REITWeek
NAREIT’s annual conference for real estate investment trusts took place this week in New York. A handful of net lease REIT presentations were available publicly. Key takeaways include:
Postal Realty Trust (NYSE: PSTL): 75% of acquisitions are sourced off-market (properly off-market with no broker involvement)
Realty Income (NYSE: O): Over 50% of tenants share information regarding carbon footprint
EPR Properties (NYSE: EPR): 2018 movie box office was $11.3 billion with average food and beverage spend of $4/customer. For 2025, those values are anticipated at $9.5 billion and $7/customer. Given the much higher margins in food & beverage, overall theatre EBITDAR coverage is expected to be as good or better in 2025 versus 2018.
W.P. Carey (NYSE: WPC): Have invested in Europe for 25 years and employ 50 team members in Amsterdam
Service Properties Trust (NASDAQ: SVC): In the market to sell ~120 hotels; Received 50 initial offers and narrowed to 4 subset portfolios with 4 different buyers; Closing anticipated in 3Q/4Q; Consider travel center net lease deals to be crown jewels of the portfolio
LXP Industrial (NYSE: LXP): Own over 500 acres of land for future development; No acquisitions in 2025 thus far
In the zone
Auto parts purveyor AutoZone (NYSE: AZO) reported its results for 3QFY2025 ending May 10, 2025. Domestic same stores sales were up 5.0% in the quarter (2.4% fiscal YTD).
Gross margin was negatively impacted by higher inventory shrink, higher commercial mix, and new distribution center startup costs (2 DC opened this year) while the company remains a cash cow ($769 million of quarterly cash flow from operations).
54 new stores were opened during the period with no closures (2 relocations). YTD, AZO completed 105 openings and no closures (5 relocations).
In the conference call, Management noted “…one of the reasons that you haven’t seen a lot of tariff cost in our side of the business is…most of our inventory turns relatively slow compared to many other industries, hard parts in particular. And that product just hasn’t shown up here in the country.”
Dollarama
Dollar stores mega-chains Dollar General (NYSE: DG) and Dollar Tree (NASDAQ: DLTR) reported quarterly earnings and held conference calls. Key takeaways include:
Dollar General (quarter ended May 2):
-Same store sales up 2.4% driven by high average transaction amount (2.7%) and offset but slower customer traffic (down 0.3%)
-Higher SG&A expenses driven by labor, compensation, and repairs/maintenance
-Opened 156 stores, relocated 23 stores
-Fiscal year guidance of 575 new U.S. store openings, 45 relocations, and over 4,000 renovations: 2,000 stores via Project Renovate (traditional program costing ~$250K per store) and 2,250 stores via Project Elevate (incremental program; much lower cost)
-Remain focused on improving debt metrics to support “middle BBB” credit ratings
-The cost to build new stores is up >40% since 2019
-DG’s 8,500 square foot prototype costs $500,000 to open including its CapEx responsibilities and inventory (targeting 17% returns on new stores)
Dollar Tree (quarter ended May 3):
-Same store sales up 5.4% driven by both higher ticket (+2.8%) and higher traffic (+2.5%)
-Opened 148 new and closed 18 Dollar Tree stores
-Higher SG&A expenses driven by depreciation from store investments, labor, general liability claims, and utility costs
-For the year, expect 400 new Dollar Tree store openings and have started construction on a new distribution center in Marietta, OK ($110 million investment)
-Sale of Family Dollar remains expected to close in early summer (reported as discontinued operations). The Family Dollar brand opened 3 new stores, converted 9 stores to Dollar Tree, and closed 25 stores. Compared to FY1Q2024, total Family Dollar revenue was down 3.4% but operating income grew by over $250 million.
-Sean Hostert