"The Irreplaceable Corner Company" Should Have a Place in Your Portfolio

AmREIT (NYSE: AMRE  ) is a small real estate investment trust (REIT) which owns and operates 32 retail and mixed-use properties in Texas and Atlanta. It is mostly concentrated in the affluent, high growth and high household income sub-markets of Houston, Dallas, San Antonio and Austin. 

AmREIT calls these properties "Irreplaceable Corners" and calls itself "The Irreplaceable Corner Company." The average household income within a one mile radius of its properties is over $120,000. 

Source: Company Website

The company has been operating for 30 years. H. Kerr Taylor, the Founder, Chairman, and CEO of AmREIT, has been at the helm since 1985.

Investors can feel confident about founders who are still actively involved in the day-to-day operations of the business after decades, similar to John Mackey at Whole Foods and Jeff Bezos at Amazon.  Management, which have an average of 16 years experience, own 8.5% of the shares outstanding.

The stock currently yields around 4.5%, but it it thinly traded and does not garner much attention or respect from Wall Street. The company quietly debuted its IPO in July, 2012.

Affluent and dynamic markets
In a recent publication by the Brookings Institute, measuring economic performance from 2007 to 2013, Texas swept the county with the top four rankings, Austin (#1), Houston (#2), Dallas (#3), and San Antonio (#4). 

These are the same four markets that the company currently operates in. Amazing! But why is Texas ranked so highly? Let's take a look at just how good the markets where AmREIT's properties are located:

  • Houston is expected to lead the state and nation in in population and job growth from 2014-2040. It is also the energy capital of the world. 
  • Dallas is home to the most Fortune 500 companies outside of New York. 
  • Its San Antonio properties are located near the River Walk and only one block from The Alamo, the two most popular tourist attractions in the state.  
  • Austin is ranked the #1 city in the U.S. where America's jobs are created and sustained. The company has property directly across the street from Whole Foods world headquarters. 
  • Atlanta is ranked as the best city for college graduates and it is also the best place to start a business. 

In Q1 2014, occupancy was a very strong 94.2%. The company does not have any short-term floating rate debt outstanding and it does not have any 2014 debt maturities. The balance sheet is well positioned to accomplish its 2014 growth objectives. Its biggest tennant is Kroger, representing 6.42% of the portfolio. Being diversified among dozen of different tennants reduces the overal risk for the company and investors. 

Competition
There are some other retail REITs operating in the Texas markets. Whitestone REIT (NYSE: WSR  ) is one of those companies. Based in Houston, it is focused primarily on commercial and "community-centered' properties, which is different from AmREIT's mostly all retail portfolio. Whitestone has a larger geographical presence as well, extending to cities such as Phoenix and Chicago.

Hartman Management is another competitor. The privately held Houston REIT operates retail shopping centers and office space.  

Takeaways
The competition is not a serious threat for AmREIT. The focus of each company is different and Texas is certainly big enough for more than one company to participate in. AmREIT is certainly under the radar, unnoticed by investors and Wall Street.

It has not been pitched by any Motley Fool CAPS members yet. If investors are looking for a small, high quality REIT that is operating in dynamic and growing markets, AmREIT looks like a great choice.  

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