Our Equity REITs investment process builds a stable, low turnover portfolio for each of our Equity REITs clients, with the goal of providing attractive risk-adjusted total returns over the long term. A typical Phocas Equity REITs portfolio consists of 25-40 REITs, diversified across all important commercial real estate sectors.
  1. Phocas Financial begins by considering all major equity REITs
  2. We come up with a quantitative ranking, using three valuation methods weighted to account for where we are in the commercial real estate cycle:
    Net asset value (NAV) analysis;
    Discounted free cash flow and potential for growth (DCF/Growth); and
    Adjusted funds from operations (AFFO) multiples.
  3. We conduct a qualitative analysis of each REIT, focusing on:
    Management quality;
    Balance sheet flexibility;
    Asset quality / strong long-term (high barrier to entry) locations;
    Potential for AFFO and NAV growth; and
    Intrinsic value relative to market price.
  4. Finally, we construct a diversified client portfolio:
    Weighting of sectors is based on individual security valuation levels and appreciation prospects; and
    Representation generally in all important sectors.
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