thepupil

https://apple.news/Ao4o1b-pmQMa7isBWMWSXpw Morningstar likes office...but thinks VNO is more Levered than SLG, loses all credibility.

love the sequence here: 1. File for Bankruptcy 2. Then release the RSA (during market/work hours) 3. then release good quarterly results that show the thing still has value. I hold myself accountable for reacting poorly and selling a stock down 30-40% when it ended up down 10%, but couldn't they have released an explanatory press release first? Is that too much to ask. Again, I'm the patsy. I'm the idiot who owned an already bankrupt Boca Raton based life settlements company. But c'mon. also I love how the bankruptcy is a "subsequent event"

EMGC they filed for bankruptcy for the 2nd time in 2 years. it appears to be a pre-pack and the equity likely still has value, but filing for BK w/o a press release or description of who gets what is enough to see me out. I am the patsy at the poker table; there could still be significant value; this is more of a liquidity rather than solvency thing. I realized a loss of 20%-50% on various lots of the small position that nevertheless stings. the stock is only down 17% today, but the intraday range is big. I thought selling down 30% or 40% was rational for a bankruptcy filing and chose not to wait for more information. this could prove costly. EDIT: Commentary on VIC more or less confirms I am the patsy and that the company should be okay

WhT exactly are you referring to with respect to Detroit? During/after GFC or like the general decline of the 20th century? You’re probably my right. Covid and WFH has destroyed my stock portfolio, now it can go after my house

really not much wisdom to share. I don't think work from home will drastically affect well-located single family homes that derive some of their value from being close to cities. maybe that's me just being delusional. I just think that for the most part rich people pay to be around other rich people: good schools/amenities/etc. and that proximity to major metropolitan areas has appeal beyond short commutes. we'll see. perhaps my straight up and to the right zestimate is making me feel overconfident. it all varies by market. maybe some areas do very well, some see a correction. but in answer to the question of the thread title: my aggregate guesstimate for the overall market effect would be 0% for SFH. just to use my own backyard as an example. Between 7-9% of DC/ Maryland, and Virginia households have $1mm or more of liquid assets; DC has more millionares/capita than any state and Maryland is number 2. Incomes are high. There are only so many homes and no buildable land. no more SFH being created. I estimated there were likely more millionaires than SFH's in the the desirable parts of DC/MD/VA*. a large percentage of transactions are cash buyers. the wealthy towns have median family incomes of $150K+ and houses can still be had for less than $1mm. Why should houses be cheap / prices fall? because a few people are going to remote in from the mountains or the exurbs now so they can FIRE at 40? I think multifamily is going to have a brutal time over the next few years but would be a buyer of super well capitalized REITs on the way down (per the thread). it's not clear to me that 5 or 10 year out urban residential values will be lower than they were in February 2020. EQR trades for $377K / unit. Are nice urban apartments going to be available for $300/$250K?$200K? I mean that just seems absurd to me and self-correcting, can you imagine being able to buy an apartment in SF/NYC/DC/LA on a first year analyst/programmer/whatever salary. a first year analyst shouldn't be able to buy an apartment in NYC with his bonus as a down payment. that would be kind of awesome, but i don't think it will happen. the competition for cool fun space to live and global real estate as a place to store value is too fierce for that. just my delusional view. *~300K households, 30,000 detached single family homes, some of which aren't in areas where people would buy expensive homes. 9% of households have >$1mm in investable assets, 20% make >$160K, the immediate wealth suburbs are wealthier and higher income because they don't have the poor parts of DC messing with the stats, so it kind of makes sense why when you're buying a "expensive" house there are 10 other qualified buyers bidding against you.

I’ll throw out my guess. “Expensive” SFH close to cities: 0%.

https://www.bisnow.com/washington-dc/news/office/walmart-labs-putting-full-herndon-building-on-sublease-market-as-it-shifts-to-remote-work-106189?utm_source=outbound_pub_7&utm_campaign=outbound_issue_42573&utm_content=outbound_link_10&utm_medium=email

this guy is arguing that as well. the United States does actually have cheaper urban real estate compared to much of the developed world even though people (including me) like to complain / point out about how "expensive" it is. I don't agree we'll see 3% cap rates, but I would assign a higher probability to that scenario than most market participants. https://www.privateeyecapital.com/germanys-vonovia-the-case-for-cap-rate-compression-at-essex/

there's a bloomberg intelligence article today that summarizes what we know about the apartment REITs robust financial condition. AIV, AVB, CPT, EQR, ESS, MAA, UDR collectively have $9 billion of available credit on their revolvers and over $10 billion of cash and available credit. EQR, AVB, and ESS have over $1.5B each. unsecured spreads have tightened from 280 bps (march peak) to 110 bps. Since April, Camden, AvalonBay, UDR, Mid-America and Essex have raised a total of $2.8 billion at a blended 2.3% coupon. and the agency mortgage market is wide open: Spreads on apartment mortgages are tighter than most other asset classes, especially for fixed-rate debt. In the commercial mortgage-backed-securities market, agency-backed apartment issuance is highest among all property types, even as overall volume has fallen in 2020. since beginning of thread, I think we've seen fundamentals deteriorate more quickly and more severely than expected, but financing has also recovered more quickly than expected and is pretty much better than pre-covid. I think this combination suggests that eventually these REITs become acquisitive; using their huge balance sheet capacity as an offensive, rather than defensive weapon. For now though, I think they're using it to keep the buildings full and pretty much engage in what could be called a value destructive price war to keep the buildings full. All-in, my exposure to multifamily has decreased (ex JBGS). bought basket in March, took profits on the way up, and have not been averaging down. I think we'll see lower, potentially significantly lower prices as the changes in rent make their way into the financials as pre-covid leases roll off. a peak rent 12 month lease signed in February has only 5 months left. that said, it's not like every apartment these guys own is in Manhattan and San Francisco CBD and the situation is not nearly as bad as you move out from there. so i could be erring on the side of bearish.

Most of the large multi family operators all use the same occupancy management software / tool. I’m not sure exactly what it’s called, but as a renter, I’ve experienced this when trying to get apartments and the same building will vary their pricing by the day, sometimes by several hundred dollars/ month (pre covid). It looks at the market and comparable and how full the building is and spits out a number for the leasing agent to tell you. I actually used this to time a lease in a FRT building where I rented a previously $3500/ month 2 bedroom for $3100 + free parking and locked it in for 24 months because a couple building opened up recently nearby. The tool is designed to dynamically change prices to keep the building close to full. Gateway multi family is rapidly taking pricing down because of this. They all operate in similar fashion and I imagine this is feeding on itself. This is just a long winded way of saying that multi family reflects supply/demand in real time to A much greater degree than say office or even retail. For this reason, the near term looks pretty bad. And it’s easy to understand why: older yuppies bought houses, younger yuppies are at their parents, 30% of student deferred, few international students came back. Supply continues to come on line.

thanks for sharing. these numbers are shockingly high. I am amazed that half of people are back in some places. the NYC REITs have been saying 10%-20% of people are back and I would've guessed 15-25% elsewhere (in the US). this article is very different than what my impression is from following the REITs. weird. trying to think if there a reason that locks/unlocks would overstate occupancy? data seems suspiciously good to me. Maybe the nuance is that higher rent type of tenants (tech/finance/law etc) that are in the blue chip buildings are functioning better remotely whereas some others are more eager to get back to the office? Vornado speaking yesterday at BofA to follow up here, ther'e a bloomberg article today saying Manhattan office is about 10% full and other major cities are more like 25%. If you pro forma'd for the real estate industry's 50%+* occupancy in Manhattan, you'd probably be in the single digits. *for the record, I think this is kind of dumb for them to be "leading by example". Can you imagine the headline if Related/VNO/SLG's/BPY's leasing/acquisition team gets covid? tenants will return because they want to/feel good about doing so, not because their landlord is in the office.

So are you saying that people are moving from where 21% of EQR's units are (SF) to where 27% are (SoCal)? In all seriousness, I agree with you that the near term disruption in urban multifamily (NYC and SF) is bad and getting worse.

+1, 0-7% discount to NAV at 10-6% cap, value of EQC increases as real estate stocks/private market goes down. there’s like $300B of RE PE dry powder, but I think a single deal $2.8B cash pile + equity group backing is unique. The biggest tail risk I see is them doing a poorly received deal with another one of my holdings and I find I own too much of one thing. This is probably me just being paranoid because I’m dipping into the cash/bond allocation to buy EQC.

Jonathan Litt is coming at AIV, speaking to potential motivations on the transaction: https://landandbuildings.com/land-buildings-sends-letter-to-aiv-board-of-directors/ https://landandbuildings.com/wp-content/uploads/2020/09/LandB-Press-Release-Letter-to-AIV-Board-9-22-20.pdf

bought some Bowdoin quasi-perps (2112 maturity) for $120 / 3.85% yield. https://www.bowdoin.edu/finance/pdf/audited-financial-statements-fy19.pdf since it's a liberal arts college rather than university/hospital. Bowdoin has a relatively simple balance sheet and cost structure. $2.3B of assets, ~$400mm or so of super long term debt, so this is 20% LTV type of paper. Bowdoin has a strong alumni network (Reed Hastings and Ken Chennault for example), an endowment of about $1mm / student, and will likely be around a long time.It is ranked the 6th best LAC in the country by US News. It is a business that deserves to exist and offers a good value proposition to its customers (graduates have the 25th highest earning power in the country, so it's no MIT, but it's no slouch either). To earn a spread of over the 30y of 240 bps to lend to Bowdoin is not a terrible way to make close to 4% nominal and get long duration. This can be barbelled with cash, to achieve a bond like yield and lots of convexity. Go Polar Bears!

thanks for sharing. these numbers are shockingly high. I am amazed that half of people are back in some places. the NYC REITs have been saying 10%-20% of people are back and I would've guessed 15-25% elsewhere (in the US). this article is very different than what my impression is from following the REITs. weird. trying to think if there a reason that locks/unlocks would overstate occupancy? data seems suspiciously good to me. Maybe the nuance is that higher rent type of tenants (tech/finance/law etc) that are in the blue chip buildings are functioning better remotely whereas some others are more eager to get back to the office? Vornado speaking yesterday at BofA

there are so few post-covid trades of big buildings going on, but here's one https://therealdeal.com/2020/09/16/what-tenants-are-paying-at-shvo-and-deutsche-finances-big-red-building/ https://therealdeal.com/chicago/2020/08/12/aig-goldman-lend-on-shvos-big-red-buy-in-chicago/ https://en.wikipedia.org/wiki/CNA_Center Chicago "Big Red" building (I think of it as the CNA building because Loews' CNA was there for a long time and it's a pretty unique building. If you have visited Chicago, you probably recognize it, if of course, when you visit places your idea of a good time is gazing the skyline and thinking of cap rates / rent per foot etc. The building is 1.2 million square feet, and was purchased for $376 million or $313/foot. It last traded for $108 million in 2016. CNA sold it to be redeveloped, so without more effort, we don't know what the 2016 buyer's basis is, but I assume they made substantial $ on this. https://www.chicagobusiness.com/article/20151216/CRED03/151219886/cna-selling-big-red-moving-hq-to-new-office-tower AIG and Goldman Sachs are providing an 8 year interest only loan. Not sure of the rate, can't find it. $240 million (63% of the price) The property is 90% leased at $21.60 / foot which is below market of $40 / foot. Northern Trust is the biggest tenant for 45% of the space. Their lease goes to 2035. chicago Housing Authority is 18% to 2037 These two pay $21 / foot and $18 / foot respectively Average base rent per square foot in the building is in the low-$20 range, well below market rates for the East Loop submarket, where gross asking lease rates are more than $39 per square foot. If there were no operating costs/property taxes, etc., this would be a 6.2% cap rate, but is probably actually a VERY low cap rate, BUT rents are 1/2 of market, so it's tough to really think about what the cap rate is. The rents won't reset for a very long time in some cases. I think this is a bullish comp overall for basically any office REIT, but it's just one data point. If a building in Chicago where the biggest tenants are locked into paying $21 / foot for a long time is worth $313 / foot, what do you think the class A portfolio in sunbelt cities* that's paying $40 / foot, that is CUZ is worth? What do you think theMart (VNO's Chicago asset / huge tech hub) is worth? if one can get 63% 8 year IO financing on this, what do you think the finacning looks like for better buildings in better geographies. *as in cities that aren't going bankrupt like Chicago.

while this does not affect the 2,3,5 year outcome of office REITs, I am surprised they didn't trade down on this. It’s an awful headline / data point.

https://seekingalpha.com/news/3613573-apartment-investment-and-management-plans-spinoff-jv https://seekingalpha.com/pr/18004279-aimco-announces-formation-of-apartment-income-reit-self-managed-10-billion-reit-and-closing AIMCO splitting into a development company / stabilized company, since the market hates development and will probably value the stabilized better. I'm not really familiar with AIV / AIMCO. Just skimmed. Also, a nice 4.2% cap rate / $592K / unit california sale in the press release. That's a strong comp as it relates to ESS. I found this the other day on twitter as it related to ESS. https://www.privateeyecapital.com/why-would-any-long-term-investor/

isn't selling a put on a merger arb, basically the same thing as being long announced spread merger arb? I guess the puts can work better if there's unexpected timeline extension but not a break, but it's basically the same thing, right?. You do lose the overbid optionality, but that's pretty rare and only relevant to some situations. Risk arbitrageurs rightly describe their business as one of put selling. Is there a non-obvious reason that put sales are better than being long the spread?

All you really need to know lol Congratulations to JPMorgan Chase for ordering everyone BACK TO OFFICE on September 21st. Will always be better than working from home! @realdonaldtrump When DJT is opining on your thesis, you know it’s become way too much of a battleground stock/s

https://seekingalpha.com/news/3612778-manhattan-rental-market-sinks-number-of-empty-apartments-triple Manhattan rental market sinks as number of empty apartments triple Sep. 10, 2020 5:19 AM ET|About: Equity Residential (EQR)|By: Yoel Minkoff, SA News Editor There were more than 15,000 empty rental apartments in Manhattan in August, up from 5,600 a year ago, as more New Yorkers fled the city amid the coronavirus crisis, according to a report by Douglas Elliman and Miller Samuel. The inventory of empty units is the largest ever recorded since data started being collected 14 years ago, dashing hopes for a rebound in the fall or the end of 2020. Rental prices have come down - median rental prices fell 4% in August - but the discounts don't appear steep enough yet to lure new renters back to the city. The average rental price for a two-bedroom in Manhattan is still $4,756/month. While REITs and real estate companies have more access to capital, smaller landlords with just one or two buildings may have trouble paying their mortgages and property taxes, which could impact banks and lenders. Related: Equity Residential, (NYSE:EQR), AvalonBay (NYSE:AVB), UDR (NYSE:UDR), Apartment Investment and Management (NYSE:AIV), Essex Property Trust (NYSE:ESS), Camden Property Trust (NYSE:CPT), Mid-America Apartments (NYSE:MAA), Invitation Homes (NYSE:INVH)

To help make some of these distinctions, I use the terms “Value factor investing” (Low P/B, high earnings/divvy yield, cheapest quartile) “Intrinsic value based investing” (underwriting an asset/company’s value and buying below that, it’s PE / boom multiple whatever may be low or high)

I see nothing wrong with discussing one of the world’s most important investors. That’s what this topic is about. The Vision fund is important for ones valuation of SoftBank, influences the whole tech ecosphere and SoftBank may or may not have been pushing up the tech market / whole market recently. It’s interesting and has impact on portfolios. John, I have to say, each of the past few reactions to a couple my posts has left me confused. Your posts are cryptic and arguably hostile. Your English is much better than my Danish, but I can only conclude there’s something getting lost in translation. You don’t have to read about a topic that’s of no interest to you.

https://visionfund.com/pdf?file=https%3A//visionfund.com/uploads/Quarterly-Results-FY-2020-June-2020.pdf Saudi exposure is $30B pref (already paid down some), mostly. slide 14.