Since REIT prices have begun to fall (in late May) shares have moved closer to fair valuation ranges. Although commercial real estate fundamentals remain sound, Mr. Market continues to value REITs based more on economic data than on true real estate values. For some REIT investors (and value investors) the price fluctuations have created a bargain element that helps cushion the risk of loss while also providing higher risk-adjusted dividend yield options.
Several REITs that appear to be moving closer to the "budget basket" include Realty Income (O - Get Report), Digital Realty (DLR - Get Report), Omega Healthcare Investors (OHI - Get Report), HCP (HCP - Get Report) and Chambers Street Group (CSG - Get Report).
Arguably, Digital Realty is perhaps a bargain-priced REIT and the others are getting closer to the segregated REIT class considered to be a "bona fide investment opportunity." As Graham defined it, the margin of safety constitutes a "favorable difference between price on the one hand and indicated or appraised value on the other."
At the time of publication the author held HCP, O, DLR, and CSG.Follow @swan_investor This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.
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