CUBE and WCIC: To Stand Ground During Shaky Times

10/13/2015 10:15 am EST

Focus: REITS

Michael Berger

President & Founder,

With global market volatility running high, Michael Berger, of  is focused on investments that are levered to the United States market, so he highlights a pair of real estate investments he expects to perform well during these turbulent times.

After a nine day rally, market futures are in negative territory following weak trade demand out of China. During September, Chinese imports fell 20.4% and exports fell 3.7% (in dollar terms). This marked the eleventh straight month of falling numbers, which extends the longest losing streak in six years. Although imports fell more than expected, exports beat analyst expectations. The better than expected export data leads us to believe that the devaluation of the yuan is helping local businesses compete overseas.

China's economic downturn has caused a ripple effect across Asia. Taiwan and South Korea, who count China as their top customer, saw shipments tumble 14.6% and 8.3% respectively, during September. Over the weekend, South Korean Finance Minister Choi Kyung Hwan said that South Korea would be more affected by a slowdown in China than increasing United States interest rates. Hwan added that 25% of Korean exports are sent to China.

One data point we are keeping a close eye on is China’s gross domestic product (GDP). China will release its third quarter GDP data on October 19. Many analysts expect to see less than 7% growth after China announced 7% growth in both the first and second quarter.

With global market volatility running high, we are focused on investments that are levered to the United States market. We want to highlight two real estate investments that we expect to perform well during these turbulent times.

CubeSmart (CUBE) is an equity real estate investment trust focused on owning, operating, acquiring, and developing self-storage facilities. During 2015, CUBE has rallied more than 26% and the company offers investors a 2.3% dividend yield. CUBE is experiencing record-high occupancy levels which are driving its strong pricing power and the company has a best-in-class Internet marketing and revenue management platform. We are favorable on CUBE due to the runway for greater occupancy gains and the ability to move the needle through external growth.

WCI Communities, Inc. (WCIC) is a lifestyle community developer and luxury homebuilder in Florida. The company operates in three segments: homebuilding, real estate services, and amenities. We are favorable on WCIC due to the strength of Florida’s housing market, as well as the acceleration of baby boomer migration. WCIC is poised to benefit from this trend due to uniquely positioned lifestyle communities. WCIC is trading at 25% discount when compared to its larger peers and we believe the current share price does not reflect WCIC’s earnings growth potential.

Michael Berger, Founder and President,

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