Where do REIT'S go from here ?

[Gregmal]

13 minutes ago, Dinar said:

EQR seems bullish.  https://investors.equityapartments.com/news-events/press-releases-news/news-details/2022/Equity-Residential-Provides-Operating-Update/default.aspx

Outside of the fact I think someone like EQR buys VRE, I think the private market sees the opportunity. Fed sees all inflation indicators are ticking down and in many cases big. Everyone wants a victory. The Fed and most of their liberal participants see the setup. So they see what the market did(IE rally big in July) but also want to hold things in check til more verification occurs. So they talk tough at Jackson Hole, basically saying “please sit tight til more time passes and more data comes out”. Then they pivot and these assets rip. 

[Ulti]

https://www.apartmentlist.com/research/national-rent-data

[changegonnacome]

11 hours ago, Gregmal said:

So they see what the market did(IE rally big in July) but also want to hold things in check til more verification occurs. So they talk tough at Jackson Hole, basically saying “please sit tight til more time passes and more data comes out”. Then they pivot and these assets rip. 

Yep that’s the consensus built into pretty much every asset + forward curve I look at…..for your CRE Taco 4 cap buyer on the previous page the above NEEDS to happen, if the opposite occurs & high yield savings accounts from the likes of Marcus & Synchrony start offerIng ‘4-cap’ yields & then Mr.Taco needs an exit, uh-oh SpaghettiOs

[Gregmal]

12 minutes ago, changegonnacome said:

Yep that’s the consensus built into pretty much every asset + forward curve I look at…..for your CRE Taco 4 cap buyer on the previous page the above NEEDS to happen, if the opposite occurs & high yield savings accounts from the likes of Marcus & Synchrony start offerIng ‘4-cap’ yields & then Mr.Taco needs an exit, uh-oh SpaghettiOs

Even outside of this manufactured inflation crisis, since like 2013 I’ve just scratched my head wondering why someone finds a triple net lease at a sub 5 attractive, at all. I’d rather pay a 3.5 cap on multi family knowing the rents roll every 12 months than sit on one of these 4-5 cap retail assets that’s locked at the business owners discretion for basically 25 years.

[Gregmal]

My friends family owned a big parcel on route 17 in Paramus that they leased for 30 years to Staples. The rent was a joke. And by the of the lease Staples basically had free rent and made 2-3x the lease subbing it out. They covered it all and then some just by leasing 1/4 of the entire thing to Trader Joe’s. You basically have no optionality with retail NNN. 

[changegonnacome]

You know my view on inflation…..one man’s inflation hoax is another man’s persistent, pervasive & entrenched inflation……as you and I have said before……..Mid-2023 is when we should know who had the right take……..the next few months is going to be filled monthly with inflation hoax narrative confirming data….……I won’t poo poo every 0.5% drop on here as ‘fake news’ cause I don’t have time…..but I fully expect it to happen and I welcome it…….but as energy & supply chain inflation rolls out of the YoY numbers…….underneath all that COVID/Ukraine inflation noise, folks are completely missing the signal……..traditional made in America 70’s style monetary inflation has taken root in the US economy……if you listen to Jay Powell he has finally separated that noise from the signal….but he’s only one man on the FOMC…..but I think and I’m betting he/the FOMC now ‘get it’……which is to say that a spineless central banker of no character would take the roll off what they deep down know to be a top layer of transitory inflation as an opportunity to chicken out and do the populist thing….….pause, pivot and rally assets……I’m seeing something new in Jay-P…….a man of steel that has finally got the memo that 2% inflation isn’t magically coming back on its own and it’s time to ‘get behind the mule & plow’ as my man Tom Waits would say…. very interesting times ahead thats for sure.

Edited September 4, 2022 by changegonnacome

[Gregmal]

Yea we shall see and it’ll be interesting. Win/win if you own good allocators who have FCF to work with for sure. 
 

While never in a million years would I buy a 5 cap Taco Bell, I guess the case to be made is if inflation is real, and even at an obnoxious level for a little bit, say 5%…you get zero net yield but the underlying land and building value should hold well given that’s what inflation actually is. Those sort of inputs going up. And even if it’s 5% for a few years, it won’t be for the duration of the lease.

 

In the meantime, we will continue to watch as things comes down and see if the Fed believes millions need to lose their jobs(IE 100% of their purchasing power) so that those that are working aren’t losing 1-2% of theirs. Which is essentially what the case would be if inflation next year is at 4-5%. I just can’t see how that’s warranted, but I ain’t Bill Ackman or Larry Summers rich. 

[Simon]

On retail NNNs: STORE Capital to be Acquired by GIC and Oak Street in $14 Billion Transaction

 

https://ir.storecapital.com/news-results/press-releases/news-details/2022/STORE-Capital-to-be-Acquired-by-GIC-and-Oak-Street-in-14-Billion-Transaction/default.aspx

 

[Gregmal]

Institutions are buying what the public market pikers are selling. 

[Ulti]

https://www.zumper.com/blog/rental-price-data/

[Gregmal]

Bad news for everything but AIV. Since obviously stocks are down on the year and short term stock market prices apparently equal the fundamentals. Only AIV is doing well by that metric. Thankfully you and I know how to pick ‘em @Ulti

[Ulti]

3 hours ago, Gregmal said:

Since obviously stocks are down on the year and short term stock market prices apparently equal the fundamentals

Ha.  Let me ask a possible silly question.. One of the persons I try to read is alex gurevich; a global macro trader with his own shop. He seems to feel we are heading to(or in) a global recession and should be concerned with coming deflation.(looking at inflation is looking in the rear view mirror).  It seems that companies like aiv and joe can handle this environment with clean balance sheets ,good locations and appeal to the top 10%er's. Is this too simplistic a viewpoint concerning mf and specialized (joe ) real estate ? Is the cyclicality of their business just due to supply\demand and that should be the focus?

[Gregmal]

10 minutes ago, Ulti said:

Ha.  Let me ask a possible silly question.. One of the persons I try to read is alex gurevich; a global macro trader with his own shop. He seems to feel we are heading to(or in) a global recession and should be concerned with coming deflation.(looking at inflation is looking in the rear view mirror).  It seems that companies like aiv and joe can handle this environment with clean balance sheets ,good locations and appeal to the top 10%er's. Is this too simplistic a viewpoint concerning mf and specialized (joe ) real estate ? Is the cyclicality of their business just due to supply\demand and that should be the focus?

It all depends on case by case but the larger question is how unique are the assets, how severe the downturn, and whether you like the way the company is managed. JOE was at $22 pre COVID and if you don’t think 170k acres and some trophy resorts has seen some value increase in an area where home values have increased 2-4x then just move on lol. Fundamentals are great and just cuz folks who would have rather owned HHC 100% higher than JOE 50% lower still feel the same way doesn’t mean anything more than that….i kid, I kid, I know! AIV a monkey can look at, see Jon Litt…and get to 12/13 minimum. The assets are greatly spread location wise and you have hard catalysts. A sale probably occurs and if not you still just own great assets at a discount to a fast growing NAV. Housing is fundamental to everything and so systematically important it’s probably one of the least risky places to be IMO, especially longer term, especially in light of the overall shortage, and especially in good areas. So just do what you are comfortable with and try to carve out the noise and focus on what’s really important. 

[Ulti]

https://www.corelogic.com/intelligence/corelogic-annual-us-rent-price-growth-slows-for-third-consecutive-month-in-july/?utm_medium=social&utm_source=twitter

[Gregmal]

Jim Chanos doing a classic case of “I was wrong about everything fundamentally but hey the whole market went down big so I’ll take a victory lap on my short position” with data center REITs today. Might be time to look at those lol 

[Dinar]

AIV is having a contested proxy.  

[Gregmal]

13 minutes ago, Dinar said:

AIV is having a contested proxy.  

Competition breeds success. Just not Jon Litt. Wish he would just go away.

[Dinar]

25 minutes ago, Gregmal said:

Competition breeds success. Just not Jon Litt. Wish he would just go away.

I am going to vote for him.  Not because I am a fan, but to send a message.  I think that AIV needs to drastically cut SG&A.  I am also not sure that they are any good at real estate development, and do not want them to learn on my dime.

[Ulti]

Oaktree and MF

 

 

 

 

 

Multifamily has historically held up well during economic downturns. (See Figure 4.) This is primarily due to the asset class’s short average lease terms (typically one year) and relatively low annual capital requirements as well as the availability of debt financing from the federally backed agencies Freddie Mac and Fannie Mae. Importantly, short average lease terms also benefit multifamily properties during periods of high inflation because property owners can quickly adjust rental rates.

While we don’t expect growth in multifamily rents to continue to increase at the rapid pace recorded in the last 12 months, we believe the rate will remain fairly high over the short to medium term, as the supply of housing in much of the U.S. is insufficient to meet the demand. Moreover, we think the U.S. housing shortage could be exacerbated if anticipated increases in land, labor, and materials costs constrain new construction.

 

 

[Ulti]

https://calculatedrisk.substack.com/p/apartments-net-absorption-very-low

 

slower completion rate of apartments in the pipeline with softer demand

[Dinar]

What we need to keep in mind is that millions of people are and have poured over the Southern border, hundreds of thousands if not a million or two have and will come from Ukraine/Russia, and hundreds of thousands will come from China and India as immigration resumes and quite a few people in China are not happy with Covid-19 policies.  Where will these 3-5 million people (say 500K-1.5MM households) live?   This will put upward pressure on rental and ownership markets at all levers - both low income and high income.   

[Ulti]

I hope you are right... we need a comprehensive immigration policy to bring in workers for areas of need... I'm afraid the politics will be just like Manchin trying to streamline permitting ...... That being said, though I'm no expert, it seems like

MF in desirable areas will continue to do well for the foreseeable future.

[Dinar]

I agree with you that we need a well thought out immigration policy, but unlikely to get it.  I forgot to mention Columbia doubling income taxes on top earners - more demand for Miami/Manhattan real estate.

[CorpRaider]

A labor-based inflation crisis, however, is probably a required condition precedent to get any real immigration reform.  We need to make the laws make sense with reality instead of creating this huge black market.  

Edited October 8, 2022 by CorpRaider

[Ulti]

https://twitter.com/i/spaces/1lPKqBaomymGb?s=20

excellent podcast with Bill McBride.... emphasis on large decrease in houshold formations and how that plays into home ownership and MF