New position

This week we bought a small position in Preferred Apartment Communities (APTS) with intent to buy more as opportunities present.  With a strong fundamental backdrop and acquisitions kicking in, APTS should be able to grow FFO/share at a decent clip.  Given a multiple of just 10X 2017 estimated FFO, this growth is not priced in which means it should result in proportional capital gains.  We have followed APTS for many years and are increasingly impressed with management’s ability to create value through asset selection and financial structuring.

On this week’s portfolio snapshot you may notice an outstanding order to sell Pure Multifamily (RUF.U).  This order did not execute but I want to highlight it as part of our trading process.  We frequently put in above market limit orders so that we can catch market noise favorable to our positions.  Additionally, I am looking to sell Pure Multifamily as their earnings report showed operational weakness which may be indicative of slowing growth.  At just over 15X forward FFO, it is about properly valued, so there is no rush to sell, but if we can get a good price we will take it.

Emerging opportunity

Triple Net REITs have sold off as a group in the aftermath of Spirit Realty’s troubles.  Interestingly, even those with almost no retail exposure have sold off by quite a bit making them opportunistic.  Specifically we will be looking to buy WPC, OLP and GOOD depending on where prices move.  Each of these has solid revenues and we believe they are unthreatened by current macro forces.

Commentary may contain forward looking statements which are by definition uncertain.  We retain no obligation to update or correct forward looking statements should the available information change.  Actual results may differ materially from our forecasts or estimations.

2CHYP Portfolio Snap Shot

5/12/17 2CHYP Performance since inception

2CHYP Weekly Trade Confirmation Report