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2 REITs to Build on

09/01/2015 9:00 am EST

Focus: REITS

Michael Berger

President & Founder,

For investors searching for value in sectors able to withstand downturns in the market, Michael Berger, of, highlights two possibilities in the REIT space focused on the single family and the shopping center market.

Recent market volatility has left investors searching for investments that will be able to withstand a downturn in the market. One of the sectors we have focused on during this time is the real estate investment trust (REIT) industry. Within this industry, we have been able to find value in companies focused on the single family and shopping center market.

The single family rental market continues to improve due to surging home prices, higher mortgage rates, and more stringent credit standards that have decreased affordability levels to the lowest levels since late 2009. Sluggish job and income growth continue to prevent potential homeowners from qualifying for mortgages and these factors have created an opportunity for companies to increase market share in the fragmented single family rental market.

One such company levered to this trend is American Residential Properties, Inc. (ARPI). Based on net asset value (NAV), ARPI is trading below its fair value to replacement cost and they have the opportunity to unlock value through an accretive acquisition or portfolio stabilization.

On July 15, ARPI paid out its first quarterly cash dividend to shareholders of record at the close of business on July 6. The company said the dividend reflected its confidence in the long-term future of the single-family rental business and ARPI’s ability to produce sustainable and growing cash flows from operations. ARPI now offers investors upside potential due to stock price appreciation, as well as a 2.3% dividend.

Retail Opportunity Investments Corp. (ROIC) is a REIT that is focused on acquiring, owning, and managing necessity-based community and neighborhood shopping centers in the eastern and western regions of the United States.

During the last month, ROIC has pulled back and shares are down more than 5%. We believe the company represents a takeout candidate due to the continued execution of its off-market acquisition strategy and its high quality asset portfolio which continues to register strong same-store net operating income growth. ROIC offers investors a 4% dividend and is led by a management team that has been able to position the company for continued growth.

Michael Berger, Founder and President,

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