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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7/25/2024
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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.