REIT Talk

[prunes]

This board has many industry-specific discussions but I haven't seen much specific to real estate. I thought it could be beneficial to have a thread devoted to REITs.

 

Although I work in the real estate industry, I have a difficult time identifying underpriced REITs. The REIT market strikes me as being fairly efficient.

 

The possible exception, I suppose, was in 2009. As with the rest of the market, opportunities were tremendous then, and I kick myself for not pulling the trigger. My father, who also works in the industry, dissuaded me, citing the great uncertainties related to deleveraging at that time.

 

For those of you who track this industry, what do you look for when attempting to identify and analyze underpriced REITs? What are you bullish and bearish on these days?

[rogermunibond]

I wouldn't be too hard on yourself.  I bought a number of REIT preferreds in early 2009 only to sell then for nice 1-2x gains and miss 6-10x gains.  :o

 

I think the conventional wisdom and the money have flowed into A grade commercial office DBD, apartments, and hotels.  I like the hotel space myself; they cut back costs to the bone and have showed nice cash flow growth as REVPAR has recovered.

 

Also like quality retail...  ROIC which has Stuart Tanz building up a shopping center portfolio after selling Pan Pacific pretty close to the top to Kimco.

[momentumgeek]

Thanks for posting on REITs. It's actually a place I've been spending a lot of time on, on the short side. I agree, it seems crazy to me that all these REITs are continuing to go straight up as yield investors chase them up to a very narrow spread vs. treasuries. Seems like the good ones and bad ones are all up. That said, I think FUR looks interesting on the long side. Ashner seems like a smart guy and has been involved with a number of assymetrical bets that the other guys don't think about, like Stuytown with Ackman and more recently the CNL resorts foreclosure with Paulson. Would love to hear your thoughts since you're so much closer to real estate than me.

 

A few long real estate plays have been listed here, like CTO and HHC which look interesting over a very long time horizon.

 

I think the other issue on the REIT space is while they've all gone up, the ones that have pricing power in an inflationary environment offer real yields.

 

Any thoughts on self storage, generally? http://www.nytimes.com/2009/09/06/magazine/06self-storage-t.html

[Myth465]

REITs are massively overpriced. Cap rates suck and yield pigs have pushed reits to 3%-5% yields. Thats crappy for such a highly levered investment. It wont work out well when risk free or free risk (you choose) rates start to raise.

 

With that said I like ROIC and FUR. Own ROIC but not much in FUR.

[PlanMaestro]

I like Gramercy Capital GKK very much. The concerns are about the Goldman/Citi/KBS refi next month but as I have been posting in the Yahoo message board (where I am sharing very detailed CDO information) there are more angles to the situation. Some high level numbers:

 

• 100m in cash flow from operations pre-working capital adjustment ($2 per share)
  
• 200m in unrestricted cash at corporate
  
• 100m in restricted cash in CDOs in reinvestment period
  
• CDO 2005 will probably heal this year
  
• CDO debt is non recourse, Goldman/Citi/KBS mezzanine is recourse only to Realty
  

 

At one moment it was a Graham stock and in December 31st I offered Above Average Odds Investing blog a write-up on the situation that he accepted. The next day it jumped 30% and I filed it because it was no longer completely a pure Graham stock. That was stupid... but it still looks very cheap.

[BargainValueHunter]

What is the best valued apartment property focused REIT @ the moment?

 

http://www.tampabay.com/news/business/realestate/article1211642.ece

 

Hard hats and hammers have become a familiar sight at apartment complexes in Tampa Bay. • Cash-rich investors are buying older buildings and pumping millions of dollars into the rental communities since few premier complexes are for sale. Prices for the older complexes are so low that even after paying for new roofs, kitchens and bathrooms, investors can still raise monthly rents to reap profits. • Another upside: Renovations provide work for contractors and improve neighborhoods by attracting better renters, experts say.

 

"This is providing a better, safer and cleaner place for people to live," said Bruce Keene, president of management services at Franklin Street, a Tampa-based full-service commercial real estate firm. "It also keeps people working."

 

I can't think of a better time in history to invest in older multi-family units than now. :)

[Packer16]

I like Capital Trust which is selling at a discount to NAV, has an asset management firm, has loads of NOLs and Sam Zell as chairman.  I can see Zell putting some real estate assets into CT to take advantage of the NOLs.  Zell did the same thing with Covanta.

 

Packer

[PlanMaestro]

I like Capital Trust which is selling at a discount to NAV, has an asset management firm, has loads of NOLs and Sam Zell as chairman.  I can see Zell putting some real estate assets into CT to take advantage of the NOLs.  Zell did the same thing with Covanta.

 

Packer

 

Me2. It is cash flow break-even, they did a good job in the reorganization, and there must be some interesting value in the legacy assets. Difficult to get much info on the CDOs though.