In case you didn't notice...

Industry Discussions Real Estate Inv. Trusts: REITs
1

REIT’s are breaking down strongly across the board REIT’s have declined anywhere between 15% to 25%. So it is time to get your buying list ready. I think Fed is determined to swing its hammer as hard as it can and if they cannot unshackle supply chain constraints, or war induced commodity price raise by interest rates, it is determined to smack the consumer on head and break the hands so that they don’t reach the wallet.

Fed is on a course where they are going to break the economy. So be prepared with your buy list. Remember it is the bear market where you make money, i.e., the purchases you make in bear market will be provide outsized gains during the bull market. And yes, there will be a bull market and once we have recession, FED will take its foot of consumer throat and try to resurrect the dead consumer.

7 Likes
2

What was surprising to me was how much Apartment REITs have fallen, of course along with every other REIT.

At least here in Austin, people still consider apartment investing as the holy grail of making money. Feels like all of us are in for a rude awakening. Private REIT market.

Thanks for posting…

3 Likes
3

I think the net least REITs have been holding on pretty well.

klee12

3 Likes
4

Hi Kingran!

Pretty astute post, if not a little graphic. ;->

With the exception of ABR and WD(which have been clobbered), I don’t own any apartment or housing-related stocks. And most of my net lease REITs are still very much in the black. But I get your point. It’s time to get ready with the dry powder to buy more shares of your favorite REIT.

And you’re right that real wealth is built on the back of bear markets–not from selling in a panic, but in buying good quality companies and REITs while they are on “sale”.

David

3 Likes
5

I have bought Simon property @ 106 and some more @97. of course underwater. The dividend of $1.70/quarter got me into it; additionally I like the management. Now that I think about it, I got in little early. We are going to have retail slowdown - due to overall conditions - that part is consensus and I don’t think anyone is disputing it. I tried to tell myself not to time the market and build my position but it is hard to shake the feeling of little too early. I am not sure if you would call it market timing if one waits out if a decline in activity is staring in your face. Very hard to differentiate what is market timing vs prudent patience based investing.

Moving on …
With rents up like 20% in Austin in last year, I am little unsure why market is punishing Apartment REITs as much as it has. I want to buy Camden as it has number of apartments locally and are managed well. Supply of new apartment start is sure to come down. I suspect that should keep the rent up for coming years. Negating that is higher interest rates pressure on NAV. I think if there is a place to park your money as things shake out, apartments would be a good place to be in.

Switching gears again…
The local developers here in Austin whom I am in touch with don’t see price falling more than say 5% because too many people are moving into city. Then you go to internet, the housing is primed for 20% fall, is the narrative. I suppose the truth is in between. I feel like a decline of prices in 10-15% range would not cause much damage to overall investment psyche. Below that we may start seeing foreclosures or definitely further declines as buyers go on strike out of fear and we get into self perpetuating cycle.

3 Likes
6

Hi all, I think the apartment REITs are somewhat Dependent on the REIT itself. I own BRT which is a smaller apartment community REIT that is focused on the southeast and buys run down complexes, fixes them up, raises rents and sometimes sells the upgraded complexes.

This stock has held up very well and is pretty close to it’s all time high as they continue to grow FFO and capital gains over time.

I also own CPT, a larger apartment REIT and it has taken a 20% haircut since I purchased it, not all that long ago.

Apparently all APT REITS are not created equal!

Randy
Long both BRT and CPT.

3 Likes
7

what other REIT people are buying - retail I suppose is mostly hated currently. Industrial seems to be in the crosshairs of Amazon warning of too much warehouse space, though I personally BELIEVE it is a one off situation.

Hotel - rates are just crazy high but then you see travel stocks like AirBnb, Marriot, Expedia, Booking - all more or less 52 weeks low. If I want to bet on hotels, I feel like Marriot may be better option (AirBnb continues to be very expensive though it is a very high quality business and people just have no alternative really)

Office - I want to stay away like 2 million miles… My office continues to be 70% or more empty and … well we all know it.

Overall things are messy and not sure good time to go in. I have bought SPG and probably buy apartments but not sure about others.

3 Likes
8

My shares of WPC have held up pretty well and are still relatively close to its 52 week high.

But most of my REITs have well off their 52 week highs. It doesn’t bother me too much because most are still in the black since I bought most of them a long time ago in the shadow of the Great Recession’s bear market of 2008 to March 9, 2009.

And I have been adding to my holdings where the draw down has been the worst assuming my take on their fundamentals is still positive.

Oh, and I do own one rather risky play on the Manhattan office market through SLG. They increased their dividend a couple of quarters ago, and their conference calls and results have been good. Their outlook going forward is positive. (Kind of counter-intuitive given all the negative comments on New York City.)

David

1 Like
9

what other REIT people are buying - retail I suppose is mostly hated currently

Not sure this is true. My potential buy list consists of the companies that I own, owned & sold like,

  • BRX - expected FFO $1.9 (This is technically right at support level, if it breaks hello $16, and any break I will buy)
  • KIM - expected FFO $1.5 (I will only consider this if the price gets below $15)
  • INVH - I will at $30
  • WY - Has good support at $30, $25. I have sold a chunk of puts for $20; So I will buy a bit at $30, $25 and continue to sell more puts for $20 strike.

If thinks gets crazy and SPG gets towards further lower, it has pretty good support around $60. I am considering selling puts for $60, if it gets there I will take the shares, if not, I will collect the premium. Current price is not interesting. Likewise if MAC gets to $5, I will buy. This recession will not kill MAC.

Sometime back I have bought a bunch of REIT’s on technical support, of course all violated the technical support and declined about 20% from my purchase price. So I may end up swapping them.

2 Likes
10

https://www.reit.com/sites/default/files/returns/prop.pdf

Being interested in investing in reits as a possible protection against inflation (and for income) I came across the above table giving “Investment Performance by Property Sector and Subsector”.

For the month of May 2022 and YTD (as of May 31) the total returns (%) of Office Sector are -7.17 and -14.63 whereas those for the Residential Sector are -7.39 and -16.08. I was not expecting this.

The ‘best’ sector is Healthcare (+1.27%, -2.02%) followed by Lodging/Resorts (-4.29%, +4.39%) and Retail (-2.21%, -12.12%).

If we consider the performance for only the month of May (which includes a greater effect of the data on inflation than the ytd figure), then the top three sectors are:

Healthcare (+1.27),
Diversified (+0.69) and
Retail (-2.21).

The average dividend yields for these sectors are 4.23%, 4.78% and 4.51% respectively. The dividend yield for the residential sector is 2.73%, rather low.

I have read in various places the suggestion that multifamily apartments sector is a good sector to invest for the coming months - rents are going up etc. The data does not seem to support this but I might have missed something.

I would like to know what others think before deciding where to invest.

Thanks.
alpha

6 Likes
11

I think 1 month is not a good period of time to base anything on. If you are going to compare
performances over periods, perhaps you should use 1-Yr, 3-Yr and 5-Yr periods. Personally, I
favor industrial, apartments, manufactured housing, self storage, data centers and cell towers.

2 Likes
12

I agree that, normally, one should consider performance over longer periods as you suggest and as is customary. However the last few months have not been “normal”, with abrupt changes in the fed policy etc (belatedly) acknowledging the non-transitory inflation scenario. So, the performance more than a year ago may not be a good indicator of things to come in the next few months/years.

Btw, mortgage reits generally have very high dividend yields. Are they all as unsafe as junk bonds? What about Mortgage reits preferred shares? Can those issued by companies with reliable past performance be considered reasonably safe for income seeking investors, like those issued by other reits?

1 Like
13

Hi alphab!

I agree with ngcpa’s comments. You really cannot evaluate the potential long-term investment prospects for any REIT based on only one month’s performance, whether it’s normal or abnormal circumstances. I especially look at how a REIT performed during the Great Recession’s bear market of 2008 to March 9, 2009, and what changes were made in debt ratios and the like subsequent to that bear market. Many learned valuable lessons from that period and greatly altered their debt and liquidity practices, much like the banks were required to do.

In the REIT space, I own non-mall retail such as BRX, KIM, NNN, O, ROIC, SRC, STOR, and WPC.

I also own one storage REIT, CUBE; and two logistic/industrial REITs, GOOD and STAG.

I own one hospital REIT, MPW. And just two office REITs: ARE which is a life sciences office REIT with very long lease terms for its pharmaceutical tenants, and a very risky Manhattan office REIT, SLG.

Finally, I own just one mortgage REIT, ABR, which was badly wounded in the Great Recession but seems to have learned the lessons of that era. Its CEO, Ivan Kaufman and his team, are executing well with their multi-family housing emphasis and most of their lending is short-term.

That said, I invested in most of those REITs more than 5 years ago, some over ten years ago, so I got in at much lower prices than today’s prices.

None of my holdings should be considered recommendations and you must do your own research and due diligence if you should consider any REIT for an investment.

If you want another resource for your research, The Motley Fool has a REIT premium service for $299. annually, called Real Estate Winners. They make specific REIT recommendations and provide follow-up for as long as a REIT remains one of their recommendations. So, theoretically, you are never alone with their recommendations.

Good luck.

David

5 Likes