A Shopping Center REIT For Average Joe

Urstadt Biddle Properties (NYSE:UBA) was founded in 1969 and listed on the NYSE on July 6, 1969. The Greenwich-based REIT has an impressive track record of increasing annual dividends for 23 years in a row. In addition, the company has maintained 46 consecutive years of uninterrupted dividends.

Summary

  • In addition to a strong geographic profile, Urstadt Biddle also has a healthy concentration of supermarket tenants.
  • The REIT concentrates on smaller properties that, due to their size, are below the radar for larger investors.
  • Value investors focus on risk as well as return.

Most investors know that Warren Buffett has direct exposure to real estate through his various operating businesses, such as Coca-Cola (NYSE:KO), IBM Corp. (NYSE:IBM), etc.

Buffett does have his hands in a few REITs today - notably STORE Capital (NYSE:STOR) and Seritage Growth Properties (NYSE:SRG) - but he prefers to be in control of his own destiny, and relying on REIT management teams (instead of his own) to produce consistent profits has never been a priority.

However, we know that Buffett does like real estate, as evidenced by his purchase of the Prudential Real Estate Brand and transitioning into Berkshire Hathaway (BRK.A, BRK.B).

In addition, Buffett said that he was an investor in a small strip center close to NYU in New York City. In 1993, he acquired the property from the Resolution Trust Corporation (it was distressed), and his partnership was able to purchase it (at a bargain), re-tenant the property and increase rents. Buffett explains:

“As old leases expired, earnings tripled. Annual distributions now exceed 35% of our original equity investment. Moreover, our original mortgage was refinanced in 1996 and again in 1999, moves that allowed several special distributions totaling more than 150% of what we had invested. I've yet to view the property.”

So in this example, Buffett sought out a real estate investment that produces income and with long-term value prospects. By utilizing the "margin of safety" principle, he was able to locate a favorable property and hire a management team (also a partner) that resulted in increased operational and managerial efficiencies, thus maximizing recurring revenue.

That worked out well for Buffett, but what about the "average Joe" investor?

A Shopping Center REIT For The Average Joe

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