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.

393 thoughts on “REIT Chat”

  1. Heard on KCBS radio today that a developer out of New York bought the Trans America building for a bargain? At 600 million plans on spending another 400 million upgrading it and has bought or owns buildings around it and plans on more development. One of the buildings is going to be increased in size and will add .13 to the shadow over a local park rumor has it city will give an exemption to a 1984 law . Want to let business know that they are welcome in San Francisco currently a 30% office vacancy rate.
    I wonder who will be the money backing this?
    Maybe some developers are seeing a market bottom?

    1. Various reports say the money is coming from overseas German pension fund(s) that have been putting together a portfolio of US real estate in NYC, Chicago, Miami, Raleigh and Richmond. A good time to buy if you are a cash-rich and patient investor.

      I looked at the chart on the presumed seller, Aegon / Transamerica, and could not get excited enough to do more research. It has been a flatliner for many years.

  2. Macy’s was in the news yesterday. PE wants to do a buyout and take private. Speculation it’s a pump and dump offer or buy for the RE value.
    I just don’t think private equity has the expertise to run a retail clothing store so this could be an effort to run the stock price up then cash out.
    The other speculation is it’s for the value of the real estate. Most Macy’s are anchor tenants and part of indoor shopping malls. With few comparable sales it’s hard to say what the value of the real estate owned is.
    This could be another slow motion disaster for shopping malls they are a part of like J.C. Penny and Sears were.

  3. Some real estate news, from Bloomberg. Sector weakness is not over.

    — Bloomberg Odd Lots has a podcast on weakness in multi-family real estate. IMHO, worth a listen. (“Another Part of Commercial Real Estate Is in For a Reckoning.”)

    The usual suspects (higher interest rates vs inability to push up rents) but in unusual places like the Sunbelt (where unseasoned developers gambling with cheap interest only loans overbuilt). Like offices, nobody is selling, and buy-sell spreads are wide, because owners don’t want to admit values are down. “Extend and pretend” is becoming more difficult for lenders since some properties are nowhere near covering operating expenses.

    — From Bloomberg Radio’s muni bond reporter: reports of high defaults in Senior Living Properties, which many think are “safe” investments. Muni CEFs hold the bonds, and I would guess some REITs hold properties, sometimes included the category of Healthcare. I was surprised that a quick Google popped up ~7% to 11% as a default rate on Senior Living facilities

    — Existential question of the day. Not from Bloomberg but in the local news and of interest to holders of NYC offices REITs. Congestion pricing is coming to midtown NYC soon. Private cars driven into NYC will soon face a large additional fee of $15 to $22, trucks up to $36, taxis and Uber $1-2.50.

    Does it make workers more or less likely to want to come to work in NYC in those big expensive half-empty offices owned by the likes of Vornado and SL Green? I tend to think employers will not want to reimburse and workers will want to work from home. Still thinking about this.


    1. Bear, from the West coast. Just wondering if you saw my post about San Francisco and Bay area.? Talk about multifamily overbuilt. Several mention of discount or 2 months free rent or free parking that they normally charge for. Even my son who doesn’t follow real estate has noticed how many projects we have in the north bay and more coming that are not finished yet.

      1. Charles – seeing similar in the south bay. housing is sitting vacant (even newly built) and landlords are having to offer incentives to try to find people to move in.

        Article on overall decline in CA

        There is a lot of clamor in CA (including from our newshound governor) for “more rental housing,” and the state is penalizing cities that don’t meet the arbitrary “new housing” targets set by the legislature. However, it. seems that the market rates for housing are not “affordable”, so the clamor is shifting toward government housing.

        Don’t get me wrong – people need to have access to housing, but having local or county governments in the landlord business (which is what is discussed with growing frequency) isn’t the answer. They started doing more of that during COVID (took over hotels/motels, vacant apartment building) and they simply can’t manage anything. Even some of our school districts are now trying to get into the landlord business.

        Nightmare in the making.

        1. Private, A nightmare indeed. We were heavily invested in directly in rental housing in CA for decades prior to, and through Covid. Dozens of “front doors” across the southern 1/2 of the state. I’ll spare the details, though during and after Covid in CA a significant part of rental owners’ property rights were transferred to the state and local jurisdiction’s control and treated as social safety nets. We sold everything. I would not even buy a CA REIT at this point. The headlines notwithstanding, I don’t think the average person has any idea of what really happened in that space.

          1. Private, Santa Rosa bought a hotel south end of town several years ago with the promise to give the homeless social services on site. Was recently in the news that there has been drug dealing going on there. Several other 1950’s hotels in the town being converted also. One or two I think are charity organizations which I hope means they we be better run.

          2. I feel for you Alpha. Tough time to be a landlord in CA. People’s Republic of CA government (newshound governor and “progressive” super-majority legislature) really did a number on landlords during Covid. The rhetoric was all about how these “big corporations” who are all the landlords should have to pay for whatever the gov. decides. Crazy. Driving small landlords out left and right.

            I have a neighbor who got caught in some of that covid-era rental mess. Cities/counties put in what essentially turned into rent holidays. Tenants could just not pay rent and there was no recourse (for years). He still had to pay the mortgages on his properties with no rent coming in.

            IIRC, there are a couple of places where landlords are still having to fight (Oakland sticks in my mind, but I may be mistaken).

        2. Private, my niece just bought a townhouse in Campbell. She made a lowball offer, the owner had it as a rental and was moving out of state and took the offer. The appraiser said it was below market. Right after, a higher offer came in, hopefully it doesn’t fall out of escrow.

  4. Halloween is over, but scary real estate headlines are not —

    — WeWork’s bankruptcy is adding to the glut of big city office space. WW is the largest private renter in the US with 20m square feet. Its been contracting. WW removed 45 sites from inventory since August, about half of those in New York. That is impacting valuation. The value of a vintage building 90% leased to WW with a 77 million mortgage fell from 127 million to 42 million. Its mortgage is in foreclosure. Increasing vacancies are pushing values down. “We believe the value of Class B and Class C buildings will probably be 55 percent less than they were prior to the pandemic,” a NYT source said. (See the Reddit quote below.)

    Interestingly. I couldn’t find any public REITs confessing to big hits for lost rents. Back in 2019, during WW’s first round of troubles, NAREIT reported that public REITs had limited exposure to it. Empire State avoided them entirely. Vornado was a cheerleader in 2019 but now claims to be out. BXP admits to having WW as a tenant.

    “WeWork Files for Bankruptcy Amid Glut of Empty Offices. The move is a blow for landlords who have rented space to the co-working group, which is planning a “comprehensive reorganization” that includes cutting some of its leases.” — NY Times 11/6/2023

    “WeWork Bankruptcy Would Deal Another Blow to Ailing N.Y. Office Market. The fallout would be particularly hard for landlords already struggling with piling debt and companies scaling back their office footprint.”
    — NY Times, 11/4/23 (shared link, free access)

    — The WSJ has yet another write-up on “Office to apartment conversions”, Every Modern Mayor’s Dream. Conversions were slow in 2022. They are expected to pick up somewhat this year, but face headwinds from high rates, reluctant lenders and weakening demand for pricey apartments. Also, renters tend to like things like windows and plumbing in their apartments.

    “Turning Empty Offices Into Apartments Is Getting Even Harder. Only 3,575 apartment units were converted from office space last year. The already fraught process now faces even more challenges.” — The WSJ

    — WolfStreet has a recent write up on WW and its fall.

    — And finally, a perceptive comment on Reddit Investing from an Average Joe who’s noticed that office occupancy is down but building prices are not. Clocked 170 replies and 385+ faves.

    “I’m in and out of lot of buildings in a major US city. It’s unreal the amount of empty offices that are just sitting. Entire buildings of empty offices. Plenty have been available for lease for over 2 years. No one wants them. Feels like a huge crash coming, but nothing has happened. Eventually these RE companies are going to have to dump these spaces, which will trigger more than just a real estate crash. ”

    A great time for REIT traders, flippers, and authors of “Buy Of A Lifetime” REIT articles at The Other Website but not so much so for buy-hold investors.
    Just my opinion. DYODD.

  5. A round up of scary real estate news and headlines for a cold and damp Halloween night:

    – Real estate brokerage stocks are tumbling after hours on the news that a jury, consisting of citizens who may have bought a house at some time and paid a big sales commission or who may know someone who did, found that price fixing by brokers was well, price fixing. The jury ordered damages, ~1.8 billion, to be paid. The lawyers will argue this and appeals will be likely filed. Reportedly, there are other similar cases out there. Zillow, Redfin, National Association of Realtors, Keller Williams, and Home Services of America are mentioned in the news stories.

    Barrons has dire predictions of falling commissions and mass layoffs of realtors. Not a word about a 3% commission leaving more in consumers pockets than a 6% commission and in some sense making housing slightly more affordable.

    — It was noted here by Tim on 10/18 that Pimco had given up 22 hotels encumbered by 240 million of debt. A bit of googling lead me to the Pimco website. In 2021 Pimco was seeing opportunities in lodging in the post pandemic world (“Opportunities in the Lodging Sector” , 12/2021). Just recently, In June 2023 Pimco suggested “targeting stressed assets in turbulent markets” and offered this tidbit of advice, LOL:

    “The hotel sector has recovered from the pandemic-induced downturn and remains resilient despite a deteriorating economic backdrop and rising operating costs. ”

    Pimco has a solid well reasoned analysis which I linked below. You would almost think it wasn’t coming from a company that was handing back property to its lenders. (“Investors should focus on high-conviction, tactical deployment into stressed and deeply discounted assets facing immediate liquidity pressures…”)

    Real Estate Reckoning

    — The WSJ has a story on tightening real estate lending. Regionals are starting to show stress. PNC’s problem CRE loans have doubled. (I have to wonder whether Bank Of The Ozarks, aka OZK, an aggressive construction lender that seems to be doing well, will increase lending and get pulled into the vortex since other lenders are stepping out.) —

    “The Money Has Stopped Flowing in Commercial Real Estate. Decline in construction loans has been particularly severe as lenders continue to cut back, ”

    Just my opinion. DYODD.

    1. Here’s something from St Louis (home to several of us)

      A 1.5 million SF skyscraper (AT&T tower) in St Louis is being auctioned w a starting bid of $2.5 million or <$2 SF. This is shocking given the building was sold by AT&T to a REIT for $205 million in 2006.

      Troubles began not long after the sale in 2006 as AT&T moved employees to nearby buildings w/ its HQ in Texas and far fewer employees in downtown St Louis. By 2017, the building was nearly vacant. That same year, the lender sued the owner and foreclosed on the property

      Just last yr, the building sold for just $4 million at an auction – this is the second time the building is going to auction in the last 2 years

      Also, for what it's worth, I do get to talk to private real estate managers for my day job, and they all confirm that the story of turning empty office into apartments is just that…. way too hard and costly.

  6. Looks like a busy Monday in the real estate business. Apparently stock deals, since there is no real money around anymore.
    Spirit SRC / Realty Income O
    Physicians Realty DOC / Healthpeak Properties PEAK

    “Buy REITs, they ain’t making any more of them.” – Will Rogers, updated.

      1. SRC-A will be assumed by O and remain outstanding – O’s senior unsecured are rated A3/A-

        “In addition, Realty Income intends to assume approximately $173 million of Spirit’s outstanding Series A Preferred Stock at an annual cash dividend of 6.0%, which is redeemable at par and is expected to remain publicly traded on the New York Stock Exchange.”

    1. Bear, How are you feeling about hotel REITS? See SA article couple weeks ago on PEB ? and Rob in Vegas comment they sold a hotel in San Francisco with almost a 40% loss to book value. These hotel reits are having a double whammy getting hit with being shut down in 2020 and slow recovery. Even with travel volume best in years they put off capitol expenditures and now higher rates for borrowing now making it difficult to roll over loans.

      1. Charles, I have no opinions about the hotel REITs right now. I don’t know anything about PEB. I’m not looking to add any hotel REITs but I’m not as pessimistic on the hotel REITs as the SA authors seem to sound.

        As far as I can tell, travel seems to be back with a vengeance. New York was hopping with tourists last week. Occupancy from all reports is good. ( N.Y. Hotel Occupancy Soars 10% As Tourists Flock To The City – Bisnow 91/23 ) I think the occupancy rate was ~86%, which is very good.

        Of course there are other parts to the equation, like what rates those rooms bring in and increases in interest expenses when debt rolls over. And, when you drill down, whether the hotels that a REIT owns cater to leisure travelers or business travelers.

        1. Well BJ i’m off to Europe soon and I’ll see how things are on the other side of the pond.
          Wine country has more than it’s share of Lookie Lou’s now almost all year round. My turn to be a tourist and stand in the middle of the road.

  7. Rite Aid will be closing around 154 stores and rejecting their leases. While the impact on REIT rents is not yet clear, from the lack of press releases, it seems that there may not be much impact on the REITs. Initial reports are that Regency/Urstadt, Kimco, Retail Ops and Brixmor each have 10 or more Rite Aid stores in their portfolio. (Those they may not be closing: most of RAD’s 2,200 stores will remain open. )

    Rite Aid is closing more than 150 stores. Here’s where they are.

    Store list in the bankruptcy filing , scroll to page 22

    Just my opinion. DYODD.

  8. If the experience of Carl Icahn in making a sure bet against beleaguered shopping malls is an example, there may be hope for office buildings. The only thing you need is a smart operator on the other side of the trade.

    Icahn correctly saw shopping malls were in trouble but apparently placed the wrong bet. He is now complaining of market manipulation. Or as an Icahn attorney put it, “Artificial acts that are non-economic and with an intent to manipulate derivatives markets are against the law and actionable.” In short (intentional pun) somebody paid more for a property than Icahn anticipated and his bet didn’t work out.

    (FWIW, a shark tactic in the Financial Crisis was making a small losing bet after placing a large bet on the other side of the trade. e,g, buying up a small bond issue to push a corporate default then collecting on the credit default swaps. “Non-economic” but very profitable. )

    A worthwhile read if only to hear Icahn complaining about how market manipulators are ruining his day. Barrons, may require a subscription. Free summary on The Other Website.

    Carl Icahn Bet on the ‘Big Short 2.0.’ Now He Says the Game Was Rigged.
    A wager against U.S. shopping malls looked like a sure thing but hasn’t worked out that way

  9. Office real estate in San Francisco / SV is still having vacancy issues, according to Wolf Street. 36% worth to be precise in SF. Counterintuitively, with vacancies up in Silicon Valley (27%) so are asking rents. Someone has to pay the taxes, maintenance and utilities. Some of the “leasing activity” is an optical illusion: merely downsizing companies moving into smaller spaces.

    Some buildings will go back to the lenders. There is cheery news: office building sales are resuming, supposedly a good sign. The sales are at huge discounts though. The weakness in offices hasn’t prevented 3 Wall Street firms from rating a SF office REIT as a “buy.”

    Despite the AI Hype, Office Markets in San Francisco & Silicon Valley Get Even Worse

    Not seeing anything to get excited about in office REITs in SF or elsewhere. Just my opinion. DYODD.

  10. Year to date, the best performing REIT sub-sector is Data Centers, which actually outperformed the S&P 500 YTD, handily beating The Magnificent 7 lead index, an impressive achievement. The remaining 11/12 REIT sub-sectors are all down YTD.

    The Other Website regularly publishes a useful chart showing YTD and weekly price changes in REIT sectors and sub-sectors. Of interest: this week, Mortgage REITs dropped twice as much as Equity REITs. Whereas, YTD, it was the opposite: Equity REITs dropped twice as much as Mortgage REITs, I am not good at mind reading Mr. Market, but perhaps the mREITs are getting the higher-longer interest-rate jitters.


    1. Thanks BJ, definitely I feel just from the chatter here and what Tim has said about his business leads me to believe mriets are going to be hurting. Not all to be sure but both commercial and residential that rely heavily on loan origination. Ones that service loans probably ok.

  11. I have been adding to my underwater position in ARE and think others should give it a look (DYODD of course).

    It’s dominant in a very attractive market segment (lab space), has a great balance sheet and increasing dividends. At current prices (~$100 and a yield of ~5%) it’s 70% of it’s high for the year. BTW, Simon Bowler on SA estimates it’s NAV @~$170.

    ARE seems to be a victim of short sellers pitching the idea the office component of lab space is not being used as folks are working from home. While office space is a challenge in the current hybrid environment, the lab space is not going anywhere.

    1. Front page of Yahoo finance today. Scroll down to article headline
      This biotech went public 3 years ago at 14.00 a share. Article mentions ARE as the landlord

  12. I’ve started nibbling on a few select REITS. I’m starting small, but they continue to get hammered and have reached my buy zone. Plenty of risk, and it’s likely to continue to get worse for a while, but I’m wading in. Those on my list are ADC, AHH, ARE, BNL, GTY, HIW, PSTL, VICI.

    1. The YTD charts of my interest rate sensitive stocks look like a dream bike ride home, a gently downward sloping hill. So I am not buying much. With rates looking to flatten and drop – maybe – this is a good time to look.

      I’ve looked at BNL, VICI, PSTL and AHH. For something quirkier and a bit more difficult to get a handle on, you might look at CTO, which is transitioning and comes with a kicker in the form of part of PINE a net lease REIT that it manages. A higher yield and maybe more risk. It has a preferred.


      1. BJ some of these I haven’t heard of before that you and Mrinprophet mention, but I agree with your analysis and what you said below. I held Terra income fund but when they combined it with another of their companies I let it go for a small profit. HPP suspending the common dividend doesn’t leave a cushion now for the preferred. Also nothing has changed in the San Francisco market on commercial RE.
        I looked at CTO and changed my mind for now. They have been aggressive in expanding.The mid West doesn’t have growth restrictions both limitations on land or zoning to make it difficult for competition to enter their market. One of the reasons I am in REXR PB because of the area they are in. Easy to buy vacant property and pour a tilt up building but zoning restrictions in Ca. are difficult. Blackstone would be interested in buying some industrial REIT’s in that area to break into the market.
        One III we haven’t heard from in a long time is Rob in Vegas. He follows REIT’s and has a good handle on good ones.

        1. Industrial and warehouses have been the blow-out REIT sectors YTD, actually beating the SnP-500, most of the other REIT sub-sectors are in the red.

          So FWIW I am not actively looking to add to my REITs now. I am looking more at utes, but they are pricey; diversified income ETFs, trying to add quality, and energy which is undervalued. I am full up on all those sectors except quality ETFs. Higher interest rates have taken a toll and I am still performing triage on the wounded. So nertia rules.

          5% income with no risk to principal for doing nothing is a good place to be. Time to “put another log upon the fire and pour myself another cup of tea.”

          1. lol BJ totally agree
            DPL bonds, SCE and PCG preferred, then don’t forget energy. PAA bond paying 6.7% and out 13 or 15 yr ( I don’t remember exactly)
            Long term a few good solid reits I want to add to the mix.

          2. REITs are really under pressure. Powerhouse industrial reit Prologis has went from $123 to $111 in just past 5 days. It could be worse. One could be riding PennYless and Morons MPW baby from $20 plus down to $5.

    2. mrinprophet–seems like a good idea–at least to ‘look’. No doubt these things have been hammered down in in the last year. Been a long time since I have even considered a REIT so will be starting from scratch.

    3. Champing at the bit, a bit? I felt the same way back in May, but, I couldn’t find a Macro-Story to bolster any sense the ‘Raining of the Knifes’ was about to cease for the REIT equities. Redirected that nervous energy toward a few of your chosen ticker’s bonds instead. One I liked, bond-wise, was GLPI (bought VICI too , etc). DYODD and all that, but, suffice it to say, they were making money! Since JPOW & Co had been consistently at least a year behind the eight-ball on all the major ‘inflection’ points, and, all the while, the most anticipated Recession in History was getting pushed out 6 or more months with every FOMC meeting, and the inflation dragon was definitely not slain, I started reallocating some of what would of been for common stocks in the pre-Covid times into bond mini-ladders while waiting for that “Macro-Story” to offer a glimmer of hope beyond my vague sense that it couldn’t get much worse than it was! Well, it did get worse for the REIT stocks. For GLPI and VICI, I currently have “cusip:361841AN9 md:9/01/2024”, and “cusip:925650AA1 md:03/15/2025”, and “cusip:89788MAC6 md:4/15/2026”, and “cusip:361841AH2 MD:4/15/2026.”

      Don’t know what my effective yield is exactly on the cusippies above, but, it is easily over 6%, and w/o all the drama. But, maybe you are in a different place along life’s journey than I am. Perhaps, the siren call of the equity vixens rings louder in your ears than mine. For me, the bonds are like the ropes that lashed intrepid Ulysses to the mast … 😉

      1. caw caw, thanks for the CUSIPS, I have been watching the BXP bonds but have yet to pull the trigger as the yield doesn’t seem high enough for the risk.
        Although 20/20 hindsight when the common hit a low around 46.50 I was telling myself it was time to buy but I didn’t.

      2. caw caw, I looked at the one VICI bond and according to FIDO bond calculator your getting 6.64% YTM if bought now and BBB- and holding for about 20 months. This is better than the 5.8% you would be getting for holding the stock which seems to be in a downtrend this past year looking at the chart.
        Two others you have listed are Truist bank and GLP finance which are not Reits
        but welcome to me scurvy pirate ship matey, I went a little farther out on the yardarm with GLP5105470 due 1/15/2029 only B+ for 8.34% YTM and GLP4955453 due 8/1/2027 B+ for 7.68% YTM
        My costs on these 91.62 and 96.48

        1. I was going to add “all typos are the fault of the computer” but it seemed redundant at the time 😉 And the “time” was late. The Bells were a-tolling.

          I’m a mistake on two legs, but, if you are correct I may have out done myself …
          FINRA says:
          “Symbol:GLPI4873379 CUSIP:361841AN9 Bond Type:CORP”,
          “Symbol:VICI5401506 CUSIP:925650AA1 Bond Type:CORP”,
          “Symbol:TFC5024171 CUSIP:89788MAC6 Bond Type:CORP”,
          “Symbol:GLPI4353023 CUSIP:361841AH2 Bond Type:CORP”.

          I think I know how Truist got in there. With multiple asset managers and multiple accounts within said asset managers I’ll try to save time by copying bond entries smeared across similar AM’s and Acct’s and then updating the old formulae with the new bond’s symbol, etc. Needless to say, “Mistakes were made.”

          GLPI at
          “Gaming and Leisure Properties, Inc. is a self-administered and self-managed Pennsylvania real estate investment trust engaged in acquiring, financing, and owning real property to be leased to gaming operators in “triple net” lease arrangements.

          Our portfolio consists of 61 premier gaming and related facilities and amenities which are geographically diversified and well-positioned across the country. We intend to grow our portfolio by aggressively pursuing opportunities to acquire additional gaming facilities and real estate assets to lease to gaming operators. Our management team actively monitors developmental opportunities for diversification and intends to expand our portfolio of assets over time by acquiring real property assets outside the gaming industry.”

          You may yet be correct about GLPI for all my bleary eyes know, but, let’s show Congress how it’s done, and agree at the very least that GLPI is REIT adjacent. Deal?

          As for my poor ‘situational awareness’ regarding my actual current effective yield I’m struggling with that. Never really owned that many individual bonds prior to Covid so I’m floundering a bit like a fish out of water with the record keeping. But that is complicated and tedious, so, enuf on that, except to say I’ve ‘got a plan, Man!’ … In the past two days I’ve added a mix of coupon vintages/convexities from each of the following RSG, NVR, NXPI, PG, LMT, AMGN, BATSLN (BATS & Reynolds), and CE. Plus the usual smattering of UST/Agencies with >1yr call-pro. Two dozen more entries just for the c-bonds in two days … whew! Anyway, I don’t really strive for absolute maximum return. More interested in being able to systematically average into a GLPI or a RSG. Thereby, dragging my overall effective yield up so that when the Market tides go back out I’ll be holding a diversified average effective yield not to far off the high tide mark for each entity. I suspect this is happening because I can’t pick the maximum bond yield any better than I can pick common stock tops/bottoms 😉 What else? I suppose YH would scold me and mrinprophet could justly scoff at my hypocrisy, but, while I was zipping through my bank’s brokerage account this morn I made small/token adds to eleven individual/wrappers for preferreds and munis. Not because the buys were all optimal (WFC.D looked pretty opportunistic if I remember right), but, because I was there and had the time 🙁 Now that’s at least 30+ trade journal entires in the past two days. … Now, for that TFC snafu … Thanks for the heads-up.

  13. REITs to keep an eye on for possible dead-cat bounces this week.

    — WP Carey, WPC. a respected REIT, has dropped after announcing a restructuring. It is retaining its warehouse and industrial properties and spinning off its “better” office buildings into a new REIT. The smaller WPC will likely cut its dividend and, unless it pulls a JNJ, lose its dividend aristocrat status.

    A lot of retired SWAN investore were surprised and upset by this. Little wonder. Analysts were ~80% bullish pre-crash and they said the dividend was safe.

    — Hudson Pacific, HPP, could benefit from the expected end of the Writers Strike. It just got an upgrade: everything is already discounted, it’s up from here. It has also got some problems, like a lot of debt, but maybe nobody will notice.

    Watching from the sidelines. DYODD.

      1. Thanks for the link and good luck with WPC, I think you’ll do okay with WPC, it offers good value.

        One of the things I like to do after a stock takes a nose dive is look back at pre-crash analyst reports to see whose crystal ball was working and whose wasn’t.

        The report linked above, written by Motley Fool Analyst Brewer, was datelined 9/25, after the crash, and is of the writing school that I call “if you liked it before, you’ll love it now.” Not unexpected. These pop up like mushrooms after a hard rain.

        My crystal ball check showed that Analyst Brewer also wrote a positive WPC report dated 9/14 which turned out to be extremely bad timing, since it came out just a week before the bad news.

        It was titled “Before You Buy Stag Industrial, Here’s a Net-Lease REIT to Consider First (WPC)” . Written right after WPC’s divvy raise and should have been easy pickins. (Random highlights – “W.P. Carey has a more attractive yield (than Stag)” and “A long-term holding you can rely on” , citing WPC’s diversification, which is now gone. )

        I found many more gushy articles on the usual suspect, The Other Website, including The Buy Buy Buy Big REIT Guy, who I enjoy reading, who touted WPC just a week before the crash: Don’t let Wall Street fool you – the best time to buy in years.

        Apparently TBBBBRG ‘s 11 analysts, 2 credit rating agencies and 13 experts — So Please Trust Me — and MF’s Brewer missed the fact that WFC had telegraphed its coming move in a public SEC filing months before (thank you to a “civilian” TOWS commenter for pointing this out.)

        My point is not a warning on WPC as much as a criticism of the self-proclaimed all-seeing experts with high subscription prices who don’t do their homework. DYODD. Always.

  14. At the end of January last year I watched a video made by a you-tuber who went back to his hometown of San Francisco and documented how deserted the downtown area had become. After doing some research, I came up with five REITs that had the most exposure to the SF Bay area real estate market that seemed vulnerable.

    Eighteen months later here is how those five REITS have fared.

    Avalon Bay (AVB) -Residential REIT (-18%)
    Boston Properties (BXP) -Office REIT (-45%)
    Equity Residential (EQR) -Residential REIT (-23%)
    Essex Property Trust(ESS) -Residential REIT (-26%)
    Hudson Pacific Properties (HPP) -Office REIT (-77%)
    Pebblebrook Hotel Trust (PEB) -Hotel REIT (-36%)
    Terreno Realty Corp. (TRNO) -Industrial REIT (-20%)

    I guess the question now is whether the bottom is in on some of these names, or are investors in for more pain?

    1. Citadel, thanks for the post and the work you put into that research.
      HPP was no surprise to me and with the turmoil in hotel REIT’s PEB is not unexpected. The industrial REIT TRNO was intriguing, wonder how they were affected and how that relates to businesses leaving SF and other industrial REIT’s
      The surprises are the residential REIT’s
      If you know or have a theory CW I would be interested in hearing it.
      The bay area has companies in the bio tech industry and maybe BXP has investments related to that. Be interesting to find out what its properties are here.
      Bty, BXP was one of my would of, should of, could of investment ideas when it was in the mid to high 40’s look at it now

      1. Its worth noting that while being down on a longer term basis, both Avalon Bay (AVB) and Equity Residential (EQR) are up double digits year to date, among the best performers in the residential REIT segment. If those two are leading indicators than perhaps other residential REITS like Mid-America Apartments (MAA) and Camden Property Trust (CPT) are getting ready to follow suit and move higher.

        1. Citadel, just my thoughts on residential REITs. On one hand I think there has been an explosion of new construction and it’s going to be awhile for the market to absorb the extra capacity. But with high mortgage rates, I think people will continue to rent. As for investing in the common equity of a REIT my feeling is with dividend of say 3% I would not be interested. The growth is limited with the higher borrowing rates right now.
          So why take the risk when you can get a safe 5% on a CD.

  15. Bloomberg Business Week has a podcast and two cover stories on “the struggling real estate sector.” (“It’s not pretty.”) The usual suspects: too much debt, too little time. Questions about whether “extend and pretend.” will work again, given increasing vacancies and the regional bank crisis. Less optimism in the story about converting offices into apartments than your hear from the message board REIT pumpers and City officials. (“Not gonna happen.”)

    The Bloomberg BW podcast has a 10 minute segment at the beginning of the very long podcast. Not behind a paywall, so you can listen.

    Bloomberg Business Week Weekend – June 23rd, 2023 (Radio)

    Story link (Paywall):
    “The World’s Empty Office Buildings Have Become a Debt Time Bomb”
    “From San Francisco to Hong Kong, higher interest rates and falling property values are bringing the commercial real estate market to a perilous precipice”
    The ‘Extend and Pretend’ Real Estate Strategy Is Running Out of Time

    1. Bear, I have a lot of friends in the CRE space, both public and private. Older ones know that CRE just like oil/gas go through boom/bust cycles. Been doing that for many decades. Prudent ones manage their finances accordingly. Several that I know have built up war chests waiting for the CRE bottom. Maybe they are inspired by the late Sam Zell.

      As for commercial office space. It is very difficult to convert to apartments, so some lower tier ~Class C properties will likely be bulldozed. Only value is in the land.

      CRE vultures are not excited yet, but they are sharpening their talons getting ready to pounce. Best guess is that it is years away.

  16. Looks like the RTL / GNL saga continues. GNL and RTL are two REITs with a common manager. In the first episode, a White Knight in the form of an Activist Investor, appeared on the scene to vindicate the interests of the long suffering little shareholders burdened by a pricey external manager.

    In the second episode, GNL agreed to merge with RTL. AR Global, which is the external manager of both REITs and is the target of investor complaints on The Other Website for allegedly excessive fees, graciously agreed to relinquish its role in exchange for a king size exit fee, say ~$375 million. Don’t rush to write the Activist a “Thank You” card just yet.

    In the latest chapter, the Activist Investor will reportedly walk away from its complaints in exchange for a payment of ~500,000 shares of GNL stock worth say ~$5 million. As I read it, that’s a shareholder cost.

    Reminds me of how Ben Franklin described New Jersey, sitting as it does between New York and Pennsylvania: “A keg tapped at both ends.”

    Just my opinion. DYODD.

  17. LANDP coming soon.

    May 30, 2023 / Gladstone Land Corporation (Nasdaq:LAND)… today announced that it has applied to list its 6.00% Series C Preferred Stock … on the Nasdaq Global Market under the ticker “LANDP.” Pending Nasdaq approval, the Company expects the listing of its Series C Preferred to be effective on or about June 8, 2023, […]

    The Company originally issued the Series C Preferred at $25.00 per share through a $255 million continuous registered non-listed offering, beginning in April 2020, which was completed in December 2022.

  18. REXR-C being offered at 22 for a 6.4% yield.

    Not bad if you are into real assets and want super high quality.

  19. Was going to post a link about Blackstone being “in talks”, looking to turn a big Chicago office property back to the lender or cut a deal, but there are a lot of these “big guy gives back the office keys” stories these days. And Koneko Research, mentioned by another poster here, has done a good job of summarizing the office REIT crisis. Hint: think Class B shopping mall REITs.

    So, for something different, a WSJ article on apartments, supposedly the safest of all real estate investments, many located in supposedly the safest of all areas, the Sunbelt.

    The story here is of investors who bought into private real estate deals, to the tune of $115 billion in recent years. Some are now finding their investments sinking as floating interest rates, taxes and insurance rise. (Not to worry though, some people do well: the syndicators collected upfront sales commissions and management fees. ) The larger issue here: whether yet another real estate sector is in the early stages of starting to crumble.

    “A Housing Bust Comes for Thousands of Small-Time Investors. They were offered the benefits of owning apartment-building rentals without any of the work, in real-estate investments that have already left some people empty-handed.”

    “Bonds Backed by Apartments Are Under Stress as Housing Market Cools.
    Nearly $88 billion in securitized mortgages are estimated to be at risk of default, with 42% tied to apartment buildings.”

    Paywall warning: may require subscription.
    Just my opinion. DYODD.

    1. Important to note that ABR was the lender in question regarding the Houston foreclosure and is mentioned in the second WSJ article.

      Also – and I hate to jump on the AI bandwagon – AI can’t be helpful for office REITS as office employees that do return to work could potentially be replaced by AI Chat Bots.

  20. News article out in the Real Deal about office REIT Vornado, VNO, which cut its divvy last month. Goldman expresses concerns that VNO could breach debt covenants. It notes rising interest costs affecting re-fis of hedges, lost tenants and costs of on going projects. (In short, things you probably already worried about when reading the news on office REITs.) VNO dismisses the Goldman report.

    “Vornado warning: REIT slipping toward debt breach. Climbing interest expenses, tenant move-outs could squeeze debt buffer to dangerous level, analysts say.”

    Sentiment on offices: “The thrill Is gone. The thrill is gone away. You know you done me wrong, baby.” Just my opinion. DYODD.

  21. Quite a bit of office news out there. Hudson Pacific HPP joins City Office REIT CIO and Vornado VNO in trimming its dividend. 40-50% for HPP. 50% for CIO.

    I found two MarketWatch articles both published on May 10. One warned against banks with office real estate; the other, advocated buying banks because real estate was transient and nothing to worry about. One of the banks on the MW watch list was also on a bargain buy list in Barrons. Quite a diversity of opinion out there.

    Of interest is valuation. Big office buildings don’t sell often. So nobody’s quite sure what offices are worth these days. (Except appraisers for developers, LOL.) The Wall Street Journal ran a excellent article in April on an almost-empty, up-for-sale office building in San Francisco. It turns out that the property, 350 California Street, just sold for 75% off, which sounds like the after-Christmas pricing of puffer vests on the JCPenney clearance rack. The WSJ was so deep in socio-economics that it glossed over the real problem: No tenants, no cash flow.

    “What Are Older Office Towers Worth? Here’s the First Sale in San Francisco’s New Era of Office CRE. Union Bank made a deal to sell its tower at 75% off original listing price, setting the first new benchmark. Other towers waiting in the wings.”

    Sentiment: still exiting office REITs. Just my opinion. DYODD.

    1. Added a bit myself. Apparently, the WSJ published a negative article on the sector that caused the downdraft.

  22. An interesting comment from the CEO in the Boston Properties (BXP) conference call.

    “.. work in the office is really about three days per week across our markets .. We are aware of isolated instances where an organization has required all their employees to work .. most of the week, .. but that’s just not the norm.”

    “The deceleration in leasing .. is driven primarily by the economic slowdown, a cyclical trend, rather than remote work, a secular trend .. With slowing growth, companies are more focused on cost control, reducing headcount, and taking less or reducing their space.”

    1. I started a toe hold in Piedmont Office Realty Trust (PDM) today. They own class A rated office buildings in growing areas of the Sunbelt. Their shares have been beaten to a pulp by the market. Hopefully, the flurry of fists landing body blows is nearing the end. But I am prepared to average down if the beat down continues. Buying class A office building near a 50% discount to net book value- what could go wrong? Obviously…plenty.

      1. MarkS

        Always good to buy good quality in the downturns.

        I’ve been using the downturn to begin new positions in ARE and FRT.

        – ARE is tossed in with the office REITs and should not be.
        – FRT is local to me and seems very well diversified outfit.

        I am also looking to add to a small position in ALX (which is kinda’ speculative).

        1. I am looking to add to my ARE position around $115- and looking at FRT as well. ALX is a new name for me. Thanks, Greg. I’ll check it out this weekend.

    1. Why do you think its bonkers? AR Global is not high on my favorites list.

      The only thing I found odd is that if you look back to ~12/22, the Blackwells folks disclosed that they owned very little RTL stock. If their complaint is that their stock is around 40% undervalued, I would pay them their ~$380 and send them on their way. But the lawyers might groan: a contingency fee on that settlement barely covers a decent steak dinner.

      (Not taking AR’s side, just saying, that between the Scylla and Charybdis* of external managers and class action lawyers, it’s hard for the average investor to pick a noble side to root for. ) *”Scylla and Charybdis, in Greek mythology, two immortal and irresistible monsters who beset the narrow waters traversed by the hero Odysseus.”
      “In accordance with Rule 14a-12(a)(1)(i) under the Securities Exchange Act of 1934, as amended, the participants in the proxy solicitation of RTL’s stockholders are: Blackwells Onshore I LLC, Blackwells Capital LLC, Jason Aintabi, Related Fund Management, LLC, Richard O’Toole and James L. Lozier. As of the date hereof, Blackwells Onshore I LLC owns 100 shares of common stock, $0.01 par value per share of RTL (“RTL Common Stock”) and Mr. Aintabi beneficially owns 100 shares of RTL Common Stock. As of the date hereof, Blackwells Capital LLC, Related Fund Management, LLC, Mr. Lozier and Mr. O’Toole do not own any shares of RTL Common Stock. The RTL Participants own an aggregate of 100 shares of RTL Common Stock.”

      Just my opinion. DYODD.

  23. Odds and ends that I found interesting:
    Brookfield walks away from 12 more buildings, this batch in DC. DC has low back to office rates.
    Full story on Bloomberg

    Boom towns Houston and Dallas have good “back to the office” worker metrics, but they are reporting high vacancies rates with ~12m sf of new office builds pouring into a weakening market.–and-empty-office-space-125019682.html

    If you can find it, the Bloomberg Odd Lots just had an interesting podcast on how PE pushed banks out of the construction loan business by offering EZ money and covenant light deals. PE thought of this business as win/win. If the loans defaulted, they got valuable real estate that they could hand over to their talented equity units. There is now a wall of coming-due loans that need to be refinanced at, say, twice last years rates.

    Anecdotal: a local real estate company I follow announced a last-minute re-fi of a big project with a brand-name lender. (The developer dawdled and missed the low rate train.) They omitted any mention of the new rate, which I estimate will soak up 30 to 40% of their profits.

    Just my opinion.

    1. Bear, If one reads Bank of Ozark chairman he speaks same language. States construction loans in NYC are low risk because if they default Bank of Ozark will own the construction project. I hope employees in Arkansas enjoy their “work-out” tasks in NYC. Who knows maybe the Chairman is right. I

      1. There was some (incredulous) press coverage of Bank Ozark’s outsize Manhattan lending business in 2018 and 2022. E.g., last year, OZK granted a $410 (of $540) million construction loan on a 1000-foot “supertall” mixed use building in Manhattan. The 2022 WSJ article identified regional banks and debt funds as active lenders in Manhattan, unlike conspicuously absent homies like JPMorganChase and Citibank.

        In the recent Bloomberg Odd Lots podcast, there were comments about debt fund lenders giving out EZ money with light covenants. (OZK reportedly doesn’t get loan guarantees.) Remains to be seen if OZK’s big bet works out (unintentional pun). They did just up their divvy by 3% and there has been some pumping of OZK stock on The Other Website.

        “How a Tiny Bank From the Ozarks Got Big and Outpaced Wall Street’s Real Estate Machine. An Arkansas bank has become one of America’s top construction lenders. Does it know something the giants don’t?”

        “This Small Arkansas Bank Is Fueling America’s Skyscraper Boom. Bank OZK is one of the most prolific lenders of construction mortgages to Manhattan developers.”

        “The most prolific lender to Manhattan property developers isn’t Wells Fargo & Co. or Citigroup Inc. or any of the other big global banks. It is Bank OZK, which not that long ago was an obscure lender from Little Rock, Ark.”

        “OZK’s $7.7 billion in construction and land development loans made up 42% of all loans on its balance sheet as of September. That is the highest percentage for any bank with more than $5 billion in assets, and more than 10 times the weighted industry average.”

        “Unlike bigger banks, OZK doesn’t usually ask borrowers to pledge their personal wealth as collateral, and it doesn’t sell off parts of a loan to other lenders….That helps it win business, but it also means OZK has more exposure in the event of a default.”

        Just my opinion.

    2. I keep saying Brookfeld is a sleazy company. Good reputation because they are successful at it so their supporters don’t seem to mind their tactics dumping losses onto shlumps who deserve it.


    This was a bad deal. I remember looking at this. Why Arbor underwrote I have no idea. From memory there were over 100 GPs. There will be good opportunities for those that understand how to underwrite deals. I think some of the REITS lacked historical experience (management) and recent history bias. All one needed was to say “value-added” and short term financing was available. I reside in TN where our city now has the fastest growing rents in the US. New construction is everywhere. Once these come online the “value-add” deals will fall apart.

  25. Some weakness beginning to appear in multi-family, according to the Wall Street Journal. Excerpts if you don’t have a WSJ sub.

    “Apartment-Building Sales Drop 74%, the Most in 14 Years
    Interest-rate increases and banking upheaval push down demand for multifamily buildings”

    “Sales have plummeted because the math for buying an apartment building makes a lot less sense now. The cost to finance building purchases has jumped alongside the fast rise in interest rates. Rents are running flat, or are even declining in some major metro areas, after record increases. A upheaval in banking is also making it more difficult to buy buildings, investors and analysts said, as more lending institutions pull back or lend only at high rates. As a result, most apartment-building values are falling, and many landlords won’t sell at today’s lower prices. ”

    “Prices of multifamily buildings dropped 8.7% in February compared with the same month a year earlier…. A separate measure by Green Street, which tracks publicly traded landlords, found an even sharper drop, with building values down 20% from their late 2021 highs.”

    “The recent troubles hitting regional banks are also a blow to the sector. These lenders became the second-largest source of multifamily loans last year, after government-agency-backed loans… Many of these smaller banks are now reducing their lending.

    “But there is one type of sale most everyone expects more of: forced sales. A number of investors bought buildings in recent years with short-term, floating-rate debt….The remaining balance of many floating-rate loans will come due this year, and borrowers whose buildings aren’t bringing in enough cash every month might have to sell their buildings to pay off their debts.

    Just my opinion. DYODD.

  26. FYI.

    Interesting editorial in the Washington Post on conversions of office buildings to residential properties.

    I think this is a growing market for RE developers. It’s interesting to me that the landmark buildings (built before air conditioning) make the most economic sense.

    I’ve gifted the article so there is no pay wall.

  27. VNO-M the 5.25% coupon preferred down 6%+ all of a sudden. Is there any adverse news or a big holder trying to exit it?

    at $16 it is 8.2% yield ! Opportunity or early warning ?

    1. Continual drop in earnings, continual drop in earnings estimates, 23 percent drop in common stock in the last month, invests in office space, big drop in dividends, drop in book value … what is not to like? Will probably be in R. Moron’s next article. The more it drops the more I tell my blind sheep to buy. His followers doesn’t know enough to pound sand down a rat hole.

        Pimco’s Columba trust has defaulted on 1.7B on 7 properties across the country. Brookfield defauted on 750m on 2 office buildings in LA
        Trump properties and Vornado defaulted on 1.2B loan on an office complex in San Francisco
        This is going to rock all the REIT’s and some babies are going to get thrown out with the bath water.
        Remember several REIT’s in Nov. put limits on withdrawals? This is going to be similar to a run on the banks as people try to get out

      2. IMHO, pretty much the same issues as before, with some new wrinkles. Office buildings are still out of favor. Larger investors are cashing out of private REITst, hoping to catch the top and reinvest proceeds elsewhere. (Or just doing normal asset re-allocation, whichever story you want to believe.)

        “Blackstone blocked investor withdrawals from $71 billion REIT in February” (Reuters via Yahoo)

        New wrinkle: casual mention on Bloomberg Radio that some private apartment REITs are now blocking cash-outs. (possibly Blackstone.) No follow-up or confirmation on this, may just be a stray comment. If so, a surprise. Apartments are a super hot investment. However, a slowdown would be consistent with recent reports on the Realtor website of rents dropping in 9/50 metros due to tapped-out consumers and an influx of new build apartments coming in.

        Just my opinion.

        1. BearNJ:

          See below link for a fantastic article on a hedge fund manager that has been shorting Blackstone (BX). He put up a monster return in 2022 (up 70%) and continues to press the bet:

          “A veteran of the private equity world himself, Koppikar thinks more bad news is ahead for the asset class. He’s shorting private equity’s publicly traded asset managers, which he thinks will be among the biggest losers in what he foresees as a coming recession — one that will be different from 2008 because private equity credit funds, not the banks, are now holding the riskiest credits.”

        2. Bear, even my wife who knows nothing about real estate has commented about all the apt. buildings going up in our county. She does wonder where all the water is going to come from with the drought restrictions we had the last couple years although we have had some good rains.
          I look at it from where are they going to get all the renters from?

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