RESEARCH & STRATEGY Industrial REITs James Sullivan Michael Gorman Thomas Catherwood Real Estate Analyst Real Estate Analyst Real Estate Analyst 212.738.6138, mgorman@btig.com 212.738.6140, tcatherwood@btig.com 212.738.6139, jsullivan@btig.com June 2020 (market data as of 6/19/2020) Please Read: Important disclosures and analysts’ certifications appear in the appendix
Coverage of 50 Stocks in 8 Property Sectors Equity REITs Sectors: ▪ Apartments (7) ▪ Health Care (7) ▪ Hotel (2) ▪ Industrial/Mixed (4) ▪ Office/Mixed (11) ▪ Retail (10) ▪ Specialty (1) ▪ Triple Net (8) Team: ▪ James Sullivan 212-738-6139 jsullivan@btig.com ▪ Michael Gorman 212-738-6138 mgorman@btig.com ▪ Thomas Catherwood 212-738-6140 tcatherwood@btig.com James Sullivan | REITs Analyst Michael Gorman| REITs Analyst 2 Thomas Catherwood | REITs Analyst
Valuations & Ratings Equity REITs NAV Estimates BTIG Price NAV Prem/(Disc) Applied Implied EV Rel. EV 2020E Rel P Ticker Rating 6/19/20 Estimate To NAV Cap Rate Cap Rate EBITDA* EBITDA P/FFO FFO AvalonBay AVB Buy $155.09 $200.35 (22.6%) 4.70% 5.81% 18.2 0.88 17.6 0.91 Camden CPT Neutral $93.51 $108.71 (14.0%) 5.10% 5.76% 22.9 1.11 19.4 1.00 Equity Res. EQR Buy $59.58 $80.10 (25.6%) 4.40% 5.50% 18.0 0.87 18.7 0.97 Apartment Essex ESS Neutral $233.78 $312.29 (25.1%) 4.50% 5.58% 21.5 1.04 18.2 0.94 IRET IRET Buy $70.45 $74.80 (5.8%) 5.50% 5.69% 24.2 1.17 23.2 1.20 Mid-America MAA Neutral $114.68 $113.21 1.3% 5.40% 5.35% 18.4 0.89 19.9 1.03 UDR UDR Neutral $37.76 $42.97 (12.1%) 4.85% 5.33% 21.4 1.04 18.5 0.96 Eq. Average (14.9%) 4.92% 5.57% 20.7 19.4 Mkt. Cap Average (18.0%) 4.76% 5.57% 19.6 18.6 Healthcare Realty HR Neutral $30.44 $32.17 (5.4%) 5.50% 5.73% 19.9 1.15 18.4 1.37 Healthcare Trust HTA Neutral $27.26 $31.55 (13.6%) 5.34% 5.93% 18.5 1.07 16.1 1.19 Healthpeak Properties PEAK Neutral $26.32 $27.79 (5.3%) 5.90% 6.12% 18.4 1.06 14.8 1.09 Healthcare New Senior Investment SNR Buy $3.76 $10.00 (62.4%) 6.25% 8.46% 15.8 0.92 6.7 0.50 Physicians Realty DOC Neutral $17.83 $18.04 (1.2%) 6.00% 6.05% 18.2 1.05 16.4 1.21 Ventas VTR Neutral $35.80 $51.98 (31.1%) 6.25% 7.73% 14.1 0.82 9.9 0.74 Welltower WELL Neutral $51.00 $60.44 (15.6%) 6.30% 6.97% 16.2 0.94 12.2 0.90 Eq. Average (19.2%) 5.93% 6.71% 17.3 13.5 Mkt. Cap Average (15.1%) 6.04% 6.72% 16.8 13.3 Host Hotels HST Buy $11.67 $25.07 (53.5%) 6.00% 11.54% 5.6 0.72 38.9 1.00 Pebblebrook PEB Buy $13.57 $33.76 (59.8%) 5.50% 8.67% 9.9 1.28 NA NA Hotel Eq. Average (56.6%) 5.75% 10.11% 7.8 38.9 Mkt. Cap Average (54.6%) 5.91% 11.03% 6.4 32.0 Duke DRE Neutral $35.60 $35.41 0.5% 4.67% 4.65% 24.7 0.88 23.7 0.90 Eastgroup EGP Neutral $117.55 $110.02 6.8% 4.91% 4.65% 23.8 0.85 22.3 0.85 Ind./Mixed Prologis PLD Buy $91.87 $80.12 14.7% 4.51% 3.96% 29.4 1.05 25.0 0.95 Terreno TRNO Buy $53.84 $46.72 15.2% 4.00% 3.51% 34.2 1.22 34.3 1.30 Eq. Average 9.3% 4.52% 4.19% 28.0 26.3 Mkt. Cap Average 12.2% 4.53% 4.08% 28.6 25.0 Coverage Universe - Eq. Wt. (24.9%) 5.63% 7.06% 17.3 15.2 Coverage Universe - Mkt. Cap Wt. ($0.14) 4.94% 5.79% 19.9 17.8 Source: FactSet, Company Documents, BTIG James Sullivan | REITs Analyst Michael Gorman| REITs Analyst 3 Thomas Catherwood | REITs Analyst
Valuations & Ratings (Continued) Equity REITs NAV Estimates BTIG Price NAV Prem/(Disc) Applied Implied EV Rel. EV 2020E Rel P Ticker Rating 6/19/20 Estimate To NAV Cap Rate Cap Rate EBITDA* EBITDA P/FFO FFO Alexandria ARE Buy $165.84 $150.23 10.4% 4.93% 4.55% 26.4 1.51 23.0 1.91 Boston Prop BXP Buy $90.76 $149.67 (39.4%) 4.69% 6.54% 16.4 0.94 12.0 0.99 Corporate Office OFC Buy $25.36 $34.20 (25.8%) 6.41% 8.00% 16.0 0.91 12.2 1.01 Douglas Emmett DEI Neutral $30.23 $45.78 (34.0%) 4.55% 6.02% 16.8 0.96 13.4 1.11 Empire State ESRT Neutral $6.85 $18.93 (63.8%) 5.28% 10.78% 10.0 0.57 7.4 0.61 Highwoods HIW Neutral $38.60 $51.59 (25.2%) 6.11% 7.48% 14.8 0.85 10.8 0.90 Office Hudson Pacific HPP Buy $25.22 $45.57 (44.7%) 4.99% 7.57% 16.1 0.92 11.6 0.96 Kilroy KRC Neutral $62.53 $86.02 (27.3%) 4.87% 6.37% 20.8 1.19 15.3 1.27 Mack-Cali CLI Buy $15.74 $28.73 (45.2%) 5.85% 8.02% 21.0 1.20 12.1 1.00 Paramount Group PGRE Buy $7.86 $21.79 (63.9%) 4.62% 7.92% 14.0 0.80 7.9 0.65 SL Green SLG Buy $51.87 $123.23 (57.9%) 4.87% 8.05% 20.1 1.15 7.1 0.59 Eq. Average (37.9%) 5.20% 7.39% 17.5 12.1 Mkt. Cap Average (23.2%) 4.99% 6.27% 20.1 15.4 Macerich MAC Buy $8.85 $56.76 (84.4%) 5.41% 9.81% 10.9 0.90 2.5 0.41 Simon SPG Buy $67.12 $202.07 (66.8%) 5.20% 9.86% 10.0 0.83 5.5 0.89 Mall Taubman TCO Neutral $37.31 $63.45 (41.2%) 5.20% 6.56% 15.2 1.27 10.3 1.69 Eq. Average (64.1%) 5.27% 8.74% 12.0 6.1 Mkt. Cap Average (65.3%) 5.21% 9.54% 10.5 5.8 American Homes AMH Neutral $26.92 $28.00 (3.9%) N/A N/A 22.8 0.98 25.6 1.01 Sing. Fam Invitation Homes INVH Neutral $27.84 $29.00 (4.0%) N/A N/A 23.9 1.02 25.1 0.99 Eq. Average (3.9%) #DIV/0! #DIV/0! 23.4 25.4 Mkt. Cap Average (4.0%) 0.00% 0.00% 23.6 25.3 Innovative Ind. Prop. IIPR Buy $95.65 $74.85 27.8% 9.00% 6.98% 13.9 1.00 18.2 1.00 Spec. Eq. Average 27.8% 9.00% 6.98% 13.9 18.2 Mkt. Cap Average 27.8% 9.00% 6.98% 13.9 18.2 Federal FRT Neutral $84.75 $135.18 (37.3%) 4.90% 6.94% 16.2 1.23 13.1 1.38 Kimco KIM Neutral $12.72 $19.89 (36.0%) 6.00% 7.59% 13.9 1.06 8.8 0.92 Kite Realty KRG Neutral $11.34 $21.71 (47.8%) 6.75% 9.65% 4.8 0.36 7.4 0.77 Strip Center Regency REG Buy $44.64 $71.31 (37.4%) 5.38% 7.54% 14.3 1.09 11.5 1.20 Retail Opportunity ROIC Buy $11.14 $19.87 (44.0%) 5.27% 7.35% 14.3 1.09 10.3 1.08 Site Centers SITC Neutral $7.56 $16.30 (53.6%) 7.00% 10.08% 16.2 1.23 6.8 0.71 Weingarten Realty WRI Buy $18.51 $33.79 (45.2%) 6.00% 9.05% 12.4 0.94 8.9 0.93 Eq. Average (43.0%) 5.90% 8.31% 13.2 9.6 Mkt. Cap Average (39.5%) 5.59% 7.75% 14.3 10.6 Alpine Income Property PINE Buy $16.27 $17.85 (8.9%) 7.50% 8.09% 12.4 0.84 14.9 1.05 Getty GTY Buy $30.32 $28.28 7.2% 7.00% 6.44% 18.1 1.22 16.8 1.19 Global Net Lease GNL Buy $16.68 $22.50 (25.9%) 7.50% 8.45% 13.0 0.88 9.2 0.65 Free Standing National Retail Properties NNN Neutral $35.84 $42.63 (15.9%) 6.25% 7.15% 14.8 1.00 12.7 0.89 Postal Realty Trust PSTL Buy $16.20 $19.04 (14.9%) 7.00% 7.80% 13.2 0.89 18.4 1.30 Realty Income O Neutral $61.53 $51.11 20.4% 6.00% 5.47% 18.5 1.25 17.7 1.25 Spirit Realty SRC Neutral $35.73 $42.49 (15.9%) 6.75% 7.48% 14.7 0.99 11.6 0.82 Store Capital STOR Neutral $24.50 $29.73 (17.6%) 6.75% 7.46% 14.2 0.95 12.2 0.86 Eq. Average (8.9%) 6.84% 7.29% 14.9 14.2 Mkt. Cap Average 3.4% 6.31% 6.36% 16.7 15.2 Coverage Universe - Eq. Wt. (24.9%) 5.63% 7.06% 17.3 15.2 Coverage Universe - Mkt. Cap Wt. ($0.14) 4.94% 5.79% 19.9 17.8 Source: FactSet, Company Documents, BTIG James Sullivan | REITs Analyst Michael Gorman| REITs Analyst 4 Thomas Catherwood | REITs Analyst
Themes for 2020 & Beyond – “History Does Not Repeat Itself Equity REITs but It Often Rhymes”… ▪ Real estate is a derivative of the preferences, decisions, and actions of a society. The location and movement of people, goods, and services dictates the utility derived from real estate. As society rethinks its priorities post-COVID, the relative utility and value of real estate can swing dramatically. ▪ Pre-COVID, several key trends drove the REIT market: ▪ E-commerce growth impacted retail and industrial real estate as more sales moved online ▪ Revitalized urban cores drew employers and employees as CBD office and multifamily assets experienced long-term demand growth ▪ Post-GFC financial discipline meant REIT leverage levels were well below historical norms ▪ Until recently, as much as 95% of the U.S. was under some form of “stay at home” order. As a result, business and economic activity has slowed materially and unemployment rates have skyrocketed. We see four key trends in societal responses to the pandemic: 1. Acceleration of secular trends in online engagement 2. Shifting in living, transportation, and entertainment 3. Strategic shift in sourcing and manufacturing 4. More regulations and higher taxes James Sullivan | REITs Analyst Michael Gorman| REITs Analyst 5 Thomas Catherwood | REITs Analyst
REIT Implied Cap Rate vs. 10-Year Equity REITs The Spread Between the REIT Average Implied Cap Rate and the 10-Yr Treasury Yield has Risen to 638 bps, and Reflects Investors’ Flight to Safety During the Pandemic 18% Avg Spread:3.90% +/- 1 Standard Dev. (68%): 2.84% - 4.97% 16% Excluding Extremes (2000-2001 and 2006-2007)* Avg Spread:3.98% 14% +/- 1 Standard Dev. (68%): 3.25% - 4.71% 12% 10% 8% 6% 4% 2% 0% Spread (Implied Cap - 10 Yr) FFO Yield Implied Cap 10 Yr Yield Average Spread +/- 1 Standard Dev (68%) +/- 1 Standard Dev (68%) * Spread extremes reflect bubble-like demand for one asset class/segment vs others. NASDAQ (2000-2001) and excess liquidity (ASN & EOP takeout pricing) - 2006-2007) 2Q20 through 6/19/20 Source: FactSet, NAREIT, U.S. Treasury, BTIG James Sullivan | REITs Analyst Michael Gorman| REITs Analyst 6 Thomas Catherwood | REITs Analyst
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