First Industrial Realty (FR)

I picked up a small starter position today in First Industrial Realty (ticker: FR) and plan to accumulate more on further price dips. First Industrial develops and operates warehouses and light industrial buildings in the top industrial markets in the US and select industrial real estate markets in Canada, Belgium and the Netherlands. FR trades below its net asset value per share and yields a whopping 10.4% with more than enough cash flow to maintain the dividend.

FR has an interesting connection with Warren Buffett. On December 3, 1999, Buffett auctioned off his 20 year old wallet with a secret stock tip inside to benefit charity. John Morgan was the winner and paid $210,000 for the wallet. Some time later, Mr. Morgan announced that the stock Buffett had recommended was First Industrial Realty (FR). At the time, REIT's were very depressed. FR was trading a little below $25 and yielding around 10%. After this year's drop in financials, FR is trading around $27 which is close to the 1999 price level, and it is again yielding over 10%.

Buffett later sold FR from his personal holdings in 2004 when it traded above $40, and it later traded over $50 in 2006. If you add in the dividend yield, the total return on the charity wallet pick was quite impressive!

FR has more risk than some of the other warehouse REIT's because it uses a significant amount of leverage. But at the current valuation level, I believe the risk/reward longer term is quite attractive.

Full Disclosure: I am long a starter position in FR.