thepupil

my newsletter already costs thousands in real estate related securities losses.

I think this has more to do with the degree to which corporate credit has tightened and asymmetry than anything. CDX IG is at 50 bps. Meaning one can pay 50 bps / year for 5 year to buy default insurance on a basket of 125 investment grade credits. Pre-covid this number was 40 bps. The risk in investment grade credit has increased by more than 10 bps. The lowest they've been in 10 years is 45 bps. During the march sell-off this blew out to 160 bp. Ackman's hedges were on US and European investment grade credit primarily, on $70 billion of notional. this time around it's "less than 1/3" the size. Let's say it's $20 billion. So he's probably paying about $100mm / year to get short $20 billion of investment grade credit. If spreads widened to 100 (for context they widened to 93 in december 2018 on general fears of rising rates/end of QE), he'd make ~2.5 points on the notional or $500mm. This is in the context of a ~$11 billion of AUM. He's fighting the fed, but even if he's wrong he has permanent capital and the cost of carry is not huge at his current size. As a PSH shareholder, I approve. I cannot put this on as I don't have ISDA's with banks lol. I would short IG at 50 bps if i could. I also think this is a good hedge to rising interest rates w/o the ZIRP/NIRP tail risk and with far better/empirically observed negative correlation to equities than shorting treasuries/rates. Corporate credit quality will deteriorate if the all-in cost of financing increases (see late 2018 widening). he may even be shorting HY at 330. HY is at an all time low absolute yield (in the low 4% range) and very low absolute spreads given the default environment. I continue to think investing in Ackman at a 30% discount is very attractive.

33% in urban RE to 30%. 2020 would have been better for me if I’d been more of a wuss and managed risk/concentration better. That’s why the name isn’t theMaster. Gregmal, I sold all my JBGS today....then bought it all again...tax gain harvest, same with berkshire.

I think that a no vaccine / no good therapeutics scenario was relatively low probability and that probability is no even lower. it's a fundamental positive for names dependent on life mean reversion vs a negative for current life extrapolation. the long term secular trends brought about by covid likely remain, but perhaps for less long or to a lesser degree. perhaps not. I think to have owned anything involving human interaction (in my case urban apts/office) you kind of had to assume that there'd be a vaccine at some point (whether people are getting their shots in 6m or 12m or 24m was less important, at least to me). I don't think much has changed and would hypothesize the degree of these moves has more to do with positioning than fundamentals, but that's speculative. i trimmed a little today in some of the more dramatic moves in urban real estate.

~7% annualized, not bad at all.

Of course the “real” reason is narrative follows price and no one knows why things are happening

No blue wave = lower probability of forceful regulation of big tech, less likelihood of big increases in corporate taxes, less likelihood of massive stimulus and growth which equals lower rates which is good for tech stocks which are a long duration asset class. Also Prop 22 in California shows that in one of the US’s largest most progressive/liberal states people still want cheap labor for their app based gig economy but that’s minor.

0-80% LTV w/ Wells Fargo @ 3.125% 30 yr amort, 10/1 ARM (fixed for first 10 years, can not go up by more than 500 bps in total or 200 bps / year) 80-97% LTV w/ Signature Federal Credit Union @ 5.25% 15 year amortization, 5 year balloon, all due in 5 years. The idea was that the balloon would not be a large amount of money for me in 5 years, but I didn’t want the full 20% down payment in 1 asset. i found signature federal credit union on a biggerpockets discussion as the most lenient highest LTV 2nd mortgage lender. EDIT: I had to buy with 20% down (can’t have a 2nd lien in the DC bidding wars, sellers will take other offers, messes with the closing to be wrangling 2 lenders), then do the 97% LTV cash out a few months later I must admit, I've since de-levered, reducing ROE, it's more like 93% at cost, 88% LTV at value now

bought my house at a 3 cap w/ 97% leverage in 2019. best real estate investment i've made thus far. get at me flyover scum with your low taxes, fiscal health, and reasonable cost of living! gross!

https://www.privateeyecapital.com/essex-property-trust-3q-results-pretty-pretty-good/

Where do we draw the fairness threshold? If an immigrant family toils to build a dry cleaning business/hotel/apartment worth $2 million, is it fair for that to be taxed at 50%+ at death? If my grandpa sat on Gillette stock for 70 years and has a 100+ bags of P&G that he wants to put in an educational trust for my future kids,what tax rate should apply at death? (This is a real life example lol) Should the rate be different because the immigrant worked harder and had a harder life than my grandpa? (This is objectively true) Or because the dry cleaning business is a “real Family business” whereas clipping divvies from tide pods and 10 bladed razors is not? What amount of dry cleaner/P&G is it fair to inherit? $500K, $1mm, $2mm? $10mm? Does it change if the money is to be spent on a Ferrari vs education? I think we need higher rates from a fiscal standpoint, but think that death duties at rates which amount to seizure are antithetical to the bedrock of capitalism and freedom: property rights.

i feel like i am really in the running for "most COBF dollars destroyed with ideas in 2020" award.

$337K / unit, 5.8% cap on new fundamentals, bought a little more but by no means a material position yet. waiting for and expect more pain, many years of pain.

EQR results look pretty bad, as expected.

one thing i would add is that there's a perception that paying up for private school leads to better college outcomes. this was absolutely the case 50 years ago (there's a fun story about harvard having an admissions folder for exeter that was bigger than the midwest) and the case 15 years ago, but I would point out that being "privileged" is actually an admissions ding for many of the top schools and it's EXTREMELY competitive when coming from a top zip code public or private. don't get me wrong, it's still an advantage, but you're not entitled to an ivy league admission if you do well at a top private school, particularly if you are asian and to a lesser degree white. this trend will only continue as some schools are even (gasp!) removing preference for legacies.

KJP, as a NW DC/MD resident, I am in your boat as well. the private school decision starts in the $30K/year for pre-K / kindergarden and gets inthe the mid $40's for high school. when you take into account tax rates, you need to make $100K-$150K / year just to fund school for 2 kids. but people get used to paying $2.5K -$3K / month for daycare and just continue it all the way through HS. that said, i went to a mediocre (academically) protestant school for K-8th in an affluent suburb in south florida. it currently costs $7K - $11K / year (k-8th). i'm sure there are plenty of these type of schools around the country, where they may be better than the public option, but aren't the same as sending your kids to germantown friends (or Sidwell friends in my neck of the woods) or whatever....what's up with the quakers and their super premium schooling! it was a great experience and worked out for me. i then went to a super rigorous private high school that's now ~$35K/year (it was $17K when i graduated 13 years ago). It was also a spectacular experience and offered a better educational experience than my top 10 college (which is more of an awesome network/brand, more so than an education)...which now cost $58K/year... my wife was all public until college and is doing just fine (PhD in competitive field). we don't have kids yet. if we are still here, we'll go public, because we make a decent income, but unsure if we'll be able to afford private school in this area; even if we can afford it, it's just hard to see spending $1mm or so after tax before college (2 kids 15*35), particularly after paying 9% in state and local taxes, and $10K+ in property taxes. the public schools are good. both of our neighbors are doctors, sent their kids to public all the way and they're doing well. i had a lot of friends in college who came out of strong public schools in this area. that's my douche-y post for the day.

this may have been said, but i like the politics category because i can mute it, and there's a clear place to discuss politics. Because it exists, political discussion is almost invisible to me, with the corona thread a notable exception. I assume that in its absence political discussions would creep into other categories/threads. this very thread is actually the most i've seen of it (since it's in "general discussion"). but if it's deleted, i think that's okay too, since it formalizes that "this is not a politics board"

https://www.costar.com/article/1866671625/apartment-tower-sale-smashes-atlanta-price-record KKR and a partner paying $180 million for Hanover Midtown in Atlanta. This appears to be quite a sexy building, 350 units. https://www.hanovermidtown.com/hanover-midtown-atlanta-ga/location https://www.apartments.com/hanover-midtown-atlanta-ga/pfsrw7t/ another article says the building also has some retail and 2 floors of office leased to WeWork, so I'm not sure if the price includes or excludes that (I don't have acess t the costar article). If I chop off $0-$40mm for that, this is $400K - $515K / unit. If the retail and office is more then it's less per unit. Nevertheless a strong print for multifamily. Earlier upthread KKR paid $800K+ unit for brooklyn multifamily.

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%.