LDR Capital Management invests in the publicly-listed preferred shares of REITs. Our investment objectives are capital preservation, providing a high quality, consistent income stream, and the generation of attractive risk adjusted returns.

PERSPECTIVES

MONTHLY SCORECARD

THINK PIECES

Diversification Benefits of REIT Preferred and Common Stock: New Evidence from a Utility Based Framework

We study the diversification benefits of REIT preferred and common stock using a utility based framework in which investors segment based on risk aversion. Taking the view of a long run investor, we conduct our analysis using data from 1992 to 2012. We examine optimal mean-variance portfolios of investors with different levels of risk aversion given access to different classes of assets and establish three main results. First, REIT preferred and common stock provides significant diversification benefits to investors. REIT common stock helps low risk aversion investors attain portfolios with higher returns, while REIT preferred stock helps high risk aversion investors by providing a venue for risk reduction. Both asset classes receive material allocations over plausible levels of risk aversion. Second, while REIT preferred stock appears to behave somewhat like a hybrid debt/equity asset, its risk/return profile appears to not easily be replicated by those asset classes. When given the opportunity, investors will reduce allocations to REIT common stock and investment grade bonds and invest in REIT preferred stock. Finally, realistic investor constraints matter empirically. Conclusions drawn from the empirical analysis are markedly different under these constraints compared to the classical unconstrained setting.

Authors

Published 19/03/2015

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REIT Preferred Securities and Rising Interest Rates

In this Executive Summary, you will gain an understanding of how REIT preferreds perform during periods of rising interests, gain insight on how REIT preferreds performed during prior periods of rising interest rates, how REIT preferreds are currently trading, and how they respond to long term rising interest rates.

Published 07/07/2013

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Preferred Security Primer

Our REIT Preferred Securities Primer will give you an in depth look into REIT Preferreds, the benefits of investing with Preferreds, the risks, and frequently asked questions regarding rates, capital stack, preferred dividends, distributions, and industry growth.

Published 01/05/2015

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REIT Preferreds Market Overview

REIT preferred general characteristics

  • $25 par value, perpetual fixed (a few floating) rate securities that carry cumulative dividend provisions
  • Quarterly cash dividends that must be paid in entirety before any distributions can be made to common shareholders
  • New issues carry 5 – year call protection
  • Some REIT preferreds are convertible into common stock
  • Senior in balance sheet status to common stock and junior in balance sheet status to debt

Published 02/02/2014

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REIT Preferreds: Attractive Liquid Alternative For Real Estate Investors

This research report discusses how REIT preferred shares add value to institutional real estate allocations providing 1.) A liquid complement to existing direct real estate investments and 2.) A way to augment REIT equity allocations that produces attractive investment returns while at the same time dampening volatility levels.

Published 10/04/2014

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LDR Capital Management