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Monthly Summary The Office sector began the month with its stock prices up 16.29% for the year and ended the month up 21.09%. The Industrial sector started up 17.97% and ended up 23.97%. The Apartment sector faired less well, starting at 15.33% and ending up 18.86%. 04 FFO estimates took a beating while the stocks advanced. The Q3 conference calls from TRZ and AIV were very negative. AIV cut its dividend and slashed its 03 FFO estimate. TRZ expected greater returns than previously expected in 03, but those gains came from increased revenues from lease termination fees. TRZ cuts its 04 FFO expectations. At the start of the month, consensus FFO expectations in the Office sector had 18 of the 22 covered REITs predicting FFO gains in 04. By the end of the month, only 13 of the 22 had consensus 04 FFO expectations of an improvement. With the economic outlook brightening for 04, and the logical presumption that the Apartment sector would be much earlier to realize the gains of those increased expectations than the Office sector, then why would the Office sector have faired better in stock returns for both the month and the year than the Apartment sector? My theory is that the answer can be found in valuations. Sector Price/FFO for Apartments ended November at 13.43 vs the Office sector at 10.55. Sector yield for Apartments is 6.52% vs Office's 6.45% - close to the same. Apartments ended November with an 86.72% usage of FFO for dividends vs Office's 66.52%. The market had over-valued Apartment space vs Office space and the safety of the Apartment dividends is in question. Thus the price gains in the Office sector were higher. This is a trend that could continue. NOTE: Although the tables below are checked and double-checked for accuracy, and may at times be 100% accurate - do NOT count on that. Please confirm through your own research any numbers on which you are to make a buy, sell or hold decision. Most sites giving this kind of data would say that it's information is for entertainment purposes only. I will not presume that you are that masochistic. I try to be accurate, but I randomly fail. The footnotes are more important this month. There were big exceptions with ARE [because of its recent inclusions in the office sector makes comparisons with October data less relevant], TRZ [in the first three weeks of the month, the FFO used in the table was NOT from the WSJ/Multex database, because the database was 3 weeks slow in reflecting current conditions] and VNO [because its special dividend was NOT reflected in it's yield] in the Office sector. In the Apartment sector, AIV [in the first weeks of the month, the FFO used in the table was NOT from the WSJ database because the database it too was 3 weeks slow in reflecting current conditions] and TCT [its FFO estimate was home made - due to the WSJ/Multex database not having one of its own]. In the Industrial sector, PLD had a major decrease in sales, distorting the sector Price to Revenue figure. All sectors had their Current Price to Revenue figures altered due to updating to the use of Q3 revenues from the use of Q2 revenues. Finally, the Price to Revenue INDEX figures, due to rounding errors, are not accurate to 3 digits. They are darn close to accurate. Javascript is expected to be accurate to within 5 digits when the calculation is simply x times y. But the complexity of the formula - or a large number of calculations to determine a result - can decrease the number of digits of accuracy. NOTE 1: ASN's 02 FFO had to be estimated (and estimated to reflect an average decrease compared to 03) due to the fact that ASN prefers to use EPS - and I could not find the number in their press releases or annual statements. NOTE 2: In 02, performance ranged from a positive 22.17% to a negative 23.33% - a spread of 45.5 percentage points. Seven of 16 performances were outside of five percentage points of average. In 03, performance estimates range from a positive 10.31% to a negative 22.81% - a spread of 33.12 percentage points. Six of 16 performance estimates are outside of five percentage points of average. For 04, performance estimates range from a positive 8.09% to a negative 0.43% - a spread of 8.52 percentage points. None of 16 performance estimates are outside of five percentage points of average. My best guess is that the current 04 forecast under-estimates the results for the future winners and over-estimates the results of the future disappointments. NOTE 3: TCT, while having an analyst[s] that give it ratings, does not have any that are making an FFO forecast. So the one in the table above is home made. It is based on their Q3 earnings from their press release. They have made an FFO of $1.52 year-to-date with $.49 in Q3, so I made a conservative estimate of $2.02 for this year, and a sector average growth of 4% for next year - resulting in $2.10. Click here for the Shopping Center, Mall, and Health Care Update page. This months article updates are here. |