Well at least looking at the equity futures it must be party time–the banking crisis is resolved and summer is almost here (although it is 9 degrees here in Minnesota)!!
Of course this is so much baloney – reading comments on this website there are plenty of opinions on what is the next issue–commercial real estate, debt ceiling, consumer credit or a plethora of other potential issues. We all know they are out there and we all know they will eventually have to be dealt with – but undoubtedly they will be not be dealt until something bad happens.
As individual investors we have to do the best we can to deal with what we can control – not to fixate on what we can’t control. One thing I can control is my investments – and right now I wouldn’t want to own any preferred stock or debt of commercial real estate related company’s. This means commercial mortgage REITs. I now don’t own any shares at all, although I did through January, but out they went in February. This would include Arbor Realty (ABR), Ready Capital (RC), KKR Real Estate (KREF), TPG Real Estate Finance (TRTX), Acres Commercial (ACRE) and others. The remote work movement is here to stay–and locally we are seeing numerous large employers not renewing leases as they intend to remain remote and have no need to lease the space.
But it is not only the mortgage REITs , but the office REITs such as Hudson Pacific, Vornado etc. that will have big, big issues. Already their preferred shares are trading way, way down. Hudson Pacific preferred closed at $9.52 yesterday. The Vornado issues are all trading in the $10-12/share area. I think some of these will be buys in the future–but this will take years to play out and there is no use trying to catch the falling knife–why buy something today for $10/share when you might get it at $5 later this year or in 2024 or 2025.
I did nothing yesterday except wish I would have bought more Jackson Financial 8% preferred (JXN-A). When I wrote about it on Monday I had bought hundreds (not thousands) of shares–either way a 13% gain in 2 days is very nice, but I suspect there will be setbacks and one can add shares if desired. Shares are now at $23.94 and I would not be surprised to see them at $27 in a month or two–but on the other hand I wouldn’t be surprised to see the share price at $21 if we have an ‘event’ of some sort. We’ll see.
Today I doubt I will do anything, although I have 2 utilities I am looking at – both issues I have current positions in. I’ll write about them in the next week. My plan continues – hold bunches of CDs and treasuries in the 5% area, buy issues of decent quality when the opportunity presents and recycle CD and treasury money on maturity over the course of 3 months to 2 years (although whether some goes back in CDs or into preferreds will be determined based on conditions at that time).
15 thoughts on “A Day to Party!!”
Party on. Risk on. Market ended the week up, with no news headlines to spook people into selling before the weekend. Did some buying yesterday and up to today but still feel with the unknown in the real estate and financials like swimming in murky water.
ALL B is crazy I bought back yesterday what I had sold and it was above 25.60 at one point today.
Seems like everyone is chasing yields a lot of preferred’s were up. Although one I checked on, HPP C is priced like the dividend might be suspended
I purchased 12 issues this week. Including…. That banks 5.5%pfd in the news out of San Francisco
Tim & others – would appreciate your thoughts.
Having reviewed corporate bond pricing for VNO, SLG, KRC, etc, all their bonds seem to be steady and only down as to allow a YTM of close to 8% which seems to be the going rate today.
In my experience, when there is true risk of default, IE CVNA, RIG, even COIN, the corporates usually trade signifcantly lower than 80 cents on the dollar.
I was expecting to see these bonds in the 60’s.
Any thoughts? Is it as bad as the share prices say or has the banking crunch and quarter end window dressing driven these names to a bottom?
Tim – I do not believe your comment here is accurate
“and right now I wouldn’t want to own any preferred stock or debt of commercial real estate related company’s. This means commercial mortgage REITs. I now don’t own any shares at all, although I did through January, but out they went in February. This would include Arbor Realty (ABR), Ready Capital (RC), KKR Real Estate (KREF), TPG Real Estate Finance (TRTX), Acres Commercial (ACRE) and others. The remote work movement is here to stay–and locally we are seeing numerous large employers not renewing leases as they intend to remain remote and have no need to lease the space.”
There is a very good chart near the end of this article that shows the percent exposure to office real estate each commercial reit has
You mentioned ABR – but ABR is 98% residential, not commercial. Ready they show as only 14% office and 6% retail. You can look at the rest but there are only 5 who have over 40% exposure to office real estate.
Now I guess someone could say they are not comfortable with any % allocation to commercial office real estate but I don’t think you can paint these all with such a broad brush
Definitely a little odd that Tim would spread that kind of fear, uncertainty, and doubt by blanketing all income securities issued by commercial mortgage REITs as toxic and un-investable, especially those with little to no office exposure.
Also surprising is that he never mentioned another sector that has large overweight exposures to the commercial real estate sector (and particularly office properties)……regional banks! Just another in a long list of problems for the regional banks right now.
I tend to try and focus more on the opportunities in times like this, and the way I look at commercial mortgage REITs and others in the “shadow” banking system is that those with strong management teams and funds to put to work should eventually benefit tremendously in the current environment.
With regional banks nationwide obviously way dialing down their commercial real estate lending exposure, these shadow banking entities should be able to find incredible deals when investing capital going forward.
Tim – I would be interested to hear more about your current interest in utilities. Given current market conditions, they seem to offer a favorable risk / reward IMO.
The Bulls have done their job these last two weeks.
So RCA matures in august, so is that a bet that’s safer than the other RC preferred?
Are there any REITs that you like?
Gary, If Tex is right and FRC goes down we will have another scare in the market on banks and REITS
Been researching and you have to ask who will still be standing and who will be the walking wounded.
Your never going to buy at the bottom so you have to decide what pain you can take if you do jump in and the stock continues to go lower.
I been looking at housing REITs like UMH-D but haven’t pulled the trigger yet.
More research to do. Need to read the financials as even though they called one preferred and the family has a vested interest I had heard they are using the D as an ATM. Want to see how much the shares of the preferred have increased if any, and is income covering both the common and the preferred.
Tim, we have two Gary’s? Whoa! Seems that could problematic since I didn’t write that comment. (7:48am)
delete – not really from Gridbird
Nice try, but I know your handwriting !
Bill, that wasnt me. I was on the golf course then. I dont know what the post was, but it isnt mine.
So- we have duplicates or fakes??
What’s going on TIM?