffirmed its “outperform” rating on Simon’s stock and set a target price of $190 per share, far higher than its closing price of $159.33 on Tuesday and its 52-week low of $141.56 set in April 2012.

Simon’s stock is up just 0.8 percent year-to-date, but it has climbed 10.9 percent within the past 52 weeks. In the midst of the recession and stock market slump four years ago, shares were trading in the low $30s. Since then, shares have catapulted nearly 400 percent.

“Simon Property reported strong fourth quarter 2012 results with [earnings] per share substantially surpassing the Zacks consensus estimate due to an increase in rental revenue and occupancy,” Zacks wrote. “The noteworthy acquisitions and addition of premium development and redevelopment projects during the quarter further added to the bliss.”

Simon, the nation's biggest owner of regional malls and outlet centers, raised its quarterly dividend to $1.15 a share from $1.10 in February amid rising funds from operations, which gauges a real estate company’s ability to generate cash.

Kite Realty, whose portfolio of retail properties is much smaller than Simon’s, is also performing well.

Its stock closed at $6.74 Tuesday, up 20.6 percent year-to-date and 28.9 percent over the past 52 weeks.

Kite reported a loss for the fourth quarter of $6.5 million, or 9 cents per share, on revenue of $26.7 million. That compares to a profit of $3.1 million, or 5 cents per share, on revenue of $24.6 million during the fourth quarter of 2011.

Kite blamed the loss primarily on its buyout, at a discount, of a partner in a shopping center development in North Carolina.


 

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  1. If I were a developer I would be looking at the Fountain Square and Fletcher Place neighborhoods instead of Broad Ripple. I would avoid the dysfunctional BRVA with all of their headaches. It's like deciding between a Blackberry or an iPhone 5s smartphone. BR is greatly in need of updates. It has become stale and outdated. Whereas Fountain Square, Fletcher Place and Mass Ave have become the "new" Broad Ripples. Every time I see people on the strip in BR on the weekend I want to ask them, "How is it you are not familiar with Fountain Square or Mass Ave? You have choices and you choose BR?" Long vacant storefronts like the old Scholar's Inn Bake House and ZA, both on prominent corners, hurt the village's image. Many business on the strip could use updated facades. Cigarette butt covered sidewalks and graffiti covered walls don't help either. The whole strip just looks like it needs to be power washed. I know there is more to the BRV than the 700-1100 blocks of Broad Ripple Ave, but that is what people see when they think of BR. It will always be a nice place live, but is quickly becoming a not-so-nice place to visit.

  2. I sure hope so and would gladly join a law suit against them. They flat out rob people and their little punk scam artist telephone losers actually enjoy it. I would love to run into one of them some day!!

  3. Biggest scam ever!! Took 307 out of my bank ac count. Never received a single call! They prey on new small business and flat out rob them! Do not sign up with these thieves. I filed a complaint with the ftc. I suggest doing the same ic they robbed you too.

  4. Woohoo! We're #200!!! Absolutely disgusting. Bring on the congestion. Indianapolis NEEDS it.

  5. So Westfield invested about $30M in developing Grand Park and attendance to date is good enough that local hotel can't meet the demand. Carmel invested $180M in the Palladium - which generates zero hotel demand for its casino acts. Which Mayor made the better decision?

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