4th Quarter Opens with a Crash

The first week of the 4th quarter featured a spike in the ten year treasury yield along with the predictable corresponding crash in REITs.  Big market moves like this often cause erratic pricing which usually causes opportunity.  This week, the big opportunity seems to be Plymouth which fell dramatically while peer industrial REIT STAG remained steady.

The only company specific news on PLYM was its acquisitions and these look excellent.  On October 2nd, PLYM announced a $27mm purchase of a Class A industrial property in Cleveland and a $24.8mm  acquisition of a Class B property in Cincinnati at cap rates of 7.6% and 8.5% respectively.

The Class A property came at $67.50 per square foot and the Class B at $22.50 per foot.  These seem like favorable prices in terms of both cap rate and price per foot.  Importantly, $10.8mm of the purchase price was funded with issuance of $17.00 OP units which validates the idea that NAV is well above market price.

If an industrial property owner is willing to essentially buy Plymouth at $17.00, I am happy to buy it at $14.50 which is where we picked up shares today.  It briefly transacted below $14.00 a share so I failed to catch the bottom, but I am still happy with the entry price at over a 10% yield.

STAG remains a great company so I was reluctant to sell, but the valuation gap between STAG and PLYM got so large that I felt inclined to make the swap.

Portfolio analytics are complete and I will be uploading them shortly.  Please check them out in the portfolio analytics section of our website at your convenience.

2CHYP Portfolio Snap Shot

10/4/18 2CHYP Performance since inception

2CHYP Weekly Trade Confirmation Report