Real Estate Sector Ideas

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>>> Sovran Self Storage



http://m.kiplinger.com/article/investing/T044-C008-S003-5-reits-to-buy-now-for-income-and-growth.html



Sales are going strong for Sovran (SSS, $101.91, P/E 18, 3.1%), a self-storage REIT that owns more than 550 properties in 26 states under the Uncle Bob’s brand. The firm is landing customers with its modernized, climate-controlled facilities, many of which are located in high-traffic urban and suburban areas. Occupancy hit 90.5% in the first quarter, up one percentage point from a year earlier. Sovran is also expanding with a $1.3 billion deal, announced in April, to acquire 84 properties from LifeStorage, a privately held firm whose buildings generate higher average rents per square foot than Sovran’s real estate.

Sovran issued 6.9 million shares of stock to finance the LifeStorage deal. That could dilute FFO per share in the near term and lower the REIT’s net asset value per share (the estimated market value of Sovran’s properties, less outstanding debt). Still, analysts see Sovran’s revenue jumping a healthy 17% this year, to $430 million. Sovran recently hiked its annual dividend rate by 11.8%, to $3.80 per share, and it ramped up its 2016 FFO forecast to as much as $5.55 per share, up 14.4% from 2015. Although the stock looks pricey at 18 times FFO, it has room to climb. Bank of America Merrill Lynch, which rates the stock a buy, expects the shares to hit $120 a year from now.

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