My REITs

Andy ProphetAAII Silicon Valley Chapter

September 8, 2012

REITs: Income PortfolioHarvest Criteria

REITs Currently Owned• Health Care REIT (HCN)

– Purchased: May 2011– Yield on cost: 6.25%– IRR: 22.44%– Valuation: $59.01– Current Price: $58.44– Dividend Growth (5-yr): 4.4%– Cash flow growth and returns consistently strong– 20-year average annual total returns 14%– Credit rating: BBB+– Acquiring publicly traded Sunrise Senior Living – Risks:

• Broad health care legislation• Genesis Health Care is HCN’s largest tenant… 17%

of gross investments

REITs Currently Owned (continued)

• Realty Income (O)– Mission is to provide its shareholders dependable

monthly dividend that increases over time– Purchased: Sept. 2011– Yield on cost: About 7%– IRR: 28.66%– Valuation: $41.00– Current Price: $42.00– Dividend Growth (5-yr): 2.2%

• In August O boosted its rate 4.4%

– Credit Rating: A– Increased its dividend throughout the 2008

downturn

REITs Currently Owned (continued)

• Realty Income (O)– Mission is to provide its shareholders dependable

monthly dividend that increases over time– 2010 Roughly $700 million in cash-flow in

acquisitions. 2011 another $1 billion, and more than $500 million already in 2012.

– Recently the dividend is up 4.3% yr.-over- yr.

– Risks:• Realty Income's long-term leases can be canceled

if a tenant files for bankruptcy • Concentration is high, top 15 customers providing

nearly 50% of revenue.