Retail REITs fall to Multi Year Lows–Most Income Issues Hold Up Well

We had to be out of the office for 4 hours today and certainly we missed some exciting times (although not of huge meaning to us).

What we noticed today was the beat down many of the Retail related REITs took. KIMCO was slapped down to a low not seen since 2009. But as some on Seeking Alpha claim–no problem because you haven’t lost anything until you sell.

Tanger Outlet Centers (NYSE:SKT) is almost in the same boat—bouncing on lows that they hit earlier this year, but previously not seen since 2010.

Believe it or not the average preferred stock and baby bond today was dead flat. We’ll take that given the direction of interest rates.

There was some interesting trading going on in individual preferred issues today. Below you can see that the GDL Fund preferred (a $50 issue) fell big yesterday and gained it all back today–happened so fast we couldn’t react.

We will write more when we have time to digest all the data.

16 thoughts on “Retail REITs fall to Multi Year Lows–Most Income Issues Hold Up Well”

  1. Tim, the retail REIT market has been very volatile lately, but there may be opportunities in the future. If “you don’t have a loss until you sell” then is it also true that you “don’t have a gain until you sell” also? If so, that would make Warren Buffet the worst investor of all-time, considering his company has not paid a dividend.

    At the current level, I like the preferreds in CDR. They are a retail REIT with an investment grade anchored grocery store chain, AHOLD.

    1. Kaptain, to me its, “it is what its worth that day”. It doesnt mean any action is needed it, but the price today is what it is worth today…..Warren Buffet may not issue dividends, but he sure loved getting them. Every time he got on CNBC he would brag about his specially arranged Dupont 8% preferred stock and his 10% BAC preferreds. He almost acted like he wanted to cry when they expired on him.

      1. Gridbird, I agree 100%. Everyone must value securities at their current market price. Yes, Warren loved to receive dividends – just like the special preferreds he was able to buy from Goldman and earn about 10% on those.

        Still looking through the garbage heap of retail REITs to see if there are any good ones to purchase now, but I’m not sure we’ve seen the bottom.

        1. Kaptain, the entire sector is your oyster….I promise to not compete there against you…I will also leave uncontested the shippers, BDCs, and Mreits for you, also. 🙂

          1. Grid – I have not opened the shell of the oyster yet as I still cannot figure out when they will hit the bottom. If KRG still had their 8.25% preferred listed, I would certainly be a buyer.

            My small ship holdings are doing pretty well, but don’t own any BDCs or MREITs, although I have some holdings in ARI-C which is a commercial lender.

    2. It is interesting how CDR has redeemed a good chunk of CDR-B, and it continues to get pummeled.

      1. Mr. Lucky, the ol market turned on them through the process of redemption. This is why I prefer past call above par issues. If things go bad they suffer a smaller loss. It is down 11% past year while lower coupon sister is down 19% I believe. I remember a guy on a forum was wanting to buy CBR preferreds. I he was wanting to buy the lower coupon to avoid call risk due to partial calls. I told him I would own neither, but I would take the higher yield, higher call risk over the call safety. Its examples like this is the reason why.

      2. Sometimes it works the other way too, though. AHT has had same issue. As AHT-D has been roached out but has started climbing again and never broached par despite its sisters getting a beat down put on them.

      3. Mr. Lucky – the call on CDR-B worked out well for me. I had a nice position in the B shares and all of mine were called or sold to other investors right around $25 as it appeared they were all going to be called. Right now, I’m buying them back at a little under $23. I refused to buy the C shares when they were issued at $25 because the coupon rate was so low – but they appear like a decent value now in the low 20’s per share. Plus a chance for some capital appreciation too.

        1. Good observation, Mr, Lucky. That is where one has to make the decision and move from capital preservation to potential cap gain play. I have never been in an issue where I got to that point by holding long enough. Since I am now out of AHT-D, watching the lower priced sisters is irrelevant to me now. I hope to stay strong and stay out of hospitality reits as I dont particularly like those either (do I like anything? Lol) . I only have a couple preferreds that actually have lower priced sisters (WFC and RILYL) that would even be worth monitoring. I cant compare my NSS to the NS preferreds as they are below NSS in capital structure and do not make suitable comparisons.

  2. For some people who are relatively new to preferreds especially the perpetual ilk that do not have to be called if company chooses not to, I thought this might be of interest…The 10 year is just now a few basis points from 3% which was the last time the 10 year hit 3% in 2013. This was called the “Taper Tantrum” when income investors flew the coop expectating higher rates. Many preferreds have been called since then and many may not be aware of how much these can move. Here are a few examples of “veteran preferreds” that were around then and now…Notice the price descreptancy between then and now even though long rates are very similiar. The question is were the sellers overzealous then? Or are people to passive to the risks, now? We may find out this year.
    KIM-I (6% par) $24.47 today, $20.31, Tantrum low
    CHSCO (7.875% par) $28.94 today, $24.40 Tantrum
    IPL-D (5.1% par) $25.07 today, $20.28 Tantrum
    CBB-B (6.75% par) $49.75 today, $42.15 Tantrum

    1. People only react when there are big moves–then it is “what the hell happened?” Watching the SA comments you can get a good flavor about the ignorance of the possibilities.

      You show the tantrum lows, but then the real lows were back in 2009 or so–I was fairly new to preferreds–scared the hell out of me. Investment grade insurance companies had preferreds selling for $7–bought a little but not near enough-held. A person could have done 200% in a couple years.

      I think it is safe to say that sometime in the next year there will be a scare–taper tantrum like–thats why I LOVE my term preferreds.

      Yes–I think investors are way too passive now–bonds that mature in 2105 and perpetual preferreds carry massive interest rate risk.

      1. When discussing the IR risk of perpetuals, shouldn’t we consider the coupon rate also? Holding a 6% coupon perpetual shouldn’t hold the same risk as an 8% perpetual.

        So it is a ‘pick your poison.’ Go with a ‘safer’ company that puts out a 6% and risk it dropping significantly with rising IRs…..or……pick an 8% and incur company-health risk but less IR risk.

        1. Unless its quality 8% “why the hell hasnt it been called” type…Such as WFC-J. Compare its yield to its sisters which are on same level. Pretty start difference. Chasing yield with call risk as only real negative…BTW, I think current price of $25.87 is too much risk. Pennies matter on these trades…That is why I liked BGCA at $25.41 so much yesterday…Investment grade 8% , take the call risk for backside price support on yield rise.

  3. Brad still wont admit his $25 reco on KIM was wrong….But yet he has recomended all the way down. His latest reco was 25% possible return. Hey that almost gets you only down 30% from initial buy, lol… I wish I didnt believe in “mark to market”. If I didnt I could do like him and just believe, I am right and the market is wrong.

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