Well the moves in equities in the last couple of weeks have been pretty muted. Almost daily the indexes move in a narrow range – seeming to be waiting on ‘something’ to occur. I don’t know if that ‘something’ is another bank liquidation, the next interest rate move by the Fed or just waiting for earnings season to get under way–maybe just the CPI report tomorrow. I know I am curious to see how the regional banks fared and what their balance sheets look like – the next Fed move is not something I am overly concerned with as we know it will be 0 or a ¼% hike and markets will move based on guesses about the future. Is it the last hike? After a hike the smart folks on CNBC will now be guessing when rates get reduced – the guessing game goes on and on.
While equities have been moving in a muted way interest rates have been moving in a more pronounced way–up 13 basis points yesterday. Once again we are not seeing pricing on preferreds or baby bonds moving in reaction to interest rate moves–just too many other factors playing into pricing at this time. This will change as other data points begin to fade into the background–over time prices do move with rates – but sometimes it is leading or sometimes lagging interest rates.
I posted the preferreds and baby bonds that I own over the weekend. I posted the laundry list simply because I had written that I would post it. Yesterday I made a small nibble on one of my current holdings and at the same time entered a good til canceled at a level 3% or so below the current level. This issue is currently my #1 pick for me- meaning extreme safety with a very good potential for capital gains. I plan to write in more detail on this issue today or tomorrow.
Today I doubt I will do anything at all – I have 5-6 good til canceled orders in place and I see no reason that anything would execute today, but I am surprised how often some nervous nelly will toss in a market order for a few thousand shares and prices drop sharply for a couple minutes–I’ll be there if it happens.
@BearNJ ,
Could you give us details on that reference, please?
Thanks.
D.
I started a position in WTFCP. The common (WTFC) was recently upgraded by Raymond James and gets pretty positive overall coverage. The common has also held up much better than other bank stocks.
WTFCP is a fixed rate reset. The first potential reset date is 7/15/2025 and will be the 5 year Treasury plus 6.507%. Prior to SVB, WTFCP traded above $25 for most of the last year. I bought around $22.80 today.
Of interest for folks:
https://www.wsj.com/articles/houston-apartment-owner-loses-3-200-units-to-foreclosure-as-multifamily-feels-the-heat-fb3d0e75?mod=hp_lead_pos10
Yeah, this really makes me wonder how many of Arbor’s (and other commercial mREITs) loans are to clowns like this:
https://www.youtube.com/watch?v=-Lnrr-SOvcc&t=16s
“comes with a classic interior; they’re not upgraded”. rofl
Arbor not only underwrote this disaster but financed the new owner. Probably to minimize the loss on its financials. One wonders at what value would an independent entity finance these for?
WoW Bur,
I followed your comment on the right. I’m not into mortgage REIT’s so I didn’t read these comments in depth when they were first posted but I did just now. 80% debt to equity as recently as 2021 adjustable rate loans. So much helicopter money and low rates for years created this. Another bubble in the real estate market this time multifamily not single family. Look for this to continue to grow. Maybe Arbor breaks even on this set of loans but it doesn’t make them look good and what about other loans they have out there?
I can’t read the paywalled article – what caused the foreclosure?
Applesway was typical of commercial-property investors who saw big profits in the prospect of acquiring moderately priced buildings and raising rents after making certain improvements. Chief Executive Jay Gajavelli said in a video posted online that he could double his investors’ money by sprucing up a lower-income apartment complex located outside central Houston, with a plan to raise rents and charge tenants extra fees for amenities.
“The property value will go up down the road,” he said.
Most of Applesway’s loans originated in the second half of 2021, just before the Federal Reserve began its campaign to raise interest rates. At one property, the interest rate on Applesway’s loan had risen from 3.4% to around 8%, according to loan information obtained from data firm Trepp Inc. At least two of the properties were financed with about 80% debt, which is considered high leverage in commercial real estate.
Another article here:
https://therealdeal.com/texas/houston/2023/04/10/arbor-realty-forecloses-on-229-million-multifamily-portfolio-in-houston/
And this is the email the GP (real stretch to refer to him as a CEO lol) sent to LPs in one of the properties. Apparently within about a year of buying these crappy apartments, he couldn’t make the mortgage payments due to interest, insurance and taxes going up
https://twitter.com/MultifamilyMad/status/1630358802720497669
Dividend Surfer–can’t read it but the headline is interesting–multifamily should be the strongest of the commercial type real estate out there.
“Quiet, weak markets are good markets to sell. They ordinarily develop into declining markets. But when a market has gone through the stages of quiet and weak to active and declining, then on to semi-panic or panic, it should be bought freely.” – DG Watts, 1888.
I see you only had one REIT preferred on your list Tim.