IRET - Investors Real Estate Trust

[Junto]

Been adding to this REIT, based in Minot, ND and located near North Dakota Shale boom. It looks like a promising play on the real estate market in ND and a rebound in the Twin Cities commercial office market. Midwest is certainly a stronger economy right now than national averages.

 

Stock pays a 7.15% dividend. Anyone else looking into this company?

[Junto]

Short post on my blog http://www.businessbankertwincities.com/2012/05/iret-investors-real-estate-trust.html. I will try to copy and paste it here:

 

$IRET - Investors Real Estate Trust

 

Recently, I added Investors Real Estate Trust to my Covestor Financial Services Model. In July 2011, I sold out of my IRET position in the portfolio at $8.32 but continued to watch the company given its location. At closing on May 4, 2012, the stock was trading at $7.15/share and an indicative yield of 7.27%.

 

The thesis on the stock is relatively simple. IRET is an investment in the real estate surrounding the Bakken Shale Oil Boom as well as a rebounding Midwest economy. The company, based in Minot, ND, owns 81 multi-family residential properties consisting of 8,921 apartment units and 184 commercial properties consisting of 12.3 million net rentable square feet. The commercial properties are office, medical, industrial and retail (10-Q). The company has upside potential if it can pick up leasing activity in its commercial office segment. The segment is particularly concentrated in the Twin Cities Metro Area and was 77.9% leased as of January 31, 2012. Brokers in the market area have indicated leasing activity has picked up in the marketplace, so this should be a positive sign for the upcoming quarters at IRET. The commercial office vacancy compares unfavorably by a large margin to the multifamily, commercial medical, commercial industrial, and commercial retail which are leased at 93.2%, 94.5%, 94.5%, and 87.5%, respectively.

 

The opportunity for this firm is its location to the Bakken Shale area. This provides it unique insight and position given its connections in the market area going back several decades. It already has started a joint venture project for a 144 unit apartment building in Williston, ND. The project is anticipated to be completed in July 2012 and is basically fully leased according to the Q3 2012 earnings call transcript. 100 of those units are furnished corporate units on 28 to 36-month leases with larger credit energy companies.

 

Using an elementary analysis, here is the upside you could estimate. The disclosure is that it provides no value to the vacant space which one could mathematically estimate was leased out to a stabilized basis the additional value it would create and doesn't consider the improvements driven by Williston, ND apartment completions. More or less this is a back of the napkin valuation range.

 

http://3.bp.blogspot.com/-kYIt54G9gnw/T6bkVSWZ68I/AAAAAAAAB54/bDNgKh3wln0/s640/iret+quick+and+dirty+valuation.jpg

 

Given its new developments in Williston, ND and leases with the oil industry in the area, I think there is long-term upside in the stock on top of the 7.27% dividend yield as of May 4, 2012. The company is uniquely positioned in one of the strongest markets in the country thereby allowing it to capture opportunities others outside the market area can’t get their arms around.