Biomed Realty Trust based out of San Diego California is known as a REIT, or Real Estate Investment Trust. This is a special kind of company that can trade shares exactly like a stock; however it must pay 90% of its earnings to shareholders in the form of dividends. REIT’s are great because they are a very liquid way to own real estate but also because their price fluctuates less and they consistently make money.
Life sciences are a highly focused real estate niche that Biomed Realty Trust caters to. These often include biomedical companies, pharmaceutical, government agencies, etc. involved in advanced and expensive life sciences. There is also heavy government support for this type of research. BMR also has very strategic locations in large cities and near university campus. Tenants are on contract for a set number of years, often more than ten.
P/E ratios are almost useless with REIT’s. You may have noticed (BMR) is well above 100. That is because the value or proper price per share for a REIT is FFO (funds from operations). This is because REIT’s pay you, the shareholder from the tenant rent. It is a huge payout compared to a large cap or blue chip. That is why the P/E ratios are so high. It does not matter. It is best calculated by adding depreciation and amortization as well as other non-cash expenses to net income.
One of the greatest elements for me to be bullish on BioMed Realty Trust is the nature of their business niche. Catering to the life sciences market, which includes a majority of pharmaceutical tenants melds perfectly with the aging population in the United States. Perhaps most important is the continual funding pharmaceutical and government programs receive for research in life saving and life changing technologies and medicines, of which take place in the properties held by BMR.
As an owner of real estate I would hate to own shares in a REIT whose tenants are mostly retail businesses or residential communities. These sectors of the real estate business are so shaky and unpredictable. They are liable to so many unseen factors for their success or failure that it is far too much for me to consider only but the best of breed with these. With Biomed Realty, shareholders only have to study a handful of property’s and tenants in a niche sector that is stable and continually in demand.
As with all REIT’s the dividend is the reason we are investing. A dividend hike of 7.5% in March is pleasing for investors. Even better, BMR offers a direct stock purchase plan as well as dividend reinvestment plan through BNY Mellon. This plan is transaction fee free. A minimum one time purchase of $100 is required and $100 is the minimum for any recurring purchases.
Currently, BioMed is a bit expensive at and near its 52 week high. This could be priced into growth or strong sales projections for the remainder of this year as well as next.
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