matts
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Posts posted by matts
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I'm in no rush to take it as I'm young and healthy. But we like to travel and looks like international travel will require it once it's widely available. Sooo, next time I want to take an international vacation i'll probably get the shot. By then, most of the kinks should be worked out, much more data etc.
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I was born in poland, educated in Canada, worked as a portfolio manager in Canada, and now I'm based in Poland.
Just starting to get a real feel of the market here. Happy to share some thoughts.
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Thanks for the input guys.
I found another possible way to play it. would appreciate any input.
Bluerock reit Pref shares BRG.PR.A trade at 20.62 (around 10% yield). Bluerock is a multifamily reit mostly in the sunbelt. They just had their Q1
Quickly put together highlights:
Occupancy at April end - 94%
Collected 97% april rents, 92% may rents through May 12 (includes 2% on payment plans)
These guys are constantly buying new buildings, renovating new units etc, so they are constantly issuing new prefs. They said that even in april, they were issuing new prefs at an annual run-rate of 200MM. I think for the next little bit they will keep diluting common and raising new prefs in order to pay the old prefs.
cap structure ooks like this:
2.5B assets (2B of depreciated buildings)
1.45B Mortgages (80% of that is GSE)
100MM revolver
715MM in pref shares
many pref shares recovered, but these still trade at a good discount which i think should close leading the way to a decent IRR
rents look like they are getting paid (if not, they can always stop paying the GSE mortgages for a few months) and they will likely keep issuing prefs to retail investors that want the yield.
Any thoughts appreciated.
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Pupil, I think i remember reading you owned RESI in the past.
you said you're not a fan of SFR but what do you think of it at 7.15 after the takeover fell through?
someone wrote up a decent thesis here:
http://yetanothervalueblog.com/2020/05/quickie-idea-renting-some-resi.html
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In terms of what I am not doing for a long time: flying somewhere. Apart from being locked in a plane with hundreds of other people, I don't think I can handle having mask on for 4-6-10 hours. Plus the airplane air makes me sneeze profusely every time I fly. So I'd be considered bio terrorist half through the flight. ::) :'(
#FirstWorldFlyingProblems
I think you missed the worst bit, which is: to even get on the plane for an international flight, you will have to get a medical certificate; get temperature checked at the airport, and queue for security in a socially distanced way. People are talking about a 3-4 hour process at the airport.
This is the year for a staycation in your own country (at an extortionate price)!
people talked about 4 hours at the airport after 9 11 as well. Not sure why it would take 4 hours this time. The certificate you get a couple days before. If everyone is wearing a mask, why would there be a need to have meters of distance in the queue? makes no sense. temperature checks take a second, and more likely, they will be done by flir cameras so you won't notice it until someone taps you on the shoulder for being too hot.
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Looks like the stimulus is working. From the Firstcash (pawn shops) call on April 21:
“Our U.S. business has been further impacted in April as customers started receiving federal stimulus payments, which are in effect a “second tax refund,” assuming a stimulus payment of $3,400 for the typical family of four. Despite the severe and broad-based economic impacts of COVID-19 on so many businesses and individuals, many of our U.S. customers appear to be somewhat more liquid than would be expected given increased unemployment rates. In addition to stimulus payments, we believe that many of our customers have temporarily reduced their normal levels of spending significantly, as they adhere to strict “shelter-in-place” regulations resulting in reduced expenditures on gasoline, dining out, travel, entertainment, childcare and other services.
“Accordingly, the U.S. results so far in April have seen both extremely strong retail sales and loan redemptions, coupled with a lower than normal volume of new loans being written. Currently, U.S. pawn loans are down 14% since the beginning of April, when normal seasonal trends for the month would typically see flat to slightly increased pawn balances. While the increased volume of loan redemptions is to date driving a 12% increase in collected pawn fees for April compared to last year, expected fee income after April will be impacted by the reduced loan balances.
“Offsetting much of the near term impact of lower pawn balances is the strength of the U.S. retail business, where same-store retail sales in the first three weeks of April are up approximately 29% versus the same period last year while being able to maintain margins consistent with the first quarter. Much of the retail sales growth has been driven by strong demand for essential “stay at home” product categories, including electronics utilized for remote work or online learning and other “home-based” recreational products, such as gaming consoles and sporting goods."
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Rent strike groups are starting to pop up
https://therealdeal.com/2020/04/16/tenant-groups-set-rent-strike-for-may-1/
any thoughts on how widespread the movement will get? and then how successful?
My answer would be pretty widespread in the large blue cities and will be meaningful on the margins for large landlords in those cities and a much bigger deal to small landlords.
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Anybody else seeing CL1 trade with a $7 handle? Or am i starting to hallucinate from cabin fever?
CL1 expires this week. so anyone who didn't want to take physical delivery of oil had to sell/roll to next month. Shortly, CL1 will become June contract which is trading at 22.55. The 7 dollar oil is just fodder for the media. Although it makes me wonder how many people were trading these futures without understanding they needed to get out ahead of the crowd to avoid this kind of reverse squeeze.
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live R number estimates by states.
It was done by one of the Instagram co-founders. Interesting visualization of the changes. I'm not nearly smart enough to understand whether they are accurate.
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I wanted to redo the poll posted by Viking on April 3 just to see how the consensus has changed. The low of March 23rd is also a much bigger drop from today than it was in early April.
Thank you for voting.
for reference here is the results of that poll as of today
Yes - High Conviction 26 (19.4%)
Yes - Low Conviction 50 (37.3%)
Neutral (no opinion or no idea) 42 (31.3%)
No - Low Conviction 7 (5.2%)
No - High Conviction 9 (6.7%)
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Yes, this will be worse than the Great Recession. The number to remember is 70% - that's the approximate portion of US GDP comprised of consumer spending. Consumption similarly drives many other developed economy GDPs.
Let's start with the optimistic case. Let's assume that the economies of the developed world are allowed to legally re-open in the next 3-4 weeks. Let's further assume that there is substantial "pent up" demand in those economies and that the citizenry decides to return to normal activities without apprehension. People go back to restaurants, they go back to retail, they order clothing and makeup and home furnishings again, they get their hair cut, etc. Finally, let's assume that the household balance sheets of these returners are largely intact - that these people have savings in reserve or access to unsecured credit on reasonable terms to drive their consumption. Overall, let's assume about 80% of 2019 capacity and 20% unemployment for FY2020 and 90% of capacity and 10% unemployment for FY2021.
Sounds good? No - even with an optimistic scenario of a quick return to 80% capacity, this will be an economic calamity. About a fifth of the job seekers in the US are presently unemployed and in survival mode. That means they're not consuming; they're trying to literally and figuratively stay in their houses and avoid the bread lines. Their balance sheets were already precarious before the crisis, and - surprise, surprise - their creditors are not legally prohibited from collecting on debts incurred, and the creditors' staff are allowed to work remotely. So how do the laid-off and furloughed workers repair their household balance sheets? The lucky ones get their jobs back and successfully renegotiate terms with their creditors. The unlucky ones declare bankruptcy and get partially or wholly wiped out. By the way, if the debtors are younger and have student loans, those aren't dischargeable in bankruptcy, so many people will come out of BK with ruined credit and still have the burden of debt repayment.
Do their jobs return? Maybe - unemployment is a lagging time series, so many jobs will be slow to come back - if they come back at all. Restaurants can't pack people in if there's no vaccine or therapeutics; they won't have a need for as much staff. Same story for employees at movie theaters, bars, stadiums, wedding venues, etc. Factories will try to automate to the extent that they can, because machines don't get sick and have family emergencies like human beings do. The oil patch is getting wiped out at $20/barrel WTI and many of those jobs are probably gone. Even the white collar work from home set is not immune, and white collar workers are liable to face layoffs if austerity hits corporations.
Homes, cars, and durable goods purchases? Forget about it - household formation will be down as the Millennials once again run headlong into the twin buzzsaws of economic disaster and high house prices (thanks, Fed). The young will choose to further delay marriage and children and consume less in the process. The elderly are in the high risk infection group and will be sheltering in place for longer than their younger counterparts, reducing their consumption too. Older people with less solid balance sheets will be forced to liquidate assets, creating a negative feedback loop.
Additional negative wealth effects could come from an equity market collapse, which could happen as soon as the "unsinkable" tech titans start to take on water. Facebook and Google rely heavily on advertising, which is a cyclical business that always declines in crises. Apple produces luxury products that cash-strapped consumers will hesitate to upgrade. Even mighty Amazon will be hit hard by a decline in discretionary purchases, cancellation of digital subscriptions, and reduction in revenues from their cloud services. After all, with the reduced corporate IT budgets and shuttered small businesses, who will need more cloud capacity? Once the FANG and QQQ bubble finally pops, the wealth destruction will be immense as upper middle class equity holders see their holdings evaporate.
In sum, the virus has caused global demand destruction on a scale not seen in generations. To steal blatantly from Churchill, we are not at the beginning of the end, and we may not even be at the end of the beginning.
Not sure who you bank with but all I'm hearing is the opposite. Banks are not collecting on debts at all. forbearance for mortgage payments for anyone with a Fannie Freddie mortgage. Most foreclosure processes offline. Moratorium on evictions for landlords with a Fannie/Freddie mortgages. Same policies in Canada. My Canadian banks are sending me an email every couple of days offering me even more help (no interest on my credit cards, forbearance on my mortgage, suspension of many monthly account fees). Banks are not collecting on personal debts, they are too busy shoveling government money out the door.
If you are a lower-paid worker in the restaurant industry for example. Very likely...you get the old unemployment payments, plus the extra 600 per month, the check directly from trump. On the liabilities side...you don't have to pay your rent/mortgage, you are very likely going to get some sort of break on your credit card debts. The above liabilities are not forgiven, but they will be in suspension until most people get to work. And really i suspect until the election because politicians will be politicians. So, how does the average low-income person get into trouble? They are earning more than before and don't have to lay out cash for their biggest liabilities.
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Texas governor announced he wants to reopen around April 27th-May1st (in phases). This will be a good "test" case for the country. Great use of pun here as Texas doesn't have access to reliable testing. This will most likely result in hospitals beyond capacity in the summer causing Texas to close again in the summer.
Maybe the market will decrease again once we see the results of Texas.
The current market levels don't make a lot of sense to me. Yes, the latest drug from Gilead shows promise for those in the severe stage but it does nothing to limit the spread and it is far from conclusive.
I feel like you are assuming everyone will go to a dallas cowboys game on april 27th. Removing the stay at home order does not mean people will just go back to their old behaviors and R0 will go back to what it was.
A very realistic way these states will open is, Businesses will open but have a limit on the number of customers at a time. Everyone will wear a mask. Still no large gatherings but at least most of the economy will be allowed to restart. The R0 will be much much lower than it was in New York 5 weeks ago. Don't have a number, but it's just common sense.
how do i know that's a realistic path? Because Europe is already doing it. I live in Poland, and i go for groceries wearing a mask (mandatory here), and keep my distance from people. I disinfect what I can when I get home. I consider the probability of me getting infected under my current behavior as quite low. the vast majority of the other people I see are practicing the same precautions and I anticipate the R0 rate in Poland to collapse in the coming weeks. America just hasn't gotten the mask idea, but they will. April 27 is still 9 days away. things move quickly these days.
Well I'm speculating to some degree as even the medical professionals don't know the course of the pathogen. My point is everything seems to be priced for almost perfection in the equity markets. The probability is higher than the market is pricing in for a 2nd wave. It isn't pricing anything in for a more virulent mutation. Look at the 1918 pathogen. The 2nd wave was more deadly than the first.
I hope I am wrong and the cases stay low and don't increase. I just don't see it happening unless a therapeutic comes out in the fall that is 95% effective. A vaccine is at least 18 months away.
We will be better prepared for a second wave. Even a slightly mutated virus won't have a high enough infection rate if people practice social distancing and masks. If it mutates to be as deadly as ebola then we should all be selling stocks and buying canned goods and shotguns. But if it mutates slightly, we have a few months to change behaviors. The behavior of the average American, which we all agree has been among the slowest to adopt, has already changed so much and it only been what? 2 months. We can do a lot in the 3-4 months before a 2nd wave hits.
I agree the equity markets are a bit frothy here, but this thread is about the trajectory of the virus. In the beginning, people were underestimating the virus and now people are underestimating the game-changer that is most people wearing masks and just being aware of the virus (keeping a distance, washing hands, surfaces). I see it every day. The chances of someone being infected are very small, and that's why the spread is so much lower in Asia and now starting to show in Europe.
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Texas governor announced he wants to reopen around April 27th-May1st (in phases). This will be a good "test" case for the country. Great use of pun here as Texas doesn't have access to reliable testing. This will most likely result in hospitals beyond capacity in the summer causing Texas to close again in the summer.
Maybe the market will decrease again once we see the results of Texas.
The current market levels don't make a lot of sense to me. Yes, the latest drug from Gilead shows promise for those in the severe stage but it does nothing to limit the spread and it is far from conclusive.
I feel like you are assuming everyone will go to a dallas cowboys game on april 27th. Removing the stay at home order does not mean people will just go back to their old behaviors and R0 will go back to what it was.
A very realistic way these states will open is, Businesses will open but have a limit on the number of customers at a time. Everyone will wear a mask. Still no large gatherings but at least most of the economy will be allowed to restart. The R0 will be much much lower than it was in New York 5 weeks ago. Don't have a number, but it's just common sense.
how do i know that's a realistic path? Because Europe is already doing it. I live in Poland, and i go for groceries wearing a mask (mandatory here), and keep my distance from people. I disinfect what I can when I get home. I consider the probability of me getting infected under my current behavior as quite low. the vast majority of the other people I see are practicing the same precautions and I anticipate the R0 rate in Poland to collapse in the coming weeks. America just hasn't gotten the mask idea, but they will. April 27 is still 9 days away. things move quickly these days.
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BSR REIT (sunbelt multifamily) gave an update
https://web.tmxmoney.com/article.php?newsid=6676403039637442&qm_symbol=HOM.U
As of April 15, 2020, the REIT has collected 93.3% of total revenue for the month. Historically, by the 15th of the month the REIT has collected 97.0% of its total revenue. Total revenue includes rental income, fees associated with moving in or out such as application and cleaning fees, parking fees, renters' liability insurance and utility charges.
To date, the REIT has received 100 requests from residents for a deferral of April rent payments. This represents approximately 1.1% of the apartment units in the portfolio and is not expected to materially impact the REIT's financial performance. The REIT will continue to monitor the situation closely and provide a further update if it receives a material increase in rent deferral requests in the weeks ahead.
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EDIT: looks like this was already posted above, but maybe you are all interested in the seeking alpha comments section :)
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I have a considerably smaller sample size, but I got 100% of my rents for April. And one tenant who hasn't paid on time for a year paid on the 1st.
For tenants who have lost their jobs, the CERB is $2000/month for 4 months. For a family with 2 adults, that's $4k/month. Someone working full time 40 hours/wk at minimum wage ($15/hr) only has a gross of $2500/month. So between taxes and payroll deductions and missing a shift many/most renters are as good or better off financially than they were. Even tenants in higher end professions seem to be mostly working from home, getting full pay, and saving money on commuting, lunches out, etc.
The piper will have to be paid for this eventually, but for now it seems OK. I think next spring when folks realize they need to pay income tax on their CERB could be tough, as one example. (No tax was withheld)
The market for property sales has slowed considerably, and both pricing and transaction volumes are way down.
I'm not sure about the leasing market, I haven't had a vacancy since this started. I suspect it's quite bad.
Much appreciated
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Bizaro,
What's your view of the alberta rental market? I used to own mainstreet equity which is an amazing company, but i sold once oil collapsed. Stock has been cut in half. They just reported 94% of rents were paid for April but also said they would be delaying their next quarterly filing as allowed by the new regulatory guidance.
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Buying a basket of tankers (Crude & products):
ADS NO
DHT
DSSI
EURN
INSW
NNA
STNG
TNP
Supercontango looks like a sure thing, now that everyone is waking up and realizing that the OPEC cuts were a farce and much less than the drop in global oil demand. Oil down, VLCC rates up, and I expect both to continue along those paths.
why not TNK?
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apologize if this was already posted. very interesting.
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I'll add my comments about the situation in poland because i see the opposite.
Poland has strict lockdown rules. Only leave the house for work (if you have to), groceries, pharmacy. Fines are fairly large but the police don't seem to fine for minor infractions unless you are doing something stupid or were under a quarantine order.
Almost everyone is practicing social distancing. Shops have a maximum number of patrons at a time. I believe it's 3 per cash register. Many people are wearing masks now even though it has not even been suggested by the government, nevermind required.
The social distancing is working, the curve is flattening. As of today, there are 7,200 confirmed cases in a population of 38 million living right next to German and with (previously) open borders to the rest of the EU. 363 Dead.
I believe in a few weeks, the lockdown will be eased in small steps. I think masks will be mandatory for indoor establishments and I think there is large pent up demand for in-person interactions
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YOu're all right - not a landlord, never been a landlord, never want to be a landlord (at least directly). Also never missed rent when I was renting, so total ignorance here for sure.
Is internet access considered essential service? Is there nothing that is available to a landlord outside of the courts?
BTW - renting was when I lived in TX, so maybe the laws / enforcement is different from rest of the country. I just remember even getting some basic stuff fixed was a real pain. Perhaps this is also because the apartments were very cheap, so you sort of get what you pay for, and I certainly had no money to go sue...
In many homes, internet goes beyond just browsing (think alarm systems, Alexa, etc.). In many locales tenants sign up and pay for utilities and cutting that off can be challenging (have to validate identify) and all. Long way of saying, landlords should stick to courts.
So perhaps I could have clarified that my comments are for the securities listed in the title of this thread. If it's a single family it's a different story. However, if it's a high rise in NY it's very likely that tenants do not have a choice on their internet provider. It's either bundled in rent, or it runs through the central infrastructure of the building (with one provider and zero choice unless cellular). Having listed in 6 different buildings in NY that has consistently been the case (4 bundle with cable, 2 individually billed, but zero choice on provider).
If it's bundled in rent it would most likely be classified as a utility by the tenant-landlord bylaws. If it's zero choice, that's still not building infrastructure. The equipment belongs to verizon. The building has an agreement with verizon to host the equipment and that's it. The individual service agreements to the units don't include the building as a party. You would have no legal right to mess with it.
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Let's play this out more realistically:
Me - Hi Matt, I haven't seen a payment for this month, are you having financial difficulties?
Matt - Yes, reasons XYZ
Me - Understood. Sorry to hear about your financial difficulties. I want to work with you through this crisis. Can you show me something that shows you've been fired or furloughed or some bank statement showing a decline in income? Let's see what we can work out.
Matt - I don't have any paperwork to prove to you my boss cut my hours in half. (or) My business revenues are way down. My aunt is sick, you want me to ask her doctor right now for a note?
Me - Well you may be right, but I'm trying to work with you. You submitted your financial information along with your credit history at time of rental, and so you don't have to provide it, but it'll make it easier for us to work through this together.
Matt - I'm doing my best here man, but you know, it's a tough time. My family is scared. My wife won't stop crying. Sorry, but there is nothing I can do here. I'm doing all I can, but my rent will be paid as soon as I am able. I hope you understand. BTW, I hear the government has announced some programs to help you out so maybe look into that. Stay safe. Matt
HOurs cut in half - ok, so based on the information you submitted during time of lease, that's a $xxx reduction in income. I assume some of your other expenses are down as well, so can you pay 50% and we'll put the balance to be due later, and have another conversation next month?
(I wait, 2 or 3 days to get back to you) Unfortunately, I don't have savings and my boss is a bit late on his payments to his employees as I'm sure you can understand. sure, I will try to pay as soon as I am able, so maybe that paycheck from trump is coming. Thanks for your understanding
Aunt sick - really sorry to hear, hope she feels better. Listen I know it's tough time for everyone, but I also have people I need to pay to run the building, people who are in equally tough situation as you, and I'm trying to not cut them back. Also I have to pay the bank, etc. How long do you think you're in a place to start paying? If it's 6 months from now I will not have any choice but to start an eviction process.
(also wait a couple days) Thanks for your understanding and well wishes. I feel your pain and I really want to pay, but I also have car payments, drugs for my family i need to refill (i don't have medical insurance). I think that check from the feds is coming any day now and so what i don't need for my basic necessities (which i won't list for you) I hope i can catch up on at least some of the rents. Let's touch base then.
I like the credit score point. And I'm not trying to paint this as a black and white picture - I realize that it's state by state and said that extrapolating is probably not a good idea previously. I just think there are ways in which different situatiosn can be worked through vs. not doing anything on non-paying tenants.
This roleplaying is fun. All of the above assumes the guy even takes your calls.
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Let's play this out.
Me - Hi Matt, I haven't seen a payment for this month, are you having financial difficulties?
Matt - Yes, reasons XYZ
Me - Understood. Sorry to hear about your financial difficulties. I want to work with you through this crisis. Can you show me something that shows you've been fired or furloughed or some bank statement showing a decline in income? Let's see what we can work out.
Matt - No, you have no right to any financial information of mine.
Me - Well you may be right, but I'm trying to work with you. You submitted your financial information along with your credit history at time of rental, and so you don't have to provide it, but it'll make it easier for us to work through this together.
Is that unreasonable?
Let's play this out more realistically:
Me - Hi Matt, I haven't seen a payment for this month, are you having financial difficulties?
Matt - Yes, reasons XYZ
Me - Understood. Sorry to hear about your financial difficulties. I want to work with you through this crisis. Can you show me something that shows you've been fired or furloughed or some bank statement showing a decline in income? Let's see what we can work out.
Matt - I don't have any paperwork to prove to you my boss cut my hours in half. (or) My business revenues are way down. My aunt is sick, you want me to ask her doctor right now for a note?
Me - Well you may be right, but I'm trying to work with you. You submitted your financial information along with your credit history at time of rental, and so you don't have to provide it, but it'll make it easier for us to work through this together.
Matt - I'm doing my best here man, but you know, it's a tough time. My family is scared. My wife won't stop crying. Sorry, but there is nothing I can do here. I'm doing all I can, but my rent will be paid as soon as I am able. I hope you understand. BTW, I hear the government has announced some programs to help you out so maybe look into that. Stay safe. Matt
Garth Turner - Real Estate in Canada
in General Discussion
Posted
Don't know the rest of Europe. But in Poland, you don't pay cap gains on ANY real estate if your holding period is at least 5 years (primary, investment, raw land, whatever). If you hold the RE less than 5 years but reinvest the gains into RE anywhere else in EU for primary residence purposes within 1 year, you also avoid the tax. All other circumstances you pay 19% flat cap gains, which is around the level of the first of 2 income tax bracks.
so you can sell your primary residence AND and 3 investment properties in poland, and buy something in a more expensive country like france to live in and avoid all tax even before the 5 years.