REITs - Real Estate Investment Trusts - Info & Discussion
- JenL_2
- mdorsey
- mdorsey
- JenL_2
- JenL_2
- SteveT
- Wren101
- JenL_2
- Kirk
- walkerman
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» JenL_2 - Timber Company REITs?
Part of an article from 12/10 Barron's posted on the "US Stock Market" thread:Rayonier's shares look cheap, especially if the company can realize its timber values
By Sandra Ward
Rayonier (RYN) is about as solid a company you can find. Its business is wood: making pulp and specialty fibers out of wood, and especially growing wood. Top management, led by Chief Executive W. Lee Nutter, commands respect not only for its experience -- he's been at Rayonier for 34 years and his two key lieutenants have been with the company for a combined half century -- but for its ability to innovate and provide decent returns, even when times get tough.
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The REIT Way to Cut Corporate Taxes
Despite a wall of skepticism surrounding the issue, one of Wall Street's best-known tax authorities, Robert Willens of Lehman Brothers, can barely contain his enthusiasm for decisions related to the merger of Plum Creek and Timber Co., and the precedent they might set for for a new wave of corporate restructuring.
"I feel they are critically important rulings that open the door for a lot of corporate financing activity," he exhorts, referring to decisions by the Internal Revenue Service in connection with Georgia-Pacific's spin-off of Timber Co. and Timber Co.'s subsequent conversion to a real-estate investment trust and merger with Plum Creek, also a REIT. "For anybody with a lot of real estate, this is the thing to do."
While the IRS didn't completely sanction the tax-free status of the transaction, because it didn't accept the deal was done for an authentic business purpose and viewed the motivation for Timber Co.'s conversion to a REIT as merely one of tax avoidance, it did however revise a former ruling under which it now accepts REITs as active businesses for purposes of a spinoff. In good news specifically for timber companies that may be contemplating a similar move to that of the Timber Co., the IRS also ruled the cutting of timber isn't a disposition of assets and so isn't subject to a built-in gains tax.
Willens argues that not only would companies with extensive timber operations, such as Rayonier, Weyerhaeuser (WY) and International Paper (IP), benefit from converting their land holdings into a REIT format , but retailers such as Sears, Roebuck, Wal-Mart Stores, J.C. Penney and even McDonald's would unlock a tremendous storehouse of value for their shareholders. "They'd be converting tax payments to Uncle Sam into dividends for shareholders," he says. By leasing properties it used to own from a newly established REIT, the corporation could deduct the lease payment from its taxes and the REIT pays out the income it receives from the lease directly to its shareholders without the IRS taking its cut. (The REIT shareholders still would be liable for taxes.)
Moreover, corporations would see their financial profiles enhanced by converting real-estate holdings to a REIT structure. In an extensive report on the subject written this past summer, Willens notes: "The separation, from a corporation's operating business, of its real estate, will dramatically improve the corporation's financial profile: The corporation's asset base will be drastically reduced and, as a result, certain key financial ratios, such as return on equity and return on assets, will be correspondingly enhanced. This, in turn, should enable the parent to trade at a higher multiple of earnings (its P/E ratio should benefit) and, as a result, an equity offering, for the purpose of expanding the business, would be facilitated. In addition, because real estate is generally debt-financed, and such real estate will now, along with the accompanying indebtedness, be lodged in a separate entity, the operating company's 'leverage ratios' will improve and, therefore, new borrowings it seeks to undertake, again for the purpose of financing expansion, should be more readily available."
It's along these lines that Willens believes other companies can make a persuasive case to the IRS that there are sound business motives for pursuing a REIT format, a case that Plum Creek failed to make. He points to the agency's own regulations in which it lists any number of business purposes that should generally result in a favorable ruling. Among those purposes are facilitating an equity offering or a borrowing.
The biggest challenge corporations will face in pursuing this strategy, he believes, is in satisfying the requirement that a converting company must purge itself of all retained earnings accumulated in its non-REIT years by paying a special dividend. But that is not as daunting as it appears, and there are numerous ways to defray the distribution, Willens insists.
Subscribe to WSJ & Barron's Online @ http://www.wsj.com
.....Jen
-- posted by JenL_2
» mdorsey - Bad news
Rise in office building vacanciesin U.S. was steepest ever in 2001
Apartment, retail sectors also declined faster than expected
By Dean Starkman
THE WALL STREET JOURNAL
Jan. 31 — U.S. office buildings last year experienced the sharpest jump in vacancies ever recorded, according to two new surveys, while the apartment and retail sectors also deteriorated faster than even pessimists predicted.
-- posted by mdorsey
» mdorsey - More bad news?
Keystone Properties misses estimates, warns on 2002WEST CONSHOHOCKEN, Pa., Feb 4 (Reuters) - Keystone Property Trust (NYSE:KTR - news) on Monday posted an 9 percent rise in fourth-quarter funds from operations as lower debt costs offset weaker revenue, but said it expects 2002 results to trail analysts' forecasts.
West Conshohocken, Pennsylvania-based Keystone reported fourth-quarter funds from operations, a commonly used gauge of real estate companies' performance, of $13.4 million, or 43 cents per share. That compared with $12.3 million, or 48 cents per share, in the year-earlier period. Revenue fell to $24.9 million from $32.3 million.
-- posted by mdorsey
» JenL_2 - REIT
copied from "Ask Rande":Author: bubee
Date: February 10, 2002 4:59 PM
Subject: REIT
Can anyone recommend a REIT that they have and are pleased with? I got 1/21/02 copy of Forbes because they ranked 20 but I did not recognize any fund name, i.e. Vanguard, Fidelity, etc. RVT (9.35%), BXP(6.11%) and VNO (6.23%) I looked up Vanguard REIT Index Fund Investor Shares and a yr was 12.35. For fixed part of portfolio - is now a good time for REIT or would this be getting in after the best has been? Thanks.
-- posted by JenL_2
» Wren101 - REITs continue to set new highs
Despite warnings of declining fundamentals, the RMS index is setting new high after new high.http://bigcharts.marketwatch.com/quickch...
One explanation is that investors have become aware that REITs offer good current dividend income and an outlook for reasonable appreciation. Many advisors are picking up on the Warren Buffet and Bill Gross line that stock market total returns for the next several years will be single digit. REITs have the potential to pay a 5 or 6 percent dividend (some higher) and appreciation in the 3 to 4 percent range (some higher). A lot of new money is pouring into REITs.
Some think that there will be a dip in the second half.
Who knows???
-- posted by Wren101
» JenL_2 - Re: REITs continue to set new highs
In response to message posted by Wren101:Hi Wren - welcome to the group! Yup this chart tells the story also:
<img src="http://chart.bigcharts.com/bc3/intchart/..." width=579 height=335>
RMS & S&P500 3 YR Chart
....but now is it the time to get into REITs or into the S&P500?......Jen
-- posted by JenL_2
» Kirk - Re: Re: REITs continue to set new highs
In response to message posted by JenL_2:My only worry is that if the Bears are right.. then the bear started in 1998 when most stocks were hit except large cap tech where money flow went. Then that was hit and the performance chasers went after dividend paying stocks and real estate.
IF we really have a major bear ahead, then the real estate bubble will deflate and the dividend stocks might have to cut dividends...
To me, it argues for a fully diversified portfolio unless you understand the risks in performance chasing of sectors.
-- posted by Kirk
» walkerman - Re: Re: Re: REITs continue to set new highs
In response to message posted by Kirk:My thought on that is that if real estate was going to get hit, it would already have been hit in the bay area, esp. sili valley, because that area got slammed when the tech bubble burst. From what I hear, property is still going up there.
-- posted by walkerman
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