REIT Stands Out From Crowd

With the interest of private-equity funds in REITs these days -- most notably for Equity Office Properties (EOP) -- I wondered whether FSP could reasonably expect some pin action. After all, the private-equity guys love to use leverage to make their deals pay off, and FSP has the most room to add leverage in the REIT industry, as far as I can tell.

But a couple of factors would likely get in the way of that happening. Size, for one. Franklin is less than a tenth the size of EOP, so only a small private-equity firm would likely find it substantial enough to pursue. Even then, it's unlikely any private-equity firm would appreciate the syndication and banking fee part of Franklin.

For their part, insiders certainly think the shares are worth investing in at these levels. Last year, eight executives and directors invested nearly $950,000 in FSP at an average price of $20.03. The prior year, five insiders put over $1 million into the stock at an average of $18.58.

So FSP isn't a raving buy for growth investors or those looking for a private-equity play, but company insiders obviously see something they like. Despite the fact that the investment banking aspect of revenues can make for lumpy earnings, and little FFO growth is forecast in 2007 by the analyst Loh, I think this REIT is a solid addition to any portfolio looking for a low-risk/moderate-return position.