Commonwealth (CWH): Meet Luxor Capital’s Newest REIT

Brandywine Realty Trust (NYSE:BDN) and Lexington Realty Trust (NYSE:LXP) are two close office and industrial REIT competitors for Commonwealth. Brandywine pays a dividend that yields 5%, with properties in promising areas such as Austin, Texas and Philadelphia. Occupancy rates are expected to see only a slight increase in 2013, to 89% from 88.5% in 2012. Funds from operations estimates predict Brandywine’s 2013 FFO growth rate will be flat, with FFO per share of $1.29, similar to 2012’s total. Billionaire investor Jim Simons – founder of Renaissance Technologies – is one of Brandywine’s biggest investors following a 500% stake increase last quarter (check out Jim Simons’ top picks).

Lexington Realty is another key office REIT that yields 6.2%. Lexington Realty reported 3Q results that showed EPS at $0.96, compared to a negative 24-cent EPS from the same quarter last year. Funds from operations also came in higher at $0.24 compared to $0.18 year over year. Despite being up almost 30% year to date, Lexington still only trades at 10x earnings, which is well below any of the other office/industrial REITs out there.

To recap: we believe that Commonwealth is a well-positioned REIT that is continually pressured by an uncertain economy, but it should perform well as it looks for strategic initiatives to provide value to shareholders. One such initiative might include the spinoff of its Australian assets. Even with a recent 50% dividend cut, this REIT still pays a relatively high yield and should be able to retain more cash for strategic acquisitions than it has in the past.