REIT Chat

This is set up for those wanting to chat about Real Estate Investment Trusts (REITs).

Try to keep this chat line open for REIT discussions–only rule is to leave politics aside.

355 thoughts on “REIT Chat”

  1. REITs crashing in anticipation of dividend cuts. REIT preferreds also crashing but not for the same reason, dividends can’t be cut only suspended which often precedes bankruptcy. So are these issues screaming bargains? Or are we headed for a wave of bankruptcies?
    High risk MITT priced like it’s among the first to go but moderate risks such as RITM TWO and NYMT preferreds are above 10%. Can’t justify that by rate hikes alone. AGNC and NLY were always considered among the lower risk and they’re staring at over 9% with the floating rates.

    1. I assume based on your post you are only referring to Mreits.

      There is a pretty good recent article by CWMF discussing this

      https://seekingalpha.com/article/4543661-mortgage-reits-plunging

      This quote in particular is one to remember:

      “Of course, there also will be a few people who yell that the sector is dead and will always be dead. If you need any comfort, go look at articles and news pieces posted from 3/27/2020 through 4/04/2020. You’ll see an abundance of “investors” claiming everything was going to $0. Not even one of them went to $0. Not even one. For preferred shares, almost all of the mortgage REIT preferred shares traded above $25.00 at some point in 2021. Don’t pay attention to investors who don’t know how the sector works.

      Not to be entirely fair, that also includes investors who claim that they’re buying the common share for the dividend and don’t care about the price. Don’t pay attention to them either. Prices trend lower over long periods because that’s what happens in a sector that almost always has double-digit yields. That’s how things work. However, when prices get too low, they also spike dramatically higher while paying out a huge dividend. For investors willing to get in and out, it’s an exceptional opportunity. For investors looking for yield, the decline in the preferred shares is dramatically overdone. Many of those should recover to trade at least close to $25 within the next few years.”

      I myself NEVER touch the common stock of a Mreit. I do however have my fair share of Mreit preferreds. I am in the CWMF camp that the decline in the preferred shares is overdone and thus presents a good opportunity for those with a time horizon of a couple of years

  2. For anyone that is new or “newer” to REIT preferred stocks, I would highly recommend reading a book called Cash is King – Investing in REIT Preferreds to Generate Long-Term Income by Simon Wadsworth. He was the long-term CFO of MAA and has a lot of experience in the area. I believe the book is out of print, but noticed this week there are a number of used copies for sale on Amazon for around $10 each.

  3. Any comments on use of the service Groundfloor (groundfloor.us) as an alternative to REIT investing? Groundfloor provides a service to directly participate in real estate loans.

      1. Something to consider as mortgage rates increase and high construction costs exist. How quickly will new construction be sold as rates increase. I’m surprised there are several large construction projects of townhouses, condos and apartments going on simultaneously in my area. It will be interesting to see how quickly they will sell. Also house flippers are still active in the area.

    1. It’s a different type of investment. I’ll stick to what I know and have had success at.

    1. Another blow-up on a REIT buy recommendation for the high-yield touts on Seeking Alpha that “shall not be named”.

      LOL I just spit my coffee out. Thanks for the laugh but now I need to clean my keyboard!

  4. What’s next for downtown Chicago? Fewer people work in offices, some major retailers have closed their doors
    tribune-logo

    What’s next for downtown Chicago? Fewer people work in offices, some major retailers have closed their doors
    Freishtat, Sarah; Zumbach, Lauren.Chicago Tribune; Chicago, Ill.

    Long associated with gleaming office buildings, retail and throngs of workers and tourists, changes could be in store for downtown Chicago as it works to regain some of the bustle it lost during the COVID-19 pandemic.

    Empty offices and closed storefronts have put the vibrancy of downtown Chicago at stake. Almost 18% of downtown office space was vacant at the end of 2021, according to commercial real estate firm CBRE. The closure of major retailers along the Magnificent Mile, such as Macy’s and Gap, left massive holes in the city’s best-known shopping district.

    Office use and shopping habits were changing long before the pandemic, but were exacerbated by COVID-19 shutdowns. As the city tries to emerge from the pandemic, downtown faces myriad challenges: a changing office landscape in the Loop, a decline in retail activity along the Magnificent Mile, concerns about crime.

    Meeting those challenges could mean changes that reshape the face of downtown, according to real estate experts, researchers and neighborhood groups. Old office buildings could be converted into housing. Michigan Avenue is looking beyond retail to more experiential options. Local businesses might have more chances to expand downtown.

    In one sign of that change, Hubbard Street Dance Chicago recently moved into an old Adidas store on the fourth floor of Water Tower Place. Adidas is now located elsewhere in the mall.

    Hubbard Street Executive Director David McDermott sees the neighborhood’s boutiques, universities, hospitals, cultural institutions and nearby beach as anchors that will keep it durable.

    “I think we’ll continue to see a diversification of tenants along North Michigan Avenue,” he said. “And we’re happy to be kind of at the leading edge of that.”

    Getting there will require bringing people downtown. There were upticks in pedestrian traffic before the omicron wave, but with fewer office workers around and amid rising worries about crime, employers, store owners and landlords are eyeing creative options.

    A makeover for old offices

    Real estate experts and landlords aren’t worried about companies deserting the urban core, but as the need for office space changes, so does the outlook for downtown. Fulton Market, which at one point seemed overbuilt, is now in demand, thanks to its newer, amenity-heavy buildings, said CBRE Vice Chairman Todd Lippman. Dated buildings in the heart of the Loop, however, are struggling.

    “I see a lot of pressure on those buildings, and I don’t know that all will come out in good shape,” he said. “I do think there will be repurposing.”

    Office vacancy at the end of 2021 in the central business district, which includes the Loop, Fulton Market and River North areas, ticked slightly down for the first time during the pandemic, according to CBRE. More space was available to sublease than in either of the two prior years, but growth in sublease space was slowing, the firm said.

    Companies want space in new office buildings with plenty of amenities to entice workers back, such as cafes, entertainment spaces or fitness centers, said Jack O’Brien, principal of Chicago-based real estate services firm The Telos Group. While many renovations were underway before the pandemic, some were adjusted to emphasize outdoor environments. That includes the Old Post Office, where a roof deck got additional seating.

    For older, less desirable office buildings, conversions to housing could be a path forward.

    That is one option under consideration for a historic office building at 36 W. Randolph St.. With little space to add amenities and working around the building’s landmarked status, a conversion to small apartments, shared living or a hotel would be most efficient, said Steven DeGraff, who is part of the group that owns the building.

    The rent the building could generate from an office tenant wouldn’t justify the construction costs of retrofitting it, he said.

    “There is a lot of need for housing, and that continues,” DeGraff said. “And location-wise, you’re right in the central business district, (where) you don’t have a tremendous amount of apartments yet. So it’s really the market that dictates that.”

    A shift toward housing had started before the pandemic. The share of space in Chicago’s central business district devoted to offices shrank from 79% in 2011 to just under 75% earlier in 2021, while multifamily housing grew from 9% to 16%, according to CoStar data.

    Meanwhile, Chicago’s downtown grew faster than any of the country’s other large metro areas between 1980 and 2018, swelling from just over 18,000 residents to more than 110,000, according to a 2020 report by the Brookings Institution.

    With new housing comes demand for services for residents, such as day cares, schools and gyms. Those can also serve as new uses for old office buildings, said Tracy Loh, a fellow at the Brookings Institution who co-authored a report on downtowns’ recovery from the pandemic last year.

    The conversions come with caveats. Residential buildings are likely to generate less tax revenue than a commercial space would, Loh said. And construction could be challenging — for example, some old buildings lack bathrooms on each floor, said Michael Edwards, president and CEO of the Chicago Loop Alliance.

    Still, Edwards sees conversions as one viable option for downtown. The Loop Alliance is championing alternative funding, such as tax credits, to help make them successful.

    Opportunities for local shops

    As office tenants seek buildings with amenities, landlords have a big incentive to fill retail and restaurant vacancies left by the pandemic, especially when they’re trying to get workers excited about returning, said John Vance, principal at Stone Real Estate.

    There were 208 more empty storefronts in the Loop in mid-2021 than in 2019, a Stone Real Estate report found. Restaurants accounted for 44% of the newly empty space, and apparel stores made up 16%.

    That could give local businesses an opportunity to expand, just as small businesses expanded in the aftermath of the 2008 financial crisis when big chains were more cautious, said Greg Kirsch, executive managing director and Midwest retail leader for Cushman & Wakefield.

    “Money’s cheap, it’s easy to get a loan, and there are entrepreneurs who want to get out there,” he said.

    Willis Tower, where about 85% of office space is leased, was already planning to focus on “uniquely Chicago” businesses with a redevelopment that started in 2017 and added 300,000 square feet of retail space, along with other new amenities, said David Moore, senior vice president and portfolio director of building owner EQ Office.

    That included national brands such as Shake Shack, Sweetgreen and Starbucks, but also local names such as Rick Bayless’ Tortazo, Lettuce Entertain You’s Sushi-san, Do-Rite Donuts & Chicken and, soon, Kindling, a new restaurant from the Fifty/50 Restaurant Group. Much of the leasing took place pre-pandemic, but interest has remained throughout, he said.

    Fifty/50 had been in talks with Willis Tower’s owners about opening a breakfast spot in the skyscraper before the pandemic but conversations stalled until the fall of 2020, when the building owners reached back out with an opportunity for a full-service restaurant with an outdoor terrace, said co-owner Scott Weiner.

    Weiner thinks downtown building owners’ interest in local concepts predates the pandemic, pointing to food halls such as Revival, and said he thinks the neighborhood has “amazing opportunities,” even with uncertainty about how the pandemic will affect foot traffic.

    “Even when Willis is 20% occupied, it still has more people than most buildings in Chicago, and there’s a weekend crowd,” he said.

    Still, landlords and prospective retail or restaurant tenants may need to get creative as long as hybrid and remote work could affect the customer base, Vance said. That could mean basing rents on a percentage of a retailer’s sales instead of a flat rate, he said.

    Elsewhere in the Loop, Edwards thinks there is a future for retail that is heavy on the experience for shoppers. That could go hand in hand with a shift toward more residential buildings, because a growing population downtown would mean more residents nearby to patronize different kinds of stores, he said.

    “When we all used to work downtown, we’d all stay in our neighborhood because we were tired of going downtown,” Edwards said. “Well, now everyone is in their neighborhood, in their house, around their street, so downtown is becoming much more of a destination on a weekend.”

    One damper, though, has been the perception of crime downtown.

    In the first three weeks of the year, 600 complaints of crimes including burglaries, motor vehicle thefts and violent crimes were reported in the police districts that include downtown and other surrounding neighborhoods, according to preliminary Chicago police data. That was up from 412 in the first weeks of 2020.

    The Loop Alliance has long had safety patrols on State Street during the day and in recent months hired unarmed security to walk the area after 11 p.m. That was partly in response to complaints that restaurants and bars were having a hard time hiring employees who didn’t feel comfortable walking to or from work late at night, Edwards said.

    “Downtown cannot be successful until we can restore customer confidence in their experience when they come downtown, it can be predictable” he said. “And right now, it’s not as predictable as we’d like it to be, both on the pandemic side and on the consumer confidence side, feeling safe,” he said.

    A few blocks north along Michigan Avenue, addressing crime such as smash-and-grab robberies and carjackings are a key priority for the Magnificent Mile Association, said President and CEO Kimberly Bares. Many retailers in the area have hired private security, she said.

    A new special taxing district on properties in the area will send about 70% of the funds raised toward safety and security measures, such as “ambassadors” walking the avenue and surveillance cameras, she said.

    The association is also urging tougher prosecution and sentencing for repeat offenders, Bares said.

    Changes on the Mag Mile

    There were positive signs for North Michigan Avenue in December. Traffic counters in the 400 block recorded more pedestrians than in the same month pre-pandemic, according to the Magnificent Mile Association.

    But the high-end retail district is grappling with a shift in how people shop that was exacerbated by the pandemic, and has left large vacancies at the Water Tower Place mall and elsewhere along the street. A panel organized by the Urban Land Institute, working with the city and the Magnificent Mile Association, set out to study solutions for the corridor.

    “Shopping and retail has changed,” said Swasti Shah, director of community engagement for ULI Chicago. “It cannot be just relying on big retail brands and flagship stores.”

    Among the panel’s recommendations were to create more places for people to gather and a focus on experiences, such as the Dr. Seuss Experience at Water Tower Place or The Office Experience at the Shops at North Bridge. Walkability to tourist destinations such as Navy Pier could be improved. Focusing on local retailers could give people a reason to visit, Shah said.

    ULI is also convening a panel to study LaSalle Street in the Loop.

    Retail will likely always have some presence on Michigan Avenue, Bares said, but experiences could also be part of the avenue’s future. In addition to pop-ups, including The Office and Dr. Seuss experiences, she pointed to existing stores such as Eataly or the Starbucks Roastery that feature dining.

    The Magnificent Mile Association is also looking at more festivals and events, such as the Meet Me On the Mile events in 2021 that closed parts of the street to vehicle traffic.

    “In an era where we can buy almost anything we want online, what we can’t buy online is experience,” Bares said. “And to the extent that anyone can match the best product or service with experience, they will be the winner in this new market.”

    That shift in focus is in line with Hubbard Street Dance’s recent move to Water Tower.

    McDermott said he approached Water Tower’s owner about moving into the space after the dance studio sold its building in 2019. He was drawn to the site after seeing other “experiential” and arts-focused tenants nearby, and to the mall’s accessibility to the public, he said.

    “How can we share Hubbard Street with more people, share world-class art with more people?” he said. “I don’t think about it really as a mall. I just think about it as a place to showcase our art.”

  5. There have been some interesting articles on SA recently regarding GEO Group and CoreCivic news and analysis. GEO Group bonds have been a good investment for me both with capital gains and constant dividend payments. I sold CoreCivic but need to reevaluate.

    1. I held both for long time but got out of GEO last year, now Corecivic is one of my larger positions. I liked when they became a C corp to eliminate the forced dividend and based on their cash flow will have no trouble with the debt maturities in coming years. I wouldn’t buy the stock in either but felt more comfortable with the Corecivic bonds.

  6. I tell you, It’s tough out there.
    How tough you ask?
    Tough enough that I had to be the Bid and Ask on CLDT-A today.
    But, I scored. As someone ate up my 26.59 offer.
    I am only 20% invested right now.
    I Did buy 10k of iBonds last week.
    A happy belated New Years to you all.

    1. Newman, one of the stranger issues of the day. After you sold, it traded up to an all time high of 27.10. Why a lodging REIT preferred would trade at an all time high in a Covid world is a mystery to me. . .

      1. I think a ETF or Fund bought the issue at high price points.
        On their list, it will appear as 8,000 shares of CLDT-A with a coupon of 6.625%
        Anyone who reads that will think, Good Catch!, but, the yield to call is less than 5.5% at 27.00
        I have been loading up on PSEC-A recently.
        My holdings are
        Qrtep, Abr-d, Oxlcm, Psec-a
        Ep-c, Nrz-b, Eccx and finally 200 shares of KTBA

    2. Newman – So 20% invested implies you’re 80% in cash losing 7% of purchasing power annually as it stands right now…. What are you doing with what constitutes your 80% uninvested funds???? Are you content to just wait it out for better opportunities??? Not being critical as I too carry high cash reserves, but nowhere near yours, so just wonderin’.

      1. 2WR, Been busy.
        Yes, I know what I am losing by being in cash. Thanks for the reminder.
        But Capital preervation, yes I can lose my “s” .
        But, the market is finally coming to us.
        I will be loading up on 5.5-6% IG issues soon enough.
        Inflation, eventually turns to a recession, so 6% yield, will be adequate, I hope.
        Still working at 70, so income stream is still strong.
        If you have ideas, don’t be shy about posting them.

      2. He’s breaking even while all of us are losing money. Buy back in cheaper for a net profit. Or is it a net non-loss?

  7. Not sure if anyone was looking today, but bought 200 shares of UBP-H today around $25.51. They are callable next September, but currently trade with about .13 cents of accrued dividends. So backing off the accrued, think I got them around $25.38 with my quick math gives them about a 5% YTC. Certainly not a home-run, but a decent 5% hold in my IRA account.
    They are thinly traded at times, but think it was a good day to purchase 200 shares. Happy investing to all.

    1. KL – Assuming QOL’s description is right, I think your math is off…. last coupon payment was 10/31 so there’s only 7.38¢ of accrued I think… and with call being 9/18/22, at 25.436 backing out accrued, I’m coming up with 4.11% YTC… to be honest, my calc feels a little chintzy but I did do it twice and that’s what the Fidelity bond calculator comes up with..

      1. Right. And there are a lot of places to put 4% yielding money to work… but that is not enough for the risk of a NY based small cap reit for me.

      2. 2wr – very possible my math was off today, as I did a quick calculation on the numbers. Thanks so much for correcting me and my error, much appreciated.

        Greatly appreciate the correction, as I had to make a 5 minute decision. Still maybe a good coupon rate for me and thanks so much for the clarification. Much appreciated!

    2. Fellow Shareholder,
      I own the H and K issues. I agree with you that the H is likely to be called in September. I have owned their other preferreds which have all been called. I like Urstadt Biddle. They own the shopping center in my town which is anchored by a large grocery store.

      You mentioned MNR-C in a post awhile back. I had then 400 shares and you got me thinking so I added another 500. Do you have any ideas for replacing them?

      Back in December I started buying PDI, a PIMCO CEF. I have had PDI and other PIMCO CEFs for years. You might want to consider a small position to see if PDI meets your requirements. A poster on another forum said “every month a train pulls into your station and drops off a lot of money”.

      Cheers,

      Dry Fly

  8. FPI and LAND both up 5%-ish today on no news– at least, no news that I can find. Sector rotation into agriculture?

    1. With FPI there’s probably still some noise going on from the effects of the FPI-B conversion, but taking LAND as the cleaner example, in a way, they’re just playing a little catch-up plus because it (as well as FPI) was inexplicably down 3% -ish on Friday……. For whatever reason they’re doing what they’re doing now, I’ll take it….. ha

  9. well, someone is not going to have a happy holiday season if this gets signed into law….
    SEC. 138144.
    RENTS FROM PRISON FACILITIES NOT TREATED AS QUALIFIED INCOME FOR PURPOSES OF REIT INCOME TESTS.

    Is there any REIT left that is a prison operator?

      1. GEO has done well for me. Current annualized yields based on my last dividends are 10%, 12+% and 13+% depending on bond. My returns are better since I purchased at lower prices. There is political football with private prisons. Democrats want to get rid of them while Republicans seem to be OK with them. GEO also have some international presence. There is a good recent analysis on SA. GEOs last dividend on common stock was Jan 2021. They stopped paying to pay down dept and other uses. That is not good for common holders but good for bond holders. They have bonds maturing 4/23, 10/24 and 4/26.
        CXW has also suspended dividend on common stock. I sold their bond in May.

    1. I know touching on this topic seems inflammatory and political, but by direct logic there are some organs of society that should NOT be privatized because it inhibits possible scrutiny and reform due to special interest and entrenchment of dogmatic social laissez-faire.
      Reagan Era policy and mythos may be entrenched but allowed cancellation if necessary.
      There is room for morality and ethics in government, Wall Street and personal decision. It just takes tougher choices and policy. There are many areas to consider!

  10. Anyone wondering re NLY-G’s (6.5%) sudden drop over past 4-5 days? Catching up to NLY-I maybe… G has another 1.5 years to go before floating at ~4.2% but too soon for that taper. No news on parent NLY.

    1. Someone has been selling higher quality MREITs which trade at a premium. Look at NLY-I and AGNCO. Good buying opportunities.

      1. They were overpriced. Now they’re back to reality. Don’t know if it’s a buying opportunity or not. I bought some NLY-F on the drop but not G.. Swapped some AGNCM for AGNCO, didnt add any.

        1. In this environment, I’d call AGNCO solid. A few years left of 6.5% yield then floating at 5%+ is pretty good for money good mREIT. Over 5x coverage to common and think they are 100% agency. But I agree shares can be volatile..

  11. Bpypn had a nice gain today, but Bpypm still looks better-higher rate, longer call. Am I missing something? Time to swap I think.

  12. Not sure if anyone is looking at UBP-K today, but I have been picking up shares over the course of the day. They were trading in the $26.50 range just five days ago, but can be bought this afternoon at $25.93. They go ex-dividend on 10/14, which is only a little more than a week from now. Not callable until 10/2024, so there is three years of call protection.

    My quick calculation math shows a Yield to Call of about 5.12%. Certainly nothing great, but I have some additional funds to work with this month. The original coupon rate on the security is 5.875%. The UBP-H at $25.66 looks interesting as well, considering it goes ex-dividend on 10/14 too. It is callable on 09/18/2022, but my quick math this afternoon shows a Yield to Call on that issue at a little over 5%. Not too bad if the security is called next September. The coupon rate on the H shares is 6.25%, so there is a decent chance it could be called.

    Once again, nothing real exciting here – but I’m tired of sitting with some funds in cash and won’t be a buyer of any of the new issues with the ultra-low coupon rates such as the VNO-O 4.45% series.

  13. ABR-D is a 6.375 Yielder.
    The last ex-div date was 7-14-21. It makes sense if the next ex-div date is 10-14. Well it’s offered for sale at 25.43 and the dividend should be .3985.
    That would make it a 25.03 entry.
    Is it a value here?

    1. I would but I already have a very hefty load of ABR-E.
      Your CLDT-A suggestion earlier this week (Tues) was a beaut. Bought it, captured the div and sold the next day for a small gain.
      The price recovered the entire div almost as soon as the market opened the next day.

      1. Re: xCalBear,
        Glad you did well with CLDT-A
        I’m still holding 1684 shares of it.
        I do expect this to get back to 26 in a few weeks.
        As for ABR D/E
        I own 1500 shares of D
        Once Ex-Div date is met, I make $599
        Then when no one is looking, I swap D with E.
        Good hunting, oops you’re a bear.

    2. Thank you for the reminder. I just added. Abr did well during covid. I sold their common way too early but I will hold their new preferred.

    3. Dividends were just declared

      UNIONDALE, N.Y., Oct. 01, 2021 (GLOBE NEWSWIRE) — Arbor Realty Trust, Inc. (NYSE: ABR), today announced that its Board of Directors has declared cash dividends on the Company’s Series D and Series E cumulative redeemable preferred stock of $0.3984375 and $0.34288 per share, respectively. The Series D preferred stock dividend reflects accrued dividends from July 30, 2021 through October 29, 2021. The Series E preferred stock dividend reflects accrued dividends from August 11, 2021 (the date of issuance) through October 29, 2021. The dividends are payable on November 1, 2021 to preferred stockholders of record on October 15, 2021.

  14. Anyone know a lot about INVH?
    They are a REIT that owns more single family housing than anyone in the country, and the stock is trading near all time highs.
    They just did another offering of shares a week ago, and this screams to me that they are striking while the iron is hot, because I would not want to be in residential real estate right now, it seems like that market is primed for a crash in the very overheated markets, which is where they seem to be concentrated.

    1. Wonder if the failure of the deal will disappoint some MNR-C holders, who might dump it.

      I entered a bid at par in the event this might happen.

      1. Both the common and the preferred ended higher on the day after the news broke of the vote failing to approve the merger (on the MNR side only). Interesting bet, though, and I hope you snatch some up on a big sell-off but this puppy has been so stubborn and sticking very close to ‘trading flat’, so to speak.

        I still think we’ve not heard the last from Zell. He knows how to play the game, will collect the breakup fees and I think wait a bit, maybe coming back to the table should the market brush or slam into the rocks. Until then, I look forward to continuing to collect those divvies.

        1. What about Starwood? Now the massive breakup fees will not have to be paid (just $10 mil), so that translates to increased price for shareholders should they come back with their last proposal. Should they do come back, there’s no plan included for the fate of MNR-C.

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