REITs - Real Estate Investment Trusts - Info &amp; Discussion

Top 11. Jun 27, 1999 8:22 PM

» BillR_5 - Never mind

Cancel that. I can see I'm way behind on my reading.

-- posted by BillR_5

Top 12. Jun 28, 1999 8:21 AM

» GoodGuy - FFO ?

Hi Paul,

Would mind explaining - All of them yield over 8% and have FFO that exceeds the dividend by a substantial margin. - FFO ?

-- posted by GoodGuy

Top 13. Jun 28, 1999 7:52 PM

» Oaktoad - REITs that I like and why

With the runup in stock prices I needed to asset allocate more to bonds. I have always sort of thought of bonds as "fixed income" type securities in general. While REITs are not necessarily fixed income they can come close on the downside but still retain some upside potential.

I screened for REITs with a yield of 8% or better. I then went thru a list of about 30 and looked up the FFO for 99 and 00. I picked those stocks that had the lowest ratio of dividend to FFO and then built a group from different types of realty, tho some are diversified already so this is not exact science.

Two that I bought were ones that were bought by Warren Buffet as I figure if he wants them they can't be all bad. These are SKT and TCT

Others are:

BRE CCG NXL USV LHO IRT PHR CEI

I also hold GLB which I have from the proceeds of a limited partnership. It has a high yield and sells for much less than book value. Mgmt currently has a plan to sell off some of the assets and buy back stock. As they have major positions in this stock and as it reportedly is a major part of their own personal wealth, I have held this and contemplated buying some more.

I plan to invest the dividends from these in either more of the same or new REITs as long as they have above average yields and the economy stays bouyant .. which if interest rates stay down is what I think will happen..

-- posted by Oaktoad

Top 14. Jul 2, 1999 5:51 PM

» Oaktoad - Best place to keep REITs in your portfolio

Is in tax deferred or advantaged accounts. Keep in mind that dividends will be taxed at your highest marginal rate if you hold them in a taxable account.

I have mine in my IRA rollover account and treat them as if they were bonds.

I attempt to get my "big winner" capital gain stocks in my taxable account to take advantage of the preferential tax treatment.

With the market hitting new highs it might be time to consider re allocation from stocks to fixed income securities. REITs have still not reached the highs of the past and with a strong economy their earnings should do very well over the next few years. Combine the prospects of lower interest rates and growth for real estate, I think there is quite possible that REITs might outperform the general averages over the next few years.

Certainly for anyone that is nearing retirement REITs should be a part of your portfolio.

-- posted by Oaktoad

Top 15. Jul 2, 1999 7:20 PM

» KirkL - Thanks Paul, you make <b> many good points</b>.

Thanks Paul, you make many good points. I'll have to take a look at some for my fixed portion of portfolio. (in my IRA).

Maybe we can get some mutual fund information to get a fund to invest in them?

-- posted by KirkL

Top 16. Jul 18, 1999 10:30 AM

» Oaktoad - REIT fund

Vamguard has one that I use as my benchmark. So far I am a bit ahead of them which I think is due to my strategy of buying very high yield REITs.

I have not looked into the fund, but would guess that for smaller amounts it would be a good place to dollar cost average. BEing a Vanguard fund the fees should be reasonable.

It is up 32.8% for three years compared to the GNMA fund which is up 24%.

Both real estate connected.. just one is government guaranteed and the other is not.

If the economy continues strong REITs should stay healthy. Most predictions are that the economy will stay strong.

With higher interest rates and a budget surplus (maybe, but certainly not the huge deficits of years past) the government has the tools available to keep this economy doing well for several years to come.

I still see REITs as a valuable part of an investment stratery and asset allocation..

New buy for me is MAA which invests in apartments. One downside that is noted (which I really do not agree with) is that as more people buy homes then apartment rents will go down or not be able to be increased. I think this is downright silly as there are not enough houses being built and in many places the costs are running so much higher that people will be stuck being renters.

Also, some of these apts are damn nice and have lifestyle features that many people like such as rec centers, pools etc. Good management can keep these pumping out profits. Perhaps those to be hurt more are the duplex, fourplex type units that don't have economies of scale and often have mom and pop mgmt which may not be very good.

-- posted by Oaktoad

http://bradhill.com/tips/stock/reits.htm

Top 17. Sep 2, 1999 6:46 AM

» JenL_3 - REITs - (CCG, EQR, SPK)

This is Tip World's Stock Tip of the Day:

REITs (CCG, EQR, SPK)

We're enjoying a long bull market not only in stocks, but in real estate as well. Stocks and property meet in Real Estate Investment Trusts (REITs), which are basically holding companies for specialized types of properties. REITs operate by somewhat different rules than corporate stocks. Created by the U.S. Congress in 1960, these trusts avoid corporate taxation by distributing most of their taxable income to shareholders in the form of dividends. These days, thanks to continued good real estate fundamentals and because the share prices are somewhat deflated (thanks to fears of overbuilding in 1998), dividend yields are quite high. Accordingly, REITs in general are an interesting bet for both capital appreciation and income.

Three REITs were recently spotlighted by Standard & Poor's as good prospects: Chelsea GCA Realty (CCG), Equity Residential Properties Trust (EQR), and Spieker Properties (SPK). CCG specializes in ownership of manufacturers outlet shopping centers. Equity Residential Properties Trust, as the name implies, focuses on apartment properties, currently holding hundreds of buildings in 34 states. Spieker Properties (SPK) owns about 20 million square feet of office space on the West Coast.

To see a comparative chart of these three REITs, visit the following site:

Brad Hill http://www.bradhill.com is the author of 10 books about the Internet and personal technology. He currently teaches Investing on the Web, an online course for ZDU; writes the Investor 2000 column for Raging Bull; and is the producer of Closing Bell, a daily market report.

The information contained in this tip is based on rules and regulations existing at the time of initial publication. These rules and regulations are subject to change. Neither TipWorld nor the author of this tip is engaged in rendering legal, accounting, or other professional services. The reader should always consult with a professional adviser to ascertain current rules and regulations and the application of this tip to personal circumstances.

Paul - Interesting that this article mentions two Reits, EQR and SPK, that did not make your list. Do you have any opinion on these Reits?.....Jen

-- posted by JenL_3

Top 18. Sep 3, 1999 4:16 PM

» JenL_3 - Boom in Real-Estate Mrkt Fails to Boost REITS

This from 9/3 WSJ:

Boom in Real-Estate Market Fails to Boost REIT Stocks

By BARBARA MARTINEZ

The real-estate market continues to soar. Rents for all property types -- from office buildings to apartments -- are still rising at a healthy clip. Demand for space appears comfortably ahead of supply in most major markets.

So shares of real-estate investment trusts, the public entities that own a chunk of the nation's real estate, are flying, right?

Wrong.

The shares are now down 4.6% since the beginning of the year, compared with a 7.3% gain in the Standard & Poor's 500-stock index. Recently, the much-watched Morgan Stanley REIT Index fell below the psychologically important 300 level.

"There isn't much joy in REIT-ville these days," says David Sherman, analyst at Salomon Smith Barney. "The mood among REIT investors remains morose, or maybe comatose." The title of one of his recent REIT reports: ZZZZZ.

There was a glimmer of hope in April, when shares of REITs shot up (after having their worst performance in more than 20 years in 1998 with a share-price decline of 22%). Even famed value investor Warren Buffett started to buy up some REITs. From the beginning of April to nearly the end of May, REIT stocks climbed 14%. Since the peak in May, however, REIT stocks are down 8.2% on a total-return basis, which includes their hefty dividends.

Most analysts cite the threat of rising interest rates, distractions from glitzier stocks and the REIT industry's own undoing.

Interest-rate fears affect REITs with variable-rate debt, which would be squeezed if rates keep pushing upward. And investors are distracted by highflying technology stocks over REITs that offer only 8% to 10% growth rates.

"Whatever is going on has to do with the psychology of stock investors, not fundamental company performance," says Eric Hemel, analyst at Merrill Lynch. "Investors are not falling in love with these companies." REITs are expected to continue to turn in healthy earnings, though the level of earnings growth is "gradually tapering down," he says.

There is another possible culprit, and REITs themselves may be partly to blame. From May 1 through July 31, over $800 million in REIT equity offerings were priced, while dedicated REIT mutual funds received only $46.7 million in inflows, says Salomon's Mr. Sherman. "Not only did this offering activity soak up all the incremental demand in the REIT market and start stocks going down, it also scared potential additional investors away."

Many investors see a role for REITs in a balanced portfolio, if only as a defensive play. "It's not the most exciting part of our portfolio, but it was never intended to be," says Charles Freeman, lead manager of the Vanguard Windsor Fund. REITs are about 4.3% of his portfolio and his REITs are up 3.5% year to date, not including dividends. Add on a 7% average yield, and that gives Mr. Freeman a 10.5% return so far, and that's "market-like performance.".....

....Now that growth investors have mostly left the sector -- after enjoying total returns of 35% in 1996 and 20% in 1997 -- many believe that the pension funds and value investors are more natural and long-term owners of REIT shares.....

....Jen

-- posted by JenL_3

Top 19. Sep 4, 1999 9:34 AM

» Oaktoad - Real estate is a long term investment

Anyone looking for quick money in this area probably should not be buying. Yes there are surges, but real estate by nature tends to be a buy and hold concept.

Those who have owned houses for a long time can see this. The market in the Bay Area has its ups and downs, but I don't know anyone that bought 20 years ago regretting the decision.. if they could hold until today.

Some who bought in the early 90's were losing until the last year or so, now they are doing fine.

Many REITs are yielding 9-10% and these are not the dregs of the industry (those yield north of 12%). YOu can do dididend reinvestment for some of these. If you are getting to be where bonds become part of the equation then I think REITs are a good alternative as the yield is much higher and there is some inflation protection, which even if it is only 2-3% per year can give a long term boost to the total return.

-- posted by Oaktoad