Presidio Property Trust Inc: Newly Listed REIT Pays 12.4% Dividend
Presidio Property Trust Inc Does Well Despite COVID-19
Presidio Property Trust Inc (NASDAQ:SQFT) isn’t so much an overlooked stock as one that only began trading on the Nasdaq last October.
To be fair, it probably wasn’t the best time for a real estate investment trust (REIT) to go public. At the time, most investors were probably thinking that, because of the coronavirus pandemic and businesses shutting down, tenants would be fleeing. That didn’t happen.
In spite of the COVID-19 challenges, occupancy at Presidio’s 15 same-store properties increased 2.4% year-over-year. Its leasing activity remains robust, and the company inked new and renewal leases for more than 280,000 square feet (which I presume is where they got the idea for their SQFT stock ticker). (Source: “Presidio Property Trust, Inc. Reports Results for the Fourth Quarter and Year Ended December 31, 2020,” Presidio Property Trust Inc, March 30, 2021.)
For the fiscal year ended December 31, 2020, the company collected 98% of its billed rent, including the effects of COVID-19-related tenant arrangements.
“We are pleased to report our first full-year earnings as a publicly traded company,” said Jack Heilbron, president and CEO. “We have a lot to be proud of in 2020, but we are especially pleased with our portfolio of diverse assets in a variety of geographies, as it validated the success of our strategy, even during the COVID-19 crisis.” (Source: Ibid.)
Because of the solid performance, the company was able to provide Presidio Property stock investors with a fourth-quarter dividend of $0.10. In February, the REIT increased its first-quarter 2021 dividend to $0.101 per share. (Source: “Presidio Property Trust Declares First-Quarter 2021 Dividend,” Presidio Property Trust Inc, February 24, 2021.)
The forward annual dividend rate for SQFT stock is $0.40, which translates to a dividend yield of 12.4%.
Despite the solid full-year results and an increase in its dividend payout, Presidio Property stock’s performance has been a little underwhelming. The stock is down 31% since its initial public offering in October 2020 and down 20.9% in 2021. On the plus side, SQFT stock is up 5.3% over the last six months.
As a result, Presidio Property stock continues to be a great REIT that’s trading in an attractive price range.
Chart courtesy of StockCharts.com
SQFT stock might be a relatively new stock on Wall Street, but the REIT has been around in one form or another since 1999. A contrarian play, Presidio says it can find profitable opportunities in overlooked, dominant markets. (Source: “Supplemental Financial Information as of December 31, 2020,” Presidio Property Trust Inc, March 30, 2021.)
The company seeks out office, industrial, residential, and model home properties throughout the West and Midwest that are not in overheated markets, thereby avoiding inflated prices, bidding wars, and performance expectations.
Case in point, the Dakota Center is a six-story, 119,000-square-foot office building in downtown Fargo, ND. The building is located in the heart of the bustling downtown metropolis. The value of the property has increased 67% since Presidio purchased it in 2016 for $9.6 million.
This might explain why companies like HP Inc (NYSE:HPQ), Oracle Corporation (NYSE:ORCL), and Tesla Inc (NASDAQ:TSLA) have chosen to move to more business-friendly, lower-tax environments in 2020.
You can find the company’s commercial properties in California, Colorado, and North Dakota. Together, the portfolio covers approximately 1.1 million square feet and has a book value of about $124.0 million.
In addition to its commercial real estate holdings, Presidio Property Trust Inc generates fees and rental income from affiliated entities, which manage and/or own a portfolio of model homes, the majority of which are in Texas and Florida.
In 2020, the REIT renewed leases covering nearly 170,000 square feet, or about 15% of its commercial portfolio. Overall, the same-store occupancy for its commercial portfolio in 2020 rose to 84.8% from 83.9% in 2019.
The residential division has done well for Presidio. It sold 46 model homes in 2020 and had eight homes for sale in escrow as of the end of the year. The homes were in Texas, Florida, Arizona, California, Wisconsin, and Pennsylvania. (Source: “Presidio Property Trust Reports 2020 Model Home Sales Activity,” Presidio Property Trust Inc, January 19, 2021.)
In 2020, the company collected 100% of the lease payments it billed to its homebuilder tenants, and 100% of the homes sold resulted in a positive investment return. The average sales price per model home sold was approximately $400,000, and the average holding period was approximately three years.
That momentum has carried into 2021. February was another month of strong performance. Presidio sold four model homes and had nine homes for sale in escrow. The average price per model home sold in February 2021 was about $480,000, and the average holding period was three years. (Source: “Presidio Property Trust Provides Update on Model Home Activity,” Presidio Property Trust Inc, March 16, 2021.)
The Lowdown on Presidio Property Trust Inc
Presidio Property Trust Inc might be a smaller REIT (as of this writing, it had a market cap of just $32.1 million), but thanks to its diverse property types and geography, it’s growing at a steady clip. In spite of the challenges posed by COVID-19, the company continues to see interest and demand from current and new tenants.
As the company grows, Presidio Property stock investors can sit back and enjoy its frothy 12.4% dividend.