It is that real estate that now holds most of the firm’s value. In its earnings report, Sears claimed property, plant and equipment assets valued at $5.91 billion. The company’s market cap this morning, following a dive of 17% in its stock price, is less than $5.2 billion. There might be a lesson here.

Sears operates more than 2,500 retail locations in the United States and Canada, including its Kmart stores. In its annual 10-K filing for 2012, Sears put a value of $1.875 billion on its land, $6.1 billion on its buildings and improvements, and $347 million on capital leases. That could be a good start on converting the company to a REIT.

Sure Simon Property Group Inc. (NYSE: SPG) and General Growth Properties Inc. (NYSE: GGP) would be many times larger, but at least Sears would be playing in a ballpark where it has a chance to compete. As it stands now, the company appears to headed for death by a thousand cuts.

Sears stock is down 16.6% in late morning trading, at $48.47 in a 52-week range of $38.40 to $68.77.

Nearly two years ago, multifamily REITs traded at an all-time high valuation spread to the REIT industry on an adjusted funds from operation (AFFO) basis. That relationship has completely reversed, with multifamily AFFO multiples below the REIT industry average for the first time since 2000. That reversal is not lost on the REIT analysts at UBS A.G. (NYSE: UBS). In a recent report, UBS reiterated a sector Overweight rating on multifamily REITS and has a list of stocks to buy.

Apartment Investment & Management Co. (NYSE: AIV) leads off the UBS list of stocks to buy. It is a major apartment company that has refocused on coastal and job-growth markets. Its portfolio of almost 200 properties is concentrated in 20 markets. The UBS price target is $33. The Thomson/First Call estimate is $31.53. Investors are paid a 3.20% dividend. It is important to remember REIT distributions can contain capital gains and return of principal.

Avalonbay Communities Inc. (NYSE: AVB) is best known for owning and building high-end apartment buildings in high barrier coastal markets. It owns or has an interest in more than 200 apartment communities in nine states and Washington, D.C. The UBS price objective is $142. The consensus estimate for the stock is at $141.50. Investors receive a 3.30% dividend.

BRE Properties Inc. (NYSE: BRE) focuses on the development of multifamily apartment communities in metropolitan markets within California and in the Seattle region. UBS has a price target of $53, but the consensus is at $51. Shareholders are paid a 3.20% dividend.

Camden Property Trust (NYSE: CPT) is a stock to buy. Since 2010, operating cash flow has increased more than 30%. The UBS target for the stock was raised from $74 to $78. The consensus estimate is $75. Investors receive a 3.50% dividend.

Colonial Properties Trust (NYSE: CLP) delivered a first-quarter profit, met Wall Street’s expectations and beat the revenue estimate. UBS has a $25 target, and the consensus is in line at $25. Shareholders are paid a 3.70% dividend.

Equity Residential (NYSE: EQR) is a mega-cap REIT to buy. It has shifted its portfolio toward coastal markets with high barriers to entry, too. It owns more than 400 properties across 14 states. UBS has a $63 target. The consensus target is $62.50. The stock pays a 2.90% dividend.

UDR Inc. (NYSE: UDR) has undergone a major transformation over the past decade. It once focused on upgrading older properties in second-tier markets. A new CEO shifted its focus toward high-barrier, urban markets. UBS has a $27 target, while the consensus is at $26. Investors are paid a 3.90% dividend.

Essex Property Trust Inc. (NYSE: ESS) is a UBS stock to buy. With properties across California and Washington state, its earnings have been solid. UBS has a $160 target. The consensus estimate is higher at $166.50. The stock pays a 3.10% dividend.

One common thread among the UBS stocks to buy is dividends of more than 3%. With the 30-year treasury trading at 2.99%, and no end in sight for the quantitative easing bond buying, rates could stay low well into 2014. Good valuation and a solid dividend makes sense for investors seeking growth and income.

Citigroup will act as sole underwriter of the offering. General Growth Properties will not receive any proceeds from the sale of shares in this secondary offering. What investors need to know here is that this entirely cleans out the portfolio ownership by Blackstone. General Growth gets to be its own show without influence from Blackstone now.

General Growth Properties is seeing a drop of 2.4% to $22.76 on the news. Its 52-week trading range is $15.85 to $23.33, and its market cap is almost $21.4 billion. Investors probably feel lucky that an offering of more than $500 million is not hitting shares harder.

Note that General Growth is a real estate investment trust (REIT). That means that it distributes almost all of its income via dividends to its shareholders. The REIT’s dividend yield is only 2.1%. Blackstone must be looking to redirect client funds for new investments, probably ones with more value and likely to pay more than just a 2.1% dividend.

Many REITs have performed incredibly well, and many of the dividends have gone from high-yield to simply expensive. Investors buying General Growth Properties may want to consider that there are many other REIT alternatives out there that pay well over 2.1% in yield.

BofA/Merrill Lynch, Wells Fargo Securities, Jefferies and Barclays were fingered as the joint book-running managers for this secondary offering; co-lead managers named were J.P. Morgan and KeyBanc Capital Markets. Lexington also has granted this underwriting group a 30-day option to purchase up to an additional 3,000,000 common shares at the same terms as the offering.

Lexington closed at $12.05 on Monday against a 52-week range of $7.82 to $12.19. As far as the gross proceeds of $234 million, its pre-secondary market cap was $2.28 billion.

This trust pays roughly a 5% dividend yield to its investors as of the close, although that will be slightly higher as shares are down 2.7% at $11.72 this morning.

According to the report, Vornado sold a block of 10 million shares through Deutsche Bank. The real estate firm said last week that it took a loss of nearly $225 million last year on its investment in J.C. Penney. Vornado’s chairman, Steven Roth, is a member of J.C. Penney’s board of directors.

J.C. Penney shares have taken a horrific beating in the past year or so, down 44% in 2012 and another 15% so far in 2013. The company’s sales have fallen through the floor as CEO Ron Johnson discontinued J.C. Penney’s long-time strategy of weekly sales and discounts in favor of raising the store’s image in an effort to attract more customers. To be fair, Johnson took over a leaky boat, but his leadership has made the leaks worse not better.

Shares are down about 4.4% at $16.00 in premarket trading this morning, in a 52-week range of $15.69 to $39.73.

In a research report released today UBS A.G. (NYSE: UBS) upgraded the multifamily “coastal” or more expensive REITS to buy. Their bias within the multifamily group over the past two years had been on the value side, the “Sunbelt” and Class B REITs, with growth rates that were similar to their pricier coastal peers. However, they now feel that the underperformance of the coastal apartment REITs has become too difficult to ignore and are predicting 10% to 15% upside over the next year.

UBS raised Equity Residential (NYSE: EQR) and these other REITS to Buy today:

• Avalonbay Communities Inc. (NYSE: AVB) with its 3.3% yield
• BRE Properties Inc. (NYSE: BRE) with its 3.2% yield
• UDR Inc. (NYSE: UDR) with its 3.7% yield

With the multifamily REITs recently providing 2013 guidance, UBS feels that the feared slowdown now has been officially confirmed and is in the rear-view mirror. If the multifamily REITs deliver on the still healthy growth outlook over the next few quarters, they also are confident that discounted valuations will evaporate as market confidence improves.

One additional nice component for investors is that all of the names that UBS upgraded pay at least a 3% dividend. This could be a nice total return play if the 10% to 15% upside targets for the next year are hit.

The filing shows that it expects to list on the New York Stock Exchange, but no ticker has been designated. This one has ties back to PennyMac Mortgage Investment Trust (NYSE: PMT). PennyMac Financial Services was founded by former Countrywide president (and COO and CFO) Stanford Kurland. Citigroup, Merrill Lynch, Credit Suisse Securities and Goldman Sachs will act as joint book-running managers for the offering.

It said:

Our principal investment management subsidiary, PNMAC Capital Management, LLC, or PCM, is an SEC registered investment adviser. It manages PennyMac Mortgage Investment Trust, or PMT, a mortgage “real estate investment trust,” or REIT, listed on the New York Stock Exchange.

PennyMac’s Advised Entities have been some of the leading nonbank investors in distressed mortgage loans since 2008, investing in loans with more than $5.9 billion of unpaid principal balances. Advised Entities had combined net assets of approximately $1.8 billion as of September 30, 2012.

The company stated:

We are a specialty financial services firm with a comprehensive mortgage platform and integrated business focused on the production and servicing of U.S. residential mortgage loans and the management of investments related to the U.S. residential mortgage market. We believe that our operating capabilities, specialized expertise, access to long-term investment capital, and our management’s deep experience across all aspects of the mortgage business will allow us to profitably grow these activities and capitalize on other related opportunities as they arise in the future. … We were founded in 2008 by members of our executive leadership team and two strategic partners, BlackRock and Highfields. Since our founding we have pursued opportunities to acquire and manage residential mortgage loans and established what we believe to be a best-in-class mortgage platform.

FULL S-1/IPO FILING

Starwood Property Trust, a REIT, will pay $856 million for six of LNR’s business properties, including a 50% stake in Auction.com, the largest online real-estate exchange in the United States. Starwood Capital will pay $197 million of the acquisition cost in exchange for 50% of LNR’s ownership interest in Auction.com and another LNR business.

Starwood’s Sternlicht said:

We are delighted to announce this transformative and highly strategic acquisition that diversifies Starwood Property Trust’s revenue sources, adds significant scale to our operating platform and dramatically expands our proprietary origination capabilities. We expect the combination of LNR’s capabilities, Starwood Property Trust’s superior access to capital, and both firms’ underwriting expertise to result in a long-term and sustainable competitive advantage.

Through this acquisition, Starwood gains entry into the commercial mortgage backed securities (CMBS) sector, which the company notes, “are counter-cyclical investments and provide a natural hedge in a variety of economic scenarios.” Like, for example, a decline in real-estate values in Europe, where LNR currently operates a commercial real-estate debt fund.

Shares of Starwood are inactive in premarket trading this morning, having closed at $24.01 last night, in a 52-week range of $19.30 to $24.56.

U.S. outdoor advertising firm Lamar Advertising Co. (NASDAQ: LAMR) said last August that it too was considering becoming a REIT and the stock posted a new 52-week high. CBS posted a new high today, and Clear Channel Outdoor Holdings Inc. (NYSE: CCO) posted a multi-month high. Clear Channel is a subsidiary of Clear Channel Media Holdings Inc. and is controlled by Bain Capital Partners LLC and Thomas H. Lee Partners LP.

The world’s largest outdoor advertising company, Paris-traded JCDecaux said last November that it was on the lookout for deals in the U.S. given the weak European economy. The French firm was clearly bargain hunting, though, and complained that valuations of CBS’s outdoor division and Lamar were too high.

Another large outdoor advertising firm, China-based Focus Media Holding Ltd. (NASDAQ: FMCN) is being taken private by a consortium including its chairman, private equity firm The Carlyle Group LP (NASDAQ: CG), and other Chinese investors for around $3.7 billion.

It would not be a surprise to see one or more of the outdoor companies go private, especially if they are set up as REITs. The outdoor advertisers spin off large amounts of free cash flow, always attractive to private equity and hedge fund buyers. And, much to JCDecaux’s chagrin today, the price of poker just went up.

CBS shares are trading up about 9.3% today at $41.45 after posting a new 52-week high of $42.55. The prior range was $27.81 to $39.77.

Lamar’s shares are up 2.4% at $42.46 after posting a new 52-week high of $43.59. The previous range was $23.37 to $41.56.

Clear Channel Outdoor is up 5.2% at $7.43 in a 52-week range of $4.48 to $14.88.

While not betting on another year of out performance the REIT, analyst team at J.P. Morgan Chase & Co. (NYSE: JPM) think that a year of total returns at slightly above 10% are not out of the question. They also are comfortable with current valuations, despite solid gains over the past four years. In fact the biggest risk they see is literally bull market risk. This is where portfolio managers would rotate out of REIT names into higher beta, pro-cyclical segments of the stock market. This risk is heightened in their minds as REIT correlations and beta declined considerably in the back half of 2012.

Risk concerns notwithstanding, here is a look at J.P. Morgan’s top REIT picks for 2013. One additional note, while they did not post specific price targets in their report, one may assume that their top picks could achieve better than 10% total return level.

In multifamily housing, the top picks are Essex Property Trust Inc. (NYSE: ESS) and UDR Inc. (NYSE: UDR). Essex is trading today at $152.82 with a 2.90% yield, and the consensus price target is $163. UDR is trading at $24.70 with a 3.60% yield, and the street is at a $26 target.

For regional mall operators, J.P. Morgan likes Simon Property Group Inc. (NYSE: SPG) and CBL & Associates Properties Inc. (NYSE: CBL). Simon is trading today at $159.72 and has a 2.70% yield, with a $173 consensus target. CBL is trading at $21.28, with a 4.20% yield and a Wall St. target of $24.

The top office REIT picks are Kilroy Realty Corp. (NYSE: KRC) and SL Green Realty Corp. (NYSE: SLG). Kilroy recently traded at $48.59, while yielding 2.90%, and it is close to the street target of $50.50. SL Green is trading at $79.33 and yields 1.70%. The Thomson/First Call estimate consensus target is $84.

In the health care sector, the top pick is Healthcare Realty Trust Inc. (NYSE: HR). Trading today at $24.96, the yield is 4.80%, and it is right at the street consensus estimate.

The public storage pick is no surprise due to a small number of national public chains: Public Storage (NYSE: PSA). Trading at $147.96, this dominate name yields 0.70% and has a street target of $146.

Lastly, the selection in the triple net lease field is EPR Properties (NYSE: EPR). Trading today at $46.06, with a strong 6.50% yield, the street target is $49.

Again, while REIT dominance of the S&P 500 may be over, a strengthening economy should help most REITs to post solid years. In addition, J.P. Morgan is looking for continued growth in distributions. It is important to remember that the distributions from REITs, which we quoted as yields, can include return of principal.