HASI-High Yield REIT

I don’t think this is what is happening but I don’t know this company specifically. Look at something like BIP, it is my longest holding to date and uses most of their free cash flow for dividend. I think also somewhere like 60-70%. But they are also expanding and buying other assets to grow future cash flows. They do this by issuing additional “units” (the are an Limited Partnership) to raise the cash. As long as they are buying assets wisely, the addition cash flow over time outweighs the additional dilution.

JDC,

BIP has increased share count from 225M in Dec 2014 to 243M today (according to Google Finance). Seems a lot more sustainable than going from 21M shares to 38M shares like HASI has, doesn’t it?

Bear

JDC,

BIP has increased share count from 225M in Dec 2014 to 243M today (according to Google Finance). Seems a lot more sustainable than going from 21M shares to 38M shares like HASI has, doesn’t it?

Bear

that is a very short period

If I go the 2010 Annual report, page 87

https://bip.brookfield.com/~/media/Files/B/Brookfield-BIP-IR…

beginning 2009: 38.2
Ending 2009: 105.6M
Ending 2010: 156.3M

Now at 243M

I think it comes down to how well are they at allocating capital, can they buy assets that create returns in greater value of the dilution.

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Did you HASI is a special kind of REIT, since it doesn’t invest in real estate. (It “provides debt and equity financing to the energy efficiency and renewable energy markets.”) These oddball REITs should be out of bounds for typical individual investors, and that goes double for small ones such as HASI.

Really---- Out of Bounds? and HASI --Doubly out of bounds? --That’s pretty severe–isn’t it? I guess their being profitably in business growing for the past 35 years is of no importance

It’s great that some folks have made money in it.

I thought that was the object of investing in the market. And you said it should be OUT OF BOUNDS----IN FACT YOU SAID HASI SHOULD BE DOUBLY OUT OF BOUNDS.

Are you serious?

b&w

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What you’re missing is that for most REITs, depreciation is the single largest expense line item that needs to be adjusted out to find taxable income. 90% of the taxable income is paid out. This is why a few posters above have suggested that you read into REIT structure before you comment more. Here’s the first one that popped up on Google search for me:

http://seekingalpha.com/article/3062776-reits-the-90-percent…

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Previous post was directed at Bear, sorry for the lack of clarification

This is a decent introduction to REITs:

About 75% of the companies in the global real estate securities market are REITs. By organizing as a REIT, real estate companies gain special tax considerations that put shareholders on a level playing fi eld with investors that own real estate directly. Because of this unique structure, REITs are an effi cient way for individuals to invest
in income-producing real estate.

A REIT is required to distribute the majority of its taxable net income to shareholders and must adhere to certain restrictions on its operations, organization and ownership (see table below). In return, the REIT does not have to pay corporate taxes on the income and capital gains it distributes, thereby reducing or even eliminating its tax burden.

You can read more at https://www.reit.com/sites/default/files/portals/0/PDF/Intro…

There’s also a great public REIT board on the Fool which can be found at http://discussion.fool.com/real-estate-inv-trusts-reits-100061.a…

I’m sure they would be happy to answer any further questions there and I’m sure Saul would appreciate the discussion being moved too.

Matt
MasterCard (MA), Nestle (NSRGY), PayPal (PYPL), and Verizon (VZ) Ticker Guide
See all my holdings at http://my.fool.com/profile/CMFCochrane/info.aspx

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There’s also a great public REIT board on the Fool which can be found at http://discussion.fool.com/real-estate-inv-trusts-reits-100061.a…

I’m sure they would be happy to answer any further questions there and I’m sure Saul would appreciate the discussion being moved too.

I believe this is the second time recently that I’ve seen a good, focused discussion on a particular investment get asked to be moved, presumably because it wasn’t focused on a typical “Saul stock”. The name of this board is, after all, “Saul’s Investing Discussions”. If a discussion like this isn’t welcome here, maybe the board needs a more specific title, such as “Saul’s Growth Stock Discussions”?

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I believe this is the second time recently that I’ve seen a good, focused discussion on a particular investment get asked to be moved, presumably because it wasn’t focused on a typical “Saul stock”.

Hi Carplan, I think the problem is not that this isn’t a “Saul Stock” but that it’s turned into an argument about the details of REITs that has gone on for 27 posts now, and it starts to hog the board and discourage other people from looking in on the board. We’ve been patient, and suggesting a move after 27 posts isn’t cutting off the discussion too quickly, BUT IT IS TIME to move it on to a board that discusses REITS. Thanks for your understanding.

Saul

PS From the Basic Rules of the Board

There are also companies that don’t belong on the board. Like a company that has seen decreasing revenue and decreasing earnings over a number of years, and now is being considered as a take-over, or a sell-off-the-parts candidate. That’s simply not what this board is about. There are other boards for this kind of situation. Another example would be an early stage biotech, with no actual revenue, but great ideas. Or a new IPO of a company that has revenue, but still has large losses and hopes of breaking even two years from now. You can weed those out yourself.

It looks like arguments about the details of REITs fit in there too.

Saul

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Are you serious?

Yes. People have made money on lottery tickets, too. That doesn’t make them good investments. HASI is a small-cap hybrid REIT, one that has been operating as a REIT for less than 3 years. It is a risky investment.

Take it to the REIT board here, which has some very knowledgeable investors on it, and see what they say, if you care.

I’m glad you’ve made money in it. But there are a fair number of newbies here, and I want to make sure they understand the risks.

That’s all I have to say on the matter.

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Not sure who to reply to, so I’ll reply to Saul.

I got interested in REITs a while ago based on what appeared to me to be a very intelligent and well informed post on SA (a rarity). The basic premis of the post was that data centers are growing like weeds with no signs of letting up and there a bunch of REITs that cater to this market by building data center shells and leasing them out to the likes of AMZN, MSFT, etc.

But reading the article got confusing because of the abundance of terms that I was unfamiliar with. I simply don’t understand the mechanics of this business. I know it seems simple, but it’s not. They use uncommon performance measures and the average investor would be hard pressed to know if a specific company was doing well, or headed for the dumpster. At least, that’s my impression.

There are so many hours in the day. I have a hard enough time keeping up with the stuff I feel comfortable with. I concluded I don’t need to know this. There are lots of good investment opportunities without having to learn all new metrics and jargon. I’ll pass.

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Hey brittle, for my own edification I’d like to take a look, any idea on the article or link?

Today after the surprising election results, REITs stock have been lower. AMT is down more than 5% and HASI is down almost 5%.

Do you have a story for that?

Does most REITs have large debts on their balance sheet? Is that a common factor to REITs and how do you know when large is too large?

tj

TJ:

Today after the surprising election results, REITs stock have been lower. AMT is down more than 5% and HASI is down almost 5%.

Do you have a story for that?

I have explained the reasons for my investment in HASI over the past almost 2 years. in case you haven’t noticed there has been an unexpected result in the US election yesterday, which have caused some disruption in the markets. In addition HASI was in the middle of a secondary offering that was successfully concluded this evening. Management had recently guided towards an increased dividend to be announced and paid this quarter during the first week of January The increase is expected to be $0.04 per quarter to $0.34 from the previous $0.30 per quarter.
My investment objective is to maximize distribution growth and I expect to drip the HASI cash proceeds into additional shares. So that being the cash, the HASI stock decline actually will give me more shares per investable dollar benefits my portfolio because I am Buying and currently have no desire to sell. I’m growing my portfolio income on market dips.

b&w

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As are most REITs, HASI is vulnerable to fears of rising interest rates. It also operates in the alternative energy industry. It was a bad day for fears of rising interest rates (see bond market), and alternative energy. HASI got hit with a double-whammy.

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Is it possible that HASI bit the dirt because Trump’s flagship policy announcement was around infrastructure renewal and public money creating shiny new infrastructure is going to compete with HASI’s private business model?
A

REITs trade inversely with interest rates. Today had a massive move upward in interest rates.
Stocks like REITs are seen as bond equivalents and as interest rates go up bonds start to look more attractive and REITs less so.

Rob

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Hi Anthony:

Is it possible that HASI bit the dirt because Trump’s flagship policy announcement was around infrastructure renewal and public money creating shiny new infrastructure is going to compete with HASI’s private business model?

Probably the HASI selloff was due to a panicky knee-jeck reaction to the unexpected Trump election win.
HASI will be announcing a dividend increase from $0.30 per quarter to probably $0.34 per quarter in the next few days and the bargain hunters will be back. I added a few today on the dip.

b&w

Rob

HASI is expected to increase their December dividend From $0.30 a quarter to $0.34 a quarter. That might differentiate it from bonds going forward. If not, and the price remains the same, i am comfortable adding additional shares at the current 6.865% annual yield as I continue to drip the dividends into additional shares.

b&w

Hi b&w
Look, this isn’t a board for the discussion of REIT’s! This has turned into an argument about the details of REITs that has gone on for almost 40 posts now!!! It starts to hog the board and discourage other people from looking in on the board. We’ve been patient, and suggesting a move after 38 posts isn’t cutting off the discussion too quickly, BUT IT IS TIME to move it on to a board that discusses REITS. Thanks for your understanding.

I’ve asked before. Remember that you are a guest here. If you won’t comply, I’ll have the Fool remove the whole thread and then it’ll be gone for good and won’t be available for reference. It’s time to move the discussion! Drop it!

Saul

PS From the Basic Rules of the Board

There are also companies that don’t belong on the board. Like a company that has seen decreasing revenue and decreasing earnings over a number of years, and now is being considered as a take-over, or a sell-off-the-parts candidate. That’s simply not what this board is about. There are other boards for this kind of situation. Another example would be an early stage biotech, with no actual revenue, but great ideas. Or a new IPO of a company that has revenue, but still has large losses and hopes of breaking even two years from now. You can weed those out yourself.

Discussiona and arguments about the details of REITs fit there too.

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