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.

344 thoughts on “REIT Chat”

  1. See the news
    Large development project backed by city of San Leandro money in the bay area is failing to find construction financing.
    Read between the lines. Regional banks that generate a large portion of their profits from short term loans like construction and are having to pay higher CD rates to keep deposits are going to report lower profits this qtr. and the next one. One example might be WAFD

  2. Bear, Who knows if I will regret it but I sold off my SITC PA today for 24.19 after collecting the last dividend.
    I want to see some improvement in the company with their game of musical chairs of buying and selling properties.

  3. There’s news story out suggesting that yet another part of the commercial real estate market is weakening -health science / lab space. Boston is the epicenter. Culprits are high interest rates, sky-high rents (averaging $1000 psf) and no more venture capital money.

    I don’t follow niche health science REITs, like ARE (10/10 Buy rated), but I have read plenty of investment board comments claiming that health-science oriented REITs are “safe” investments or at least safer than plain vanilla office space REITs.

    The news story was balanced so it included the expected cheer leading from civic leaders, real estate brokers, etc. Niche space. Small part of the office market. Risk limited to Boston. Money on the sidelines, expect the spaces to fill up, etc etc. Still the vacancy rates seem alarming. Over 60% of the 7 million sf of construction completed in 2023 is vacant. Almost none of the 8 million sf coming on line in 2024 is leased.

    Just another worry bead to add to the real estate bracelet. Offices (post pandemic), hotels (pandemic), regional malls, strip centers, essential retail (drugstores), big city rent-regulated multifamily, overbuilt Sunbelt multifamily, warehouses (lately), construction lenders, permanent lenders, high LTV mortgage lenders, etc. Wasn’t long ago that names like WP Carey and Vornado were considered safe retirement choices.

    “Any which way you are tempted to roam,
    its a long, long long way to go home”
    — “Way to Go Home,” The Grateful Dead, 1994


    1. Bear, your views on reits are always welcome.
      Sold my REGCO to free up some money. Still holding KIM PM, REXR PB, BFS PD & PE, SITC PA
      Thinking of selling the SITC PA to free up some money.

      1. I sold my entire position in ARE for the reasons mentioned. On the institutional side, every discussion where real estate comes up there’s little to no interest… everyone seems to be waiting for the dust to settle. There’s some mention of private real estate secondaries… but I’ve seen little traction. Interesting to talk about, but little capital earmarked for real estate. We have long time private RE managers coming to market and we will pass. I wouldn’t want to be raising capital today.

        1. Mrinprophet, That is why I have liked several reits that have recently done deals not involving borrowing or very little. Both KIM and REXR come to mind, and there might be others if anyone has some to share.

    2. Miss 2WR Youtube posts to his music , opened me up to genres I had no idea existed.
      Bear, I know reits are an area you have an interest in. What you just wrote doesn’t give me a lot of confidence in this sector, but I know you might have some babies that will survive getting thrown out with the bathwater.
      Anything you might want to list?

  4. Over the weekend I happened to notice a number of investors were interested in CDs due to current interest rates. Not sure how long these rates will last (no one knows), so I decided to go with a super-safe investment for the fixed income portion of my portfolio instead of purchasing a CD.

    Prologis is one of the largest REITs with a market cap of over $100 billion. I like their size, because they are too big to be taken over by a private equity firm. For those of you that follow REITs, PS Business Parks was taken private and the new owners loaded up on debt and completely tanked the price of the outstanding preferred stock.

    PLD has recently issued a 10 year bond with a coupon rate of 5%. It is rated A3/A and is not callable during this time. The current ask price on Vanguard is 98.329 for a YTM of 5.214%. Also, for investors with smaller accounts (like my niece), the minimum purchase is only 2 bonds this morning. This company is a cash machine. The CUSIP is 74340XCJ8. This will be a nice investment in the fixed income portion of my IRA portfolio.

    1. Those Applesway foreclosures last year were so horrendous it seemed likely there would be more from that vintage to come. And the way Ivan tried to portray it as ABR didn’t lose any money was pretty disingenuous.

      1. A financial advisor wrote a blog post about Lessons To Be Learned From Arbor’s 2023 Houston Foreclosures. Arbor apparently didn’t get the proverbial memo.

        He mentioned that some of the Arbor properties were 80% financed. The financing was floating rate debt, which as of May 2023 had gone from ~3.4% to ~8%. While the interest rate jump was arguably an unforeseeable risk, IMHO Arbor’s financing C-class properties at 80% leverage was not. Occupancy was declining and some the properties were in poor condition with code violations. The then owners agreed to fix the violations. One wonders if Arbor will be left with paying the $20 million bill.

        I don’t follow Arbor, but reading the news stories, it seems to me that that Arbors due diligence and management decision-making process for a $230 million investment loan left a lot to be desired. JMO. DYODD.

    2. Good article on SA about Arbor. Summary the short report is not taking into consideration the rent hikes during bridge terms. Not my skill set but on surface the counter argument seemed credible.

  5. Economic reality is catching up with office real estate, with a push from an unexpected place – an obscure overseas bank. It is writing down its US loans big time. The drops are large but surprising only if you are either a real estate developer, an “extend and pretend” lender, a big city Mayor, or a REIT stock tout selling pricey subscriptions. Here’s the news from the Aozora Bank.

    “(Aozora Bank) cut the value of its non-performing office loans by 58%, including a 63% reduction in Chicago, and reductions between 51% and 59% in New York, Washington D.C., Los Angeles and San Francisco.

    “U.S. office loans of $1.89 billion were 6.6% of its total, and it classified 21 of those office loans worth $719 million as non-performing. It boosted its loan-loss reserve ratio on U.S. offices to 18.8% from 9.1%.”

    “Not just NYCB: Japanese bank issues warning on U.S. offices, cutting some Chicago loans by 63%.”

    The Aozora bank numbers are in line with what the local trade press has been publishing about weak property sales and hedge fund walk-aways and with reports on outlier sites like Wolf Street. I agree with those who see trouble because a lot of loans are coming due in 2024-2025 and buildings won’t be able to cover operating costs in the face of large vacancies, higher interest rates, higher taxes, utilities and operating costs. I’m not seeing regional banks except OZK lining up to lend. Most of the regional bank reports I’ve read seem to emphasize “how little office we’ve got and how muchly it is occupied by the owners, not speculators.”

    Or you can be an optimist and load up on the discounted famous-brand office REITS or Bank of The Ozarks, OZK, the big city construction lender which has the uncanny ability to fly above the bad weather like a Boeing jet.

    Just my opinion. DYODD.

  6. I notice the name Phillips Edison has been mentioned on the REIT chat section (strip center real estate anchored by grocery stores). While not the highest yielding investment, they do have one corporate bond that is listed. The coupon rate is only 2.625%, but it is trading at 81.504 today at Vanguard for a YTW of 5.585% when it matures in November 2031. The yield is a little too low for me, but may pick up some for my elderly parents (early 80’s). Should interest rates rise in the next year, the bond may look attractive for elderly investors. The CUSIP is 71845JAA6.

    Slightly more attractive for me is the Mid-America Apartments (MAA) 5% bond that matures in March 2034. Today it is trading at 99.09 at Vanguard for a YTW of 5.114%. The CUSIP for this issue is 59523UAV9. Due to the high credit quality of A3/A- , this is a decent way to lock in a 5% yield for the next 10 years.

  7. American Healthcare REIT has an IPO upcoming, looking to raise ~900 million. Price 12 to 15. Dividend policy unknown to me. I don’t know anything about this one, other than what I read in the papers. Other than it has around 298 properties. News reports say that it is backed by an investment group that a quick Google suggests is in home health care. This may or may not be a good thing. I haven’t researched the report.

    I expect to see the usual flurry of stock tout articles on The Other Website soon. Beat the rush. Or Caveat emptor. There has been some negative press on REITs with troubled hospital properties, senior living properties with troubled operators and, sadly, elder abuse.

    American Healthcare REIT Announces Launch of Public Offering


  8. Anyone else taking note of CTO-A? 7.8% current yield is very attractive for for a strip center retail pref.

    Grocery anchored retail has been one of the most desired and stable cash flow in recent years, and interest is only picking up as supply is not increasing.

    Leverage seems to be higher compared to peers but its still manageable. The company has also re-purchased both common and pref. They state they have an automatic repurchase program if the stock hits a certain price.

    Lastly, it can be illiquid with wide bid ask spreads. I actually prefer these types of names as it allows for opportunistic purchases and sales. Like all names, I buy to hold, but prepared to sell if the prices comes my way.

    1. Maine, I think it’s one I own. But I need to check later when I get home. Would like to respond with date and purchase price if I do.
      I did a little research on various shopping center REIT’s and strip malls with anchor grocery stores. Phillips Edison also comes to mind. But I don’t own that one.

      1. Thanks Charles. Philips is a good credit.

        Other public retail REITS with prefs include: KIM, FRT, BFS, REG, and SITC. They all trade at 7% yield or less. Heck, FRT-C trades at 5.5%!

        Anyways, there is a large seller today in CTO-A, so it’s pretty easy to buy at current levels. We are already at 2.2x normal volume.

        1. Maine, I checked and I don’t own any CTO PRA I had thought about it and decided against it. First off, as of the last qtr. it had a payout ratio of over 100% on the common and preferred dividends which meant they had to reach into cash reserves. They have sold several properties to build up cash including a loss on the sale of one property. We Work which had filed Chapter 9 was 3% of their tenant base and AMC theaters is doing ok but not great is almost another 3% Then there is occupancy, which is low compared to other market reits If the preferred dropped into the 18.50 to the 19.50 range I might be interested again.

        2. Long CTO-PA w basis 18.37, not selling, would add on swoon. Consolidated Tomoka now CTO REIT has been around a long time w seasoned r/e folks in charge and pfd divs well covered. CEO bot shares 2x last year too and owns 542k shares. The common of most REITs just does not interest me and I would need a swoon to buy into them and evaluate. Smallish, so of course many more quality names like REG, KIM in the area. But ok w the pfds.

    2. Maine:

      Just be careful on CTO+A. It has one of the worst change of control ratios (.9406) on that preferred in all of REIT preferred land.

      If CTO common were taken private it would have to be at a price of $26.57 for you to be guaranteed to get $25/share on the preferred. That is a tough sell with CTO common currently trading for $16.85.

      CTO is less than $1B total enterprise value, so if a private takeout happens at least you can’t say you weren’t warned on that preferred. For this very reason it is one I now stay away from as I want a little more safety if I am going to reach for yield on a preferred from a small cap REIT.

      1. Kid, thanks for the info.
        I view the optional “change in control” provision as a positive as any buyout would likely be accompanied by a common share spike.
        I am more concerned with a buyout (or spin) that doesn’t trigger the change in control and the pref gets orphaned. What am I missing?

        BTW, have you followed the latest with SITC? They are basically spinning off the best assets and slowly selling the remaining traditional retail. Not quite sure how that impacts SITC-A. RAIT was a disaster years ago, IRT was spun and the Prefs went bad. My sense is that won’t happen with SITC but still waiting on confirmation on plans for the pref.

  9. OPI Office Properties Income Trust was down over 35% yesterday on news of a 96% cut in its dividend. The price today is stable. The stock touts are coming out. If you liked it at a 100 cents on the dollar you’ll love it at 65 cents. Unless you bought it at 100 cents as a yield play.

    OPI is in the RMR external management stable along with Diversified Healthcare Trust DHC. A merger between the two REITs fell through last year. The thought was DHC was the weaker partner. B Riley reportedly involved in helping out DHC with its finances. Quite a cast of characters here. Not a REIT that I follow.

    Offices, like everything else these days, have what the media now calls “a conflicting narrative.” One recent pessimistic article noted the large amount of debt coming due in 2024 and 2025, large lease rollovers and weak demand. Sacred cows were mentioned: Boston Properties, Kilroy Realty, City Office REIT, and SL Green.

    On the other hand, a SF office owner on Bloomberg suggested Work from Home is over. He said AI is creating a new boom in SF office demand: his buildings are doing just fine and buildings on NYC’s Fifth Avenue were filed up with techies. This sounds like wishful thinking or a bad response from ChatGPT.


    1. RMR will probably only do whats necessary to try and keep the debt above water. They don’t want bankruptcies on their public record. Equity, I would be wary of and they’ll use it like toilet paper.

  10. Anyone else accumulating a stake in LXP-C?

    I find it compelling compared to other high quality options. It is also one of those names which can get cheap when a large seller wants out.

    7% current yield with room to rally and ex div coming up in a few weeks. For reference, their 2028 bonds trade at 5.65%.

    1. Maine-
      LXP stock price right where it was in 1993. Current yield on the stock dividend 5.5%. I’d give the company a P-rating for persistence and call it a bond proxy long-term.

      LXP-C has spent most of its history around $50, except for the GFC. Why do you believe it’s high quality?

    2. Hi,

      I am at 1% allocation now at about 45.45. I will continue to add below 46 to an allocation of 2%. I suspect we will get a chance before mid year interest ratecuts….

  11. Whats not to like about a REIT in a safe industry like health care which we all need? With a safe business model like net leases? Spanning three continents? Medical Properties Trust MPW is trading down today on rent collection problems with a large tenant. It is off about 30%.

    I don’t follow this one, but I did scroll back to look at the recommendations on The Other Website. The current sentiment is mostly Hold, with a smattering of Sells and Buys, after MPW did cut its divvy in October 2023. The Rear View Mirror Theory of Investment Analysis. (In fairness Wall St does the same. One bank cut it rec today after the news citing “uncertainty and ongoing risks.”)

    I scrolled back to earlier in 2023 and found Buy recommendations from the usual suspects like The Buy Buy Big REIT Guy, The Controversial Guy Whose Group Sounds like A Cable Network but some respected names too. The same folks Who Just Met With The CEO, Have Analysts On Staff and who missed NEE, O, WCP . (and American Realty Capital, still a sore point.)

    If the past is prologue, they will be sheepish for a while then begin recycling their old reviews through AI with fresh Buy recs. Traders: Beat the rush and buy the dip. Buy-holders: hope for an Inverse TOWS ETF to add to your Inverse Cramer position. Just My Opinion. DYODD. Caveat Emptor.

    1. Forget if it was bearcave or another short seller has been attacking MPW over governance concerns. Have stayed clear due to uncertainty of the claims.

    2. Bear – I don’t post here very often, but enjoyed your comment today. Absolutely, the REIT health care sector should be safe, especially with the aging population here in the US. I think 10,000 people per day join Medicare. Sounds safe to me. Until you get a bad management team. From what I have seen in the past, the companies with the best management teams always win. This is true even with small banks or restaurants across the street from each other. In a small town about 30 miles from me there were two banks that were in business for over 100 years and they were right across the street from each other. Due to good/bad management decisions, one bank really prospered and the other one almost went under due to bad loans and was being overseen by the federal government.

      I’ve also seen some of the same things in the REIT sector with grocery-store anchored strip shopping centers. This one sounds easy too: have a grocery store (with heavy traffic) become your anchor and then fill up the other spaces with the local hair salon, liquor store, pharmacy, Subway, nail salon, Wendy’s, Sherwin Williams, Dollar Tree, Dominos, etc. Kimco (because of their superior management team) makes it look easy. Then a former company call Cedar Realty Trust compiles a terrible track record and finally sells out to a company called Wheeler Real Estate Investment Trust. WHLR common stock is trading at .29 cents per share today.

      1. Better story is RPT Realty selling out to Kimco. That was a nice boost for RPT preferred like RPT-D. Different company, different outcome.

      2. I would agree that Good Management makes difference even in a what should be a good business. I was in Wheeler early on. Grocery anchored + the South is growing fast looked like a good story. Not to mention a preferred with a fat coupon. I got out of Wheeler long ago because it was a lackluster performer. Have not had any regrets.

    3. From Yahoo Finance: Shares of Medical Properties Trust (NYSE: MPW) were crashing 29.7% lower as of 10:20 a.m. ET on Friday. The steep decline came after the company provided an update following the market close on Thursday about its tenant, Steward Health Care System.

      Steward recently told Medical Properties Trust that “its liquidity has been negatively impacted by significant changes to vendors’ payment terms.” Because of this, Steward’s total unpaid rent rose to around $50 million as of the end of 2023. The hospital operator is also continuing to make only partial monthly rent payments.

      Medical Properties Trust said that it has engaged a financial advisor and a law firm to advise it on options to collect the money that Steward owes. The real estate investment trust (REIT) has agreed to fund a $60 million bridge loan to Steward and defer unpaid rent. It also plans to write off around $225 million in rent in the fourth quarter of 2023.

      Just how bad is Medical Properties Trust’s news?
      Make no mistake about it, Steward’s ongoing financial difficulties are bad for Medical Properties Trust. But just how bad? Steward is the REIT’s top tenant, accounting for 19.98% of its total assets and 23% of its total revenue in the third quarter of 2023. Medical Properties Trust also has made a sizable investment in the hospital operator.

      It’s possible that Steward’s outlook could improve, though. The hospital chain hopes to either sell or find new tenants for some of its facilities as well as divest some noncore operations. It’s also taking steps to improve its collections process.

    4. Bear, Just coming back to your post. I had another reader over on the dark side asking me about medical reits. He was in the business, being a physical therapist down in San Diego and was asking about MPW & DOC Like the Kaptian I agree there is always going to be a market for medical services. But sometimes if you’re standing too close to the forest you don’t see the trees.
      I’m in the business of supplying the medical field. My advice is very few of these small independent reits are going to succeed. I sell a lot of 6pcs there 10pcs here for remodels and maybe new builds. But anyone can take an old commercial office space and turn it into a chiropractor’s office.
      Small rural hospitals that are 50 or 70 yrs old are shutting down as they can’t compete with the 800# gorilla’s that are building 10 to 50 acre medical campuses. People are finding out their local hospital is being shut down as they can’t compete and the patients are having to drive farther for treatment.
      The trend isn’t going to change.

  12. Here is a archived Bloomberg article from July on Korean investments in commercial RE
    This mentions Oaktree investors
    This is a recent article that you may have to wait to look for on as it’s too recent
    The story Private posted a while back about developers in China had a comment in it about would their defaults lead to similar events worldwide.
    Note these articles are also talking about pension funds and other asset managers holding these commercial RE assets.
    Makes you wonder about American and Canadian funds going into the first half of 2024

  13. Another comment on the radio today about San Francisco commercial occupancy rate. Going to get worse before it gets better. It’s down another 2% as sub leases are starting to expire. Up to 35% vacancy rate and expected to grow into 1st and 2nd quarter of 2024 as more sub leases expire.

    1. Charles–saw something today that said the ‘return to office’ movement is over and company’s are going to live with what they have now in terms of folks coming back in.

      1. Yes, I think it’s a little of Doctor Dolittle’s pushmi-pullyu
        Quite honestly I felt the layoffs in the tech world were overdue. In a tight employment market it’s hard to keep and get the best talent so I think after the chaff is winnowed the companies are going to a hybrid model to keep the best talent.
        But even the best talent who moved too far out into the boonies are going to lose their jobs if they don’t participate in the group and come into the office occasionally.
        Now we just have to see where the balance in real estate ends up.
        I am not the age or mindset of younger people, But I don’t see the appeal any longer of major downtown areas. I see the demand maybe shifting to large suburban campuses in nearby areas with more open spaces and less crime.

        1. The appeal of downtown areas (or used to be) is that you can go out for entertainment and not be at risk for getting a DWI. (Ride hail services have obviously mitigated this when it comes to some areas, but that is the draw for young people in cities, having everything close by)
          And don’t discount the backlash among the young about car ownership. It is real and significant.
          And just check on twitter for the threads of people who applied to 100% remote jobs and got all the way through the screening process to find out they were NOT 100% remote, but the 100% remote hook was used to increase the candidate pool.
          Even with the layoffs, employees have a LOT of leverage when you have sub 4% unemployment, as businesses have no choice. (and the demographics are so far out of whack, something is probably going to break, as the number of people entering the workforce daily is dwarfed by the number leaving, a trend that is not slowing for the next few years because the generation entering is tiny in the US)
          And the best talent can write their own check. My firm has finally settled on a policy. New workers and their supervisors need to work in the office, but after 6 months, they can go 100% remote. We have about 25% of our former space, and it is completely deserted on Mondays and Fridays.
          I now have co-workers who now live in rural Sicily as well as Hawaii.

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