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.
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12/21/2024
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Recently added to my position in ARE.
Yield of 5%, with great fundamentals.
A non cheerleader view of the stock is on this link.
https://seekingalpha.com/article/4669610-alexandria-real-estate-ordinary-after-all-reit-stock
DYODD
— Advance Auto Parts AAP is closing 700 stores, about 500 corporate and 200 franchised, and four distribution centers. I didn’t see parts stores as major tenants on my “usual suspects” REITs list . Exceptions were WP Carey WPC and Agree ADC. For WPC, AAP was a Top 25 tenant (#12) with 299 stores and 1.5% of rent. Agree had a number of AAP stores but only a few in the US West. (WPC is controversial (think: “kindered”) and is now being pitched by the pundits as a high yield value play. Agree is a trending favorite. )
— Store closings may not impact REIT rent flow in the short run. In the long run, there will be more vacancies to be filled. Auto parts stores join dollar stores, drug stores and conveniences stores as REIT tenants exhibiting weakness. JMO. DYODD.
The issue I see for drug stores and its a big issue, is not only are Walgreens, Rite aid and CVS competing against each other they are competing with the grocery and retail stores like Walmart and Target. They are in small strip malls in just about every town in America.
CVS and Walgreens control the major corners within 3 miles of my house, a total of 5 stores. One CVS has closed, and that’s a dedicated structure so I assume they are still paying rent. There’s another inside the Target across the street.
If they can’t make a profit in my hood, they are in real trouble as the area has otherwise “blown up” with $5 mill+ homes and Californians are rapidly moving here (Henderson, NV).
They need a CEO with a new business model.
As to the dollar stores, every one I’ve been in is terribly cluttered and devoid of anything most people would buy. I don’t understand how they make money.
Goodwill is better organized.
If this were Mexico, I’d assume they are narco money-laudering operations.
I’ve asked the CEO of a private reit I’m invested in if they keep up with the financials of the companies that are tenants and the answer was “not unless they stop paying rent, because they don’t have financial covenants in the lease”
We’ve got a few of each type.
There are far too many auto parts stores in our locale; Some within a few miles of each other. Makes no sense. Additionally, we have car dealers here that MANDATE vehicles bought at their locations bring the vehicle TO their location for any repairs or the warrantee is canceled.
Hi Howard,
I had a local dealer junior guy tell me I had to bring my wife’s new plug-in hybrid to the dealer for service. I asked to talk to the service manager, who disavowed that and chewed the guy out in front of me. Not sure that it wasn’t all just theater for my benefit, but the service manager was clear that such requirements are illegal in California.
I am not aware of any state where requiring a car to be brought to the dealer for repairs (or the warranty is void) is legal. That all got worked out in most states almost a hundred years ago (from what I looked at some years ago).
The “edges” of this are being litigated in some related industries (farm equipment jumps to mind), but IIRC, this is pretty well settled in the consumer space.
There are a few cars where “dealer repair” is practically required (like Tesla in its first few years, ditto for Rivian) because there weren’t any other places that could fix them (yet) – but even Tesla has had to back off from this.
If you find a car dealer doing that, you should call your state consumer protection department (or AG’s office, if you don’t have a state/county consumer dept). They usually like these kinds of “softball” wins.
For anyone interested, I think there could be a great discussion on this board for REIT corporate bonds that pay over 5% for the next 10 years. This maybe should be posted on the bond page, but perhaps the REIT tab is the way to go.
MAA, SUI, and EXR may be the best way to play some of these solid companies. Personally, I avoid any type of office REITs as I just find them too risky right now. These are not large holdings of mine (yet), but will likely be buying more in the next couple of months depending on market conditions.
Franchise Group FRG seems ready to file bankruptcy. I don’t know the split between franchised and owned units, but the likely result will be the closure of unprofitable stores through the bankruptcy process. I don’t follow Franchise Group any more but vitamin shops, furniture stores and pet stores are under its umbrella.
Tenant names in the most popular business categories for retail net-lease-type REITs keep showing up in news stories about bankruptcies, slowing development programs and mass store closings: convenience stores (7-Eleven), dollar stores (Dollar Tree, Dollar General a gung-ho expander quietly closing stores, Big Lots), restaurants (TGI Fridays, Red Lobster, Starbucks), drug stores (Walgreens, Rite Aid, CVS).
I now look at the brand names in retail REIT portfolios when I shop. While closings may not hit the income of diversified REITS, my thinking is that retail REITs will have a difficult time maintaining dividend growth in the face of headwinds from flagging tenants in top tenant categories. There may be more alt investments like casinos coming to retail REIT portfolios and more acquisitions .
As to FRG – not to worry. The Other Website is already touting its parent B Riley as a buy on the theory that the bad news is out and its all up from here. (Icahn also had a little issue with a portfolio position, but they’re still declaring a buck, right? ). Good luck to the traders. JMO. DYODD.
Thanks Bear, you’re always on top of this.
Latest news report is FRG’s entire American Freight operation will be closed down, 365 stores in 40 states and Puerto Rico. The AF chain includes about 135 former Sears Outlets. Management is spinning this as an opportunity “to de-lever our balance sheet.”
Store closing sales begin November 5. (No news yet but B Riley used to have a “Going Out Of Business Sale” service, making for an interesting opportunity to step ahead of other creditors. ) Store sizes average 20 to 30,000 sf. I have not seen any landlord or REIT news yet.
Sears Outlets, R.I.P. : You only lived twice.. Or so it seemed. “We’ve had some interesting times together. I’ll be sorry to go” – James Bond, 1967 JMO. DYODD.
Bear, back to B. Riley. Where there is smoke there is fire. I hope people trading their bonds don’t get burnt.
Bear – NNN took a pretty big hit over the past two weeks as they have a number of properties rented to FRG. NNN is a very high quality REIT, but even the best run operators get hit with tenant bankruptcies at times.
Currently I don’t own any NNN common stock, but do own some of their bonds, as they are rated BBB+/Baa1.
kaptain lou — whatever happened to your SEC complaint against Grid? Curious why you filed it (if you did) and what type of documentation you had. Also, i thought you had a problem with this site because people often talk about what they are buying or selling (with disclaimers). Is that correct or wrong? Just curiousl
kaptain pou – I was wondering as well. Please reply to Franklin’s comment. Many of us are curious.
I guess we’ve got kaptain lou posting here but not Gridbird…
As President-elect Trump once said, “This has been the worst trade deal in the history of trade deals”
Dick welcome back. Let’s just keep things civil. I like hearing from you on investments. The political stuff not.
Hi Franklin, thanks so much for checking in with me!
At least for right now, I am laser-focused on getting some great returns on REIT stocks by the end of the year. Have a few deals brewing right now and hopefully going to use some of proceeds for my local food/clothing pantry, so I just have to focus on the future and not the past. Please feel free to reach out to me if you have any questions on REIT stocks. NNN bonds are just a small holding of mine for me and some family members. Have a great day tomorrow!
Kaptain Lou, i think it’s great that you are donating to food and clothing. But my impression, which may be wrong, was that you had a problem with the site AND with Grid and since you are posting here I think an explanation is deserved. Great to focus on the future, but the past is what got you here. You can clear this up easily by just answering did you file a complaint against Grid? if so why and with what documentation? do u object to the site (if you do, it’s strange to see you posting here), and again why? I know a lot of people here wold like to hear what exactly happened because it affects the site. So I think it’s highly appropriate that you answer.
Franklin, Grid was an expert at obscure Illiquid preferred. We all know from recent experiences posted here of people having problems trading these at Fidelity and my experience with T Rowe.
I felt Lou was seeing manipulation when it may have been nothing more than the herd rushing into stocks that don’t see large volume trades normally because Grid was posting and sharing here on an open forum.
Charles,
Regarding “was an expert…” I think the only conclusion I can draw is you have killed Gridbird. Slingshot, most likely.
I’m calling the FBI, police, and DOJ right now and notifying my first cousin who was a federal prosecutor 25 years ago. I’m sure you’ll be arrested soon.
Too bad you couldn’t keep your mouth shut…well too bad for you. SEC is the least of your worries now.
LT, can I subscribe to your Reddit site for a daily dose of humor?
Investing is a serious business but I always need a break.
I hear you, Charles. And Grid excelled in the illiquid area where low trade volume is the norm. But simply posting issues he liked is hardly manipulating the market, IMO. He added a lot to the site and if Kaptain Lou is the one who chased him off I think many of us would like to read his explanation. Maybe there’s more to the story than most of us know. Maybe not. Either way, with KL back on the site I think it’s fair to ask him. Best.
Kaptain Lou get the Hell out of here you bird killer.
Martin G – I was only posting on this board to add to any type of discussion on REITs and their corporate bonds, as I have a fair amount of experience in the area and thought it may help other investors.
Wishing you the best in the future.
As far as I know Gridbird stopped posting here and other forums around the say date. Health issues?
Dan, someone said they had talked to him. I respect his privacy and haven’t tried to track him down.
Has anyone heard of this:
Private reit I am in has set up a Delaware Statutory Trust that bought one shopping center and put it in the trust .
The purpose is to allow people with 1031 proceeds to exchange them into the trust containing the shopping center . After one year the shopping center is transferred into the REIT via a tax free exchange and the individual receives
operating partnership units in the REIT on a tax -free basis . The reit is paying 5.5%.
It, I could be wrong but it sounds similar to what I think Kimco Realty did. I remember this and looked for it.
https://seekingalpha.com/news/3917604-kimco-realty-announces-reorganization-into-upreit-structure
I believe this is a way for a REIT to buy other properties and for the owners to sell the properties in exchange for shares of the REIT without having to be taxed on the sale.
I have been holding KIM-PM & KIM-PL for several years now. Others here I believe got in on KIM-PN back when it was $51.00 to $52.00 a share.
BTY, if you look in FINRA you will see Kimco’s bonds are listed Baa1 and most are selling over par. They have also been able to issue debt out to 25yrs so a well run REIT
Thanks, Charles, but the reit is already a UPREIT for the purpose you describe.
This would allow anyone with any proceeds from any type of real estate to 1031 it into operating units of the reit on a tax free basis.
My understanding is , say you retire from doing residential rentals, but don’t want to pay taxes on the sales of the homes,you could 1031 it into the reit.
It, sounds like you already knew the answer. I suspect you might be one of the holders of a private reit and are thinking of doing this. My friend’s father got in on a private equity Reit and he was unhappy as he told it the management company got paid and after the maintenance costs there was never anything left to pay out to the investors.
The dst is something new that the reit I’m in came up with as a way to issue more operating partnership units ( same effect as shares). It’s recent vintage for this reit but I’d never heard of using 1031 proceeds from any type of real estate to wind up with units of a dividend paying shopping center reit 12 months later.
I was just wondering if others had seen similar structure.
This is a post to add to what Tex posted very early today on commercial real estate. I’m working today and doing call outs to customers.
Salesman in Salt lake told me he is still sitting on inventory of my product he bought a year ago. Said sales for commercial roofing jobs have really slowed down. Same with residential building of new apartments. Said he is getting flyers in the mail offering 1 months free rent to sign a lease. He rents and his landlord offered a $200.00 drop in rent if he renewed his lease. He didn’t even have to ask.
There was an article in the real estate trade press about things getting back to normal in office leasing for “good” buildings anyway. Volume is up. A small mention in passing that large tenant concessions were being given, more free rent during the lease term and big tenant allowances. Got to love gullible lenders financing a 5 year lease on 3.7 years of income.
Lost the link, but stumbled across an article that SL Green, and friends ( SLG up 76% YTD and a favorite of The Other Website) had just defaulted on a 940 million NYC office mortgage. Even Jingle mail can hurt. Green reportedly put 525 million into the building. There was some speculation that a lender who thought they had a AAA credit might get burned. I would write more – like saying that 38B of CRE is on the edge of default – but I would again be accused of being a doomer and gloomer.
FWIW, one CRE website is selling Jerome Powell sweatshirts for Christmas emblazoned with “All I Want For Christmas is Lower Interest Rates ” — IMHO this pretty much sums up the CRE industry and its regional bank lenders right now, JMO. DYODD.
Whitestone REIT WSR is a smallish REIT that specializes in smaller retail and service tenants in the Sunbelt. It pays about 3.6% dividend. There was a lot not to like about WSR, ranging from conflicted management to too-small Mom-and-Pop tenants to a pandemic dividend cut to litigation. The big name REIT pundits and commenters on The Other Website were invariably negative on WSR, which offered buy ops for the deep value investor.
WSR changed management and resolved the resulting litigation. The Sunbelt is back in favor. The Mom and Pops are looking better than vacant store fronts left by failed famous-name retailers in the big malls. Lately it’s been a veritable Love Fest for WSR on TOWS. Confirming the value proposition: every now and then WSR gets an offer. JMO. DYODD.
FrontView REIT FVR just did an IPO which was priced at $19/share. Rumor is FVR expects to pay a 4.3% divvy but don’t quote me on that. They have an unusual niche: they specialize in outparcels with good visibility and street frontage in shopping centers (Front view – get it?)
FVR has about 278 tenants, mostly recognizable names. The tenants are spread over 31 states. The top 20 tenants pay about 40% of the rent with none particularly above or below the 2% average. The biggest business concentration is restaurants at 36%. That sounds scary, except, you know, that’s what outparcels are for.
https://www.frontviewreit.com/
JMO. DYODD.
Just trying to think about this a bit by reading some articles. 278 properties. A specific type. Wanting to raise about 277 million. Giving it a total valuation of 561 million.
So 561-277=284 million would be the current valuation while private? Now a lot of those properties I can fully imagine they don’t own the land right? Just the building? Not sure yet. These are often just called pad sites. I just see properties of this type go up for sale from time to time in my state and they don’t seem to come with the land in some cases. But with that said maybe they do own the pad site. This stuff can be confusing for me as I am not very familiar with it.
FFO for the first half of 2025 was 7.6 million.
https://www.sec.gov/Archives/edgar/data/1988494/000114036124040627/ny20009871x12_s11.htm
I guess I find this one a bit more complicated. I am not sure what they truly own when it comes to land.
There is more to this than meets the eye. It appears they acquired all of these properties from a company that FrontView CEO used to be associated with for 25 years, North American Development Group. Best I can tell it was a private, non-traded REIT. Not clear if the whole portfolio was shopped to the other existing publicly traded NNN reits, like O. If it was NOT shopped, that is bad because maybe it was sold for below market value, thereby shortchanging the seller. If it was shopped, that is also bad that O and others did NOT find it attractive enough to buy. First impressions are negative despite that fact that it is Texas based. . .
Link to part of the backstory:
https://www.costar.com/article/157011782/dallas-reit-with-hundreds-of-retail-properties-across-31-states-files-for-ipo
Tex,
I just get the feeling if I cannot tell who the sucker is in the room it has to be me. They are not going to use external mgmt and all of these guys are going to become full time employees from NADG. One can only imagine the salaries they will pay themselves… I can imagine there is a place for family too based on the NADG website with last names being seen 3 times in one situation and 2 times for another. I have no idea how much skin they have in the game.
Not really enough information to make a good decision. First blush is also negative.
Fills in some blanks thanks. Maybe they were trying to avoid a no-escape situation like those Blackstone private REITs with monthly withdrawal caps by creating liquidity with an IPO and a NYSE listing.
The IPO was ~$3.00 dilutive to new IPO buyers and slightly accretive to the existing sellers. (Ownership was said to be 73% NADG and 27% “convertible non-controlling preferred interests.” Was not able to determine how much NADG controls after the IPO.) More background on The Other Website
https://seekingalpha.com/article/4723764-frontview-reit-finalizes-ipo-plans-on-slowing-growth-rate
Starting to smell a little like Nick Schorsch’s American Realty Capital situation back in the 2010’s. IIRC, they moved assets from non-traded to traded and did some funny valuations in the process. I do not recall the details but somehow Nick got removed and they brought in a new CEO to run the place. IIRC, somebody went to jail over it. New CEO was a good guy and cleaned the mess up.
Then they changed the name to VEREIT before selling it to Realty Income (0) later on. . .
I also do NOT like the three Preston’s as the top managers of the predecessor company. Most of the nepotism REITS like CBL, RMR,WRI did not go well, SPG being an exception.
Not sure if this link will work, but if anyone got “Wheelered” over the past few years, they are making a tender offer for some of the old Cedar Realty shares now. I owned them for many years, but was fortunate to get out early from this terrible merger.
https://ir.cedarrealtytrust.com/news-events/press-releases/detail/215/cedar-realty-trust-announces-planned-tender-offer
Lou, I think J posted earlier on Reader Alerts
Hi Pig Pile, there was no reply button in Sandbox re your Postal Realty inquiry PSTL, so thought I should just post here in REIT chat. Also wanted to say thank you for all your ideas and posts always good stuff!
I was long PSTL and moved a 7% gain plus div into a pfd not sure what one more or just me moving into more pfds. Spodek CEO and Donahoe board Chair know the best properties to get into; Spodek been doing postal r/e for years and Donahoe of course was Postmaster General. Spodek was buying shares all thru the $13’s and is up to about 920k shares, Donahoe’s stable modest holding.
Is the 6.65% yield enough compared to a solid pfd now, of course some hope/room for cap appreciation and maybe some modest div increases but they cut it close on FFO/AFFO payouts so not sure how much they’d raise. They are putting 3.5% inflation riders into the new leases and again given their ‘insider’ knowledge of the biz and the locations probably pretty solid if ‘boring’ money. Insider trading; mostly positive again on CEO buying for sure. http://www.openinsider.com/screener?s=PSTL&o=&pl=&ph=&ll=&lh=&fd=1461&fdr=&td=0&tdr=&fdlyl=&fdlyh=&daysago=&xp=1&xs=1&vl=&vh=&ocl=&och=&sic1=-1&sicl=100&sich=9999&grp=0&nfl=&nfh=&nil=&nih=&nol=&noh=&v2l=&v2h=&oc2l=&oc2h=&sortcol=0&cnt=100&page=1
Hope this helps a little, take care thanx again PP!!
Bea, thanks for your rundown. Fitting the dividend in was my worry too, that and settling in on this after that nice run up recently, sounds like maybe you got in early enough to take the nice quick cash in and head out. I think I’ll be more interested if it were to head back down into lower 13’s.
The Medical Properties Trust saga continues. Bankrupt MPW Tenant Steward Health is asking the State Of PA for an immediate 1.5 million cash infusion or it will close a hospital. A bargain: Steward got 30 million from Massachusetts. Bloomberg reports that Steward just sued MPW which if I remember correctly gave Steward a 75 million cash infusion.
MPW has Strong Sell, Strong Buy and Hold ratings at The Other Website. MPW is up 20% in the last 6 months. MPW is down 33% in the last year. A split opinion there. One for the traders. Or those who like 13% dividends and believe that the safest dividend is the one that has been cut.
No interest in MPW. Does serves as a reminder to look at portfolio concentrations in the REIT quarterlies. JMO. DYODD
Bankrupt Steward Demands State Funds to Keep Hospital Open, Pennsylvania AG Says
https://finance.yahoo.com/news/bankrupt-steward-demands-state-funds-183502976.html
I travelled 60 miles for surgery because Seward was better than our crappy local hospital. Sad to see them go. Apparently it’s not cost effective to provide adequate service.
Looks like none of the pundits on the stock boards read all the way through the Reuters article or understood the possible implications for MPW. (MPT in the Reuters article is Medical Properties Trust, ticker MPW.)
“Steward’s other creditors intend to file a separate complaint challenging the transactions that led to MPT’s ownership of the hospital real estate, according to Steward. The creditors’ action would “raise a bona fide dispute as to whether MPT actually owns the underlying real property,” Steward said in Monday’s complaint.”
“Bankrupt Steward Health sues landlord over stymied hospital sales”
https://www.reuters.com/legal/litigation/bankrupt-steward-health-sues-landlord-over-stymied-hospital-sales-2024-08-19/
Nor did the subscription pundits read down in the Miami Herald article
“The health company also is asking the court to reject the master lease it has with the landlord for its hospitals in Florida and several other states, similar to how the master lease for its Massachusetts hospitals was rejected in July.”
These Florida hospitals are for sale. Will a dispute over land affect what’s next?
Read more at: https://www.miamiherald.com/news/health-care/article291177580.html#storylink=cpy
JMO. DYODD.
While this comment could be posted in the Bond Discussion area, I felt it applied to REITs as well. It does appear that later this year the Federal Reserve may decide to lower interest rates. CD rates are decent now, but hard to know where they will be in a year or two. In my retirement accounts, I’ve been trying to lock in rates of 5% + for the next 10 years and have been a heavy buyer of REIT corporate bonds this month.
Extra Space Storage (EXR) has just issued $400M of 5.35% bonds. These bonds are rated Baa2/BBB+ and are not callable until 1/15/2035. The CUSIP is 30225VAT4. Today they are trading at Vanguard at an ask price of 100.963 for a YTM of 5.229. The company has a market cap of $36B and feel pretty confident about their credit rating. They have about 3,800 locations spread across 42 states.
At least for me, these bonds are a perfect fit in the Fixed Income portion of my retirement portfolio.
Interesting readings in “The Real Deal” on Arbor. Facing shareholder suits, claims of fraud in a mobile home portfolio and risk of losing bank repo lines. The article continues “the investigation of Arbor opened by the Department of Justice and the Federal Bureau of Investigation in New York signals pressure is mounting for the multifamily lender.
Arbor reported $1 billion in multifamily delinquencies in a second-quarter earnings report Friday, a sign the firm is struggling to handle the volume of troubled loans on its balance sheets. ” https://therealdeal.com/national/2024/08/06/arbor-realty-trust-sued-by-investor-alleging-securities-fraud/
The Real Deal often has good articles. In addition to the Arbor piece, they have an article on Ready Capital, RC which just sold off some loans for 70 cents on the dollar. A more-or-less real time snapshot of how bad the CRE market still is.
The predictable reasons: the loans are secured by over-priced properties burdened with short tern floating rate debt that is rolling over at higher rates in a weak economy. Surprising to me: can’t-lose multi-family is weaker than can’t rent office. RC management seems optimistic. RC pays a fat dividend and is doing stock buy-backs. RC has notes and preferreds. I don’t own either Arbor or Ready JMO. DYODD.
Wasn’t going to do a REIT post, but Nasdaq had an in-your-face front pager tonight – “Hey You! There Is a Big New REIT IPO.” (Nasdaq screamed “largest” 3 times in just 35 words.)
It is called Lineage, ticker symbol LINE. The IPO raised $4.4B . LINE is in the cold storage warehouse business. They have ~500 facilities and use advanced technologies in what is a necessary but mundane business.
It seems like Americold COLD might be a competitor but don’t quote me on that. FWIW – Global Net Lease just unloaded 9 COLD warehouses as part of GNL’s debt reduction program, bringing in 170M. (Would rather GNL had dumped offices, but offices are the unwanted kittens of CRE. Everybody loves them but nobody wants to own one. )
LINE is up from 78 to 86 since the IPO. The REIT pumpers haven’t started touting LINE yet, so there is time to avoid the rush. JMO. DYODD.
Bear, Another one of those, “oh dear Jack, trade me some of your hard earned cash for some magic beans” I’m in a show me mood and no hurry to jump into a REIT IPO. Wake up old Rip Van Winkle in about a year after we see a year’s worth of operations.
I apologize Bear if I seem cynical, You have always had some good information and ideas regarding REITS always like hearing from you. Your suggestion on CALM was V. good even with the avian flu problem.
BFS earnings were great..as expected, happily one of my biggest positions in the D and E w$20 basis; I see earnings reported covering pfd divs 5x. Earnings after expenses etc. real money not FFO noise. REG was good to, have the P’s the old Urstadt, great REIT pfd anchors in my mix. Some buzz about Blackstone buying a shopping center REIT brought some attention to this ‘stable’ area of REITdom.
DYODD …not ‘pumping’ .. if you do anything after reading a ticker or cusip, it is so on you. Period. Illiquid, thinly traded, gold stock..whatever the case may be. And I know this would hold up in court or the SEC.. if you are being ‘advised’ by a brokerage or fiduciary – even w disclosure signed saying you knew what you were doing- you MAY have a case. MAY. Reading tickers, articles, et al on financial social media has NOTHING to do with the reality of legal financial actions. Period. So just stop. Stop. Bea
Bea, I have been in and out with this family for a decade at least. Bought on some drops and intend to keep this time unless they get bought out. Point in life I need the income now. Still will accumulate as I don’t think they are at my 3%max rule.
REIT and real estate –
– Blackstone Mortgage Trust – BXMT – Now paying a sustainable dividend of around 10%. Management sees the stock as undervalued and has announced a 150 million buyback program. Good timing by Mgmt. BXMT now even more undervalued after the 25% dividend cut announced on the same day. Stock off ~12% on the cut. The safest dividend is the one that just got cut.
Credit to Carson Block who predicted in December that BXMT would cut in the second half of the year. (Bloomberg video.) Bloomberg mentions Arbor, Apollo, KKR and TPG as competitors.
Until recently, Blackstone had been limiting withdrawals out of its private real estate funds, This change is either a sign of optimism about the recovery or an attempt to avoid panic. (Remember the movie scene where Jimmy Stewart hands cash to a depositor to stop a run on the bank.)
– Generation Income, GIPR, a net lease micro REIT, quietly omitted its dividend in a long and folksy shareholders letter. Its costly acquisitions didn’t work out.
– Deutsche Bank DB down ~9.5% on fears of commercial real estate losses (although you won’t hear much mention of real estate in the “things are fine” conf call. ) Pumpers are out on this one for those who like to buy the dip. (DB is the EU’s Wells Fargo: always a magnet for bad news. If there is a scandal, they will somehow find it. )
https://www.bloomberg.com/news/videos/2024-07-24/blackstone-mortgage-trust-cuts-dividend-by-24-video
JMO. DYODD.
A few real estate headlines, nothing new, from my faulty memory –
– Private real estate funds are limiting withdrawals due to lack of liquidity. (In other words, they have no money because they can’t sell empty office buildings.) Industry participants remain optimistic and urge patience, while using code words like “challenging” and “price discovery.” MarketWatch. Price discovery is downside asymmetric. You never hear it used when Nvidia goes up.
– Multifamily CRE is fine, very low default rates, but rates are edging up. Wolf St. Fears are that Sunbelt areas that got overbuilt with cheap money during the pandemic euphoria are facing high re-fi rates and weak rents. A lot of debt rolling over this year, anxious owners are waiting on the Fed rate cuts. NY Times This is a “don’t worry be happy” situation because Fannie and Freddie will backstop the market for shaky multifamily loans as part of their “mission.” I find this frightening in a “bugs on a bumper” 2008 sort of way.
– The WSJ ran an inconclusive article on big banks and real estate. Big Banks have real estate. But relatively less than the regionals. That might or might not be a problem. The article sounded like a philosophy term paper. I was glad I dropped my subscription.
The rush to exit commercial real-estate funds is going mainstream
https://www.marketwatch.com/story/the-rush-to-exit-commercial-real-estate-funds-is-going-mainstream-ae178260?mod=MW_article_top_stories
JMO. DYODD.
ARBOR REALTY TRUST MOST SHORTED STOCK. Great article in WSJ, I tried to gift it so hopefully not behind paywall.
Arborhttps://www.wsj.com/real-estate/commercial/propertys-big-short-isnt-going-to-plan-4559e8cb?st=rb6sa1vioypnfhi&reflink=desktopwebshare_permalink
I have avoided Arbor but know there is interest for some. Put my eggs in strong regional southern banks. And, given the expiration of Trump tax cuts slowly minimizing my REITS from taxable accounts.
If this doesn’t work remove “Arbor” in front of https
The preferred D and E offer some nice yields >8%, and the f/f F yielding ~18% to call date 10/26, and if not called, SOFR + 5.442%.
I buy ABR preferreds when the short sellers hysterically negative hit pieces drive the price down. Sell some when it bounces back.
TNT:
Here is an even better article from Bloomberg on 6/6/24 on Apartment Real Estate Syndicates where the equity investors are all getting wiped out.
In the article it states that ABR is one of the major lenders to these private syndicates. At some point one would think ABR is going to have to seriously ramp up the CECLs (Current Expected Credit Losses), no matter how many games they play. But this short does seem way too crowded.
“Real Estate Investors Are Wiped Out in Bets Fueled by Wall Street Loans
Syndicators made big purchases that are unraveling with high interest rates, adding distress to an already troubled US property market.
https://www.bloomberg.com/news/features/2024-06-06/real-estate-investors-face-crisis-as-big-wall-street-deals-unravel?srnd=homepage-americas
KT, I read that and other articles on syndicators. The low interest rates distorted the capital markets. I personally have had 4 calls from syndicators asking if I would take preferred return so they can finance rate caps and increased interest expense. My answer remains, “why would I want to take that risk for 8 to 9% when risk free is over 5%?
I invested in several deals. Thankfully, I had great GPs. The deals in Phoenix cashed out and the one remaining I invested solely because the developer took HUD financing so he has 20 + years under 3% (while others laughed at him going thru hoops when banks were giving it away free). A few others in TX are doing ok. No capital calls nor distress. I do feel sorry for some of these limited investors (and syndicators). The era of easy money made many folks rich that honestly didn’t have a clue!
One of my takes about regional banks is just this issue. I don’t think the banks will take big haircuts but the investors and syndicators may very well lose everything.
the two controversial I guess REITs I now find in my portfolio are EPR, the experiences REIT. Read thru their NAREIT transcript on SA and I had a position, will bring that to 2%. Yes theaters but the best ones in the country booming w concessions sales too and they get a % of those in some theaters they have renegotiated the terms with. About an 8.4% now on the monthly which was incr this year. Topgolf, ski resorts, Andretti ‘Karting’..slowly reducing dependence on theaters. I have the C pfds as well for a small holding.
next up in the ‘what Bea’ category is PSTL the USPS reit; about a 7.2% yield on the 13.30. Spodek the CEO has been buying shares as recently as late May and has added 80k since fall ’23. Chairman is former Postmaster General. They know the best properties to buy and build here, not expecting much div growth but navigating getting better cap rates well to adjust for higher int rates. Mail Order RX delivery, last mile small packages etc strong, local supermarkets still sending flyers ea wk, they tried to pullback and people complained! lol. Anyway like a pfd to me here.
DYODD, like Martin G but in a different way and other comments about not hanging out short end rate wise too long, while I still have 48% or so in SGOV/cash, I have been ‘moving’ out the curve w perp pfds and select income issues. Lot of work but if you are managing your own money you better do the work. GLTA. Bea
I just found and purchased PSTL the other day. Thanks for the additional info though on that one.