Insiders At WP Glimcher Inc (WPG) Taking Advantage Of REIT’s Low Price And Large Yield

Insiders at WP Glimcher Inc (NYSE:WPG) have been snatching up shares of the real estate investment trust at a significant clip. WP GLIMCHER is a result of the merger between Washington Prime Group, a spin-off of Simon Property Group  Inc (NYSE:SPG), and Glimcher Realty Trust. Mark Ordan, WP GLIMCHER’s executive chairman, recently bought 25,000 shares of the real estate investment trust in an open market transaction on June 11 for a total cost of $332,500. A day earlier, Jacquelyn Soffer, an independent director at the company, purchased four times the amount of shares in the open market that Ordan did; Soffer bought 100,000 shares for $1.3 million. These insider purchases were preceded by the open market purchase of 10,000 shares in early May by Robert Laikin, WP GLIMCHER’s lead independent director. In addition to the open market buying, WP GLIMCHER insiders have been acquiring shares of the REIT in non-open market transactions and they have not dumped any shares. Thus, it seems that the insiders at WP GLIMCHER are bullish on the REIT’s future and picking up a significant number of shares.

Insider Trading Back

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Following the purchases of insiders can also generate alpha. Insiders have more knowledge about their companies than outside investors. Insiders also know about future catalysts before anyone else. Because of this, research shows that following insider purchases can generate superior returns. It helps that WP GLIMCHER is coming off a strong quarter in which the company beat its funds from operations (FFO) per share estimate by $0.01 and its revenue estimate by almost $3 million. The company reported FFO per share of $0.47 and revenue of $237.7 million, an increase of over 50% since last year. The company also surpassed estimates in its prior quarter with beats on FFO per share by $0.03 and on revenue by $7.3 million.

WP GLIMCHER’s quarterly dividend of $0.25 gives the shares of the REIT a yield of close to 7.5%. One of the reasons the company’s insiders are picking up shares is likely their yield. If the company can maintain this payout, the shares of WP Glimcher Inc (NYSE:WPG) would make, at the very least, a nice income investment in such a low-interest rate environment in which the 10-year Treasury yields 2.25% and the Federal Reserve stalls raising rates.

In addition to a nice yield, the company could recognize appreciation in the share price post-merger, which the insider purchases could also be a sign of. The company expects to generate $1.77 to $1.85 per diluted share in adjusted funds from operations (AFFO) in 2015. If WP GLIMCHER were to trade at the long-term average price-to-funds from operations (P/FFO) multiple for REITs of 16, WP GLIMCHER shares would appreciate to $28.32 or almost 100% over their current price of $14.27 at the low end of its estimate. It is easy to see that there could be significant upside in the shares of WP Glimcher Inc (NYSE:WPG) and a yield that could attract investors to wait. The insiders likely realize this and are trying to capitalize on the yield and potential appreciation through their purchases in the open market and acquisitions outside of it.

J. Alan Reid Jr.‘s Forward Management and Israel Englander’s Millennium Management are among the largest shareholders of WP Glimcher among the funds we track.

Disclosure: None