AmREIT (AMY)

AmREIT, Inc. is a diversified real-estate company with three distinct businesses, viz. a Real Estate Development, an Asset Advisory business and a Portfolio of Irreplaceable Corners. The Company’s portfolio of Irreplaceable Corners business, which consists of premier retail properties, is the largest segment and produces around half of the total revenues in the form of rental income. AmREIT own a real estate portfolio, consisting of 49 properties located in 15 states, with 90% of its rental income being generated from properties located in major Texas metropolitan areas.

The shopping-center industry in the US showed solid performance in 2006; with lenders funded deals at record prices and retailers looked to expand, while new construction remains restrained. Additionally, the current decline in the housing market, due to a build-up of inventory and rising interest rates, would have impact on the construction of retail centers, however the fall out will take much longer as retailers are still catching up to consumer growth and it will be a delayed impact due to lower vacancy rate in shopping centers.

AmREIT's has seen a healthy performance in 2006, backed by 23 new leases creating a positive impact on average rent per foot. However, the company has only 3% to 6% of its total lease coming for rollover till 2008. As a result, there will be no significant improvement in company’s rental inflows. Additionally, with just $330 mn in assets, it is the smallest of the eighteen publicly traded REITs (real-estate investment trusts). The company falls under ‘micro-cap’ size with just 6.26 million outstanding shares, which makes it too small for most institutional investors, while the retail investors are more inclined towards other major REIT’s companies, thus making AmREIT one of the most thinly traded stock. Moreover, with rising interest rate, increasing leverage due to poor cash flow and lack of significant initiatives in 2007, AmREIT is expected to register a mediocre performance.