Below is a chart and brief excerpt from today's Early Look written by REIT analyst Rob Simone.
The last two weeks have definitely been interesting for Best Idea Long PSA. Since we launched on 4/5, another activist (Land & Buildings) joined the fray along with Elliott Management, pressuring the company on a parallel front. Then yesterday the company announced a ~$1.8 billion portfolio acquisition, which adds 48 higher-quality, newer-vintage assets to its mid-Atlantic portfolio. A big portion of the thesis is capital deployment towards external growth at very attractive economics, and this deal definitely accomplishes that.
It’s not too often that you look at a sources & uses chart and see only one source of funds – unsecured debt. But that’s exactly the point – PSA’s under-levered balance sheet, scale and significant cash flow generation provides a unique opportunity to fund external growth accretively at an extremely low cost of funds.