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

Top 71. Mar 19, 2000 1:29 PM

» Roger_Babson - Kirk . . .

. . ., what you're describing, my friend, is the
direct results of the greatest credit and asset bubble in world history.

As for 100,000 more immigrants, to make up for the demographic sag in the next 13-17 years, we would need to permit 1.2 to 1.6 million additional immigrants into the country each year in that period.

Moreover, INS and Census data show that the majority (55%) of immigrants in the last two decades come from Mexico, the Caribbean, Central and South America, and Africa. These persons earn on average one-half of the average American worker; they have much lower rates of high school and college completion; more persons per household; have higher unemployment rates; suffer high rates of substance abuse and incarceration; virtually do not invest in the stock market at all; significantly underrepresented in the professional occupations; and have significantly lower rates of home ownership.

Asian immigrants (including from poor countries like Thailand, Myanmar, Philippines, Cambodia) make up 35% of the total. However, higher educated Asian immigrants from India, Taiwan, Hong Kong, Korea, China, and Japan make up only 11% in the past 20 years and roughly the same ratio in the 1990s.

You may be correct that a disproportionate share
of high-income Asians will move to the Bay Area, but you must also note that they, too, have higher number of persons per household, have relatively low participation in stock market (they invest directly in small businesses for the most part); and they do not have the same spending patterns as do natives for at least one to two generations after immigration.

So, the conclusion one must draw is, just as dramatically rising immigration in the 1930s-40s did not immediately assist the U.S. economy from
emerging from depression, nor will it be the case this time.

The massive demographic wind that has helped propel the U.S. economy forward since the late 1940s and early 1950s soon will encounter a gale to our face for 15-20 years ahead.

Regards,

-- posted by Roger_Babson

Top 72. Mar 19, 2000 4:57 PM

» Kirk - Good points Roger

Do you read the SJ Mercury News?
BIG story there where immigrants from Vietnam (and Mexico and ....) were buying the VERY CHEAP homes on busy streets and setting up their small business inside the garage! Why pay $4K a month to a strip mall to cut and color hair when you can do it in your garage like you did in the homeland? The savings they are giving their patrons is about 50% and making it just a bit more livable here in the Bay Area. VERY interesting article on how some adapt to make things work. These are not engineers designing the latest optical networks in their garages, but regular folks like hair stylists and florests.

I DO worry about shifts that can hurt us, but I just don't feel confident saying demographics will be our downfall. Perhaps the stocks I hold will be the gateway technologies that will be required for all in the 2nd and 3rd World to gain 1st World status? They might still win even if the US slows.

BTW, last week I read of the first Vietnamese "angel" Venture group investment all funded by Vietnamese who are doing well.

-- posted by Kirk

India.net: Microsoft, cultural ties link Indian immigrants leading online ventures

Top 73. Mar 19, 2000 5:23 PM

» JenL_2 - Huh Roger??

This interesting article is from 2/13 The Seattle Times:

by Gordon Black

Pradeep Singh ushers three visitors into his office overlooking Lake Washington. They all gravitate to the large windows offering a lake vista. It's an impressive view.

Almost immediately, the guests comment on the office and its location. They especially want to know the cost of such space, at Kirkland's Carillon Point.

It's a reasonable starting point for chitchat among four people in the software industry, and for whom Eastside real-estate prices are a fact of business life. Never mind that they all earned undergraduate degrees in India or that they are all first-generation immigrants to the United States.

Singh and his visitors - Deepak Amin, Digvijay Chauhan and Vijay Vashee - are members of what has become a growing club, Indian-educated ex-Microsoft software professionals who have helped create Web start-ups in the Puget Sound area. Naveen Jain and Raghav Kher are also members of this unofficial group, which numbers about 10 and is growing.

It's a high-tech masala, curry-dot-com in Silicon Forest, where a generation of Indian immigrants enriched by Microsoft stock options are creating new companies with names like InfoSpace.com, Imandi.com, AskMe.com and vJungle.com.

All products of an intensely competitive education system, most came to America to pursue advanced degrees and soon gravitated to a software industry hungry for talented engineers. Each has a story to tell of overcoming challenges and hardship on the way to financial security.

And each has a drive that may be a combination of personal and cultural that is best summed up in one way: Failure is not an option.

In becoming entrepreneurs, they are following a trail created by a handful of engineers in California, who, faced with a promotion ceiling, began networking to form their own businesses in the early '80s.

"There is a perception that there was an old boys' network here (in Silicon Valley) and it was hard for immigrants to pierce that," said Annalee Saxenian, a professor of regional planning at the University of California, Berkeley. "There have been several high-profile successes that have made it easier for Indians and Chinese to achieve success."

In a study, Saxenian identified 22 companies in Silicon Valley either started or managed by Indian immigrants, including perhaps the best-known, Sun Microsystems, co-founded in 1982 by Vinod Khosla, a leading venture capitalist in the technology sector.

Saxenian said success among the pioneers inspired those who came later. "There is a very strong Indian network," she said. "These guys are in very close contact with one and other."

In Silicon Valley, Indian engineers grouped together to help each other. In the Puget Sound area, the common denominator for the recent start-ups is Vijay Vashee.

A soft-spoken 49-year-old who grew up in Zimbabwe, Vashee could claim the title of elder statesman of Indian software professionals at Microsoft. He reckons he has helped 200 fellow Indians since he joined the Redmond company almost 18 years ago.

The Microsoft connection is another commonality. "In Microsoft, they make that joke about the IM network, the Indian Mafia network," said Kher, chief executive officer of one of the start-ups, Imandi.com. "It has no negative connotation. It is just about the bond and how the news travels faster through the unofficial channel than through the official channel."

There are some very good reasons for the Indian connection: India produces more technically qualified graduates than any other country.

Additionally, software companies often assert they need anywhere from 190,000 to 350,000 skilled information-technology workers to make up for the jobs the domestic work force can't fill.

Accordingly, Indians claimed the largest number of H1-B visas - the type intended to be set aside for specialty occupations that the U.S. labor force cannot itself fulfill.

Many of them trained at the India Institute of Technology, which is highly regarded around the world for the quality of its graduates.

IIT has five campuses around the subcontinent, including in Bangalore, Delhi and Bombay, which not so coincidentally have become incubators for India's indigenous high-tech industries.

Such is the reputation of IIT that, to recruiters, an engineering degree from there holds the same stature as one from Massachusetts Institute of Technology or Stanford University. Gaining admission to IIT might be even tougher than getting into the top schools in the U.S.

"The year I applied, 50,000 applied and 1,800 were given admission," said Vashee. "Today, it is 150,000 applicants. You know what it means to be competitive in a very fierce way."

Competition, in fact, is a feature of the education system in India from the earliest years of schooling, said Sutapa Basu, director of the Women's Center at the University of Washington, also a native of India.

"There is a huge push for education," she said. "Because it is so competitive there is tremendous pressure for students to do well - by both parents and society."

Basu said this drive is particular among middle- and upper-middle-class families. "They are pushing both girls and boys, but in the lower classes that is not always the case," she said.

By the time students are ready to enroll in college, they must all take the national Joint Entrance Exam, or JEE, in which everyone's performance is ranked.

The joke among Indian engineers here is that when they first meet they ask what each other's JEE ranking was.

"I was 270th," said Pradeep Singh, who co-founded Talisma and studied electrical engineering at IIT in Delhi. "I will know that until the day I die."

Along with the competitiveness comes a mindset - a willingness to take risks, said Deepak Amin, the entrepreneur who founded vJungle.com.

And there may be something else, too. "A lot of it is luck," said Kher. "It was luck that I got into Microsoft, but compared to a lot of people who are smart or smarter than I am . . . we were in the right industry at the right time."

......Jen

-- posted by JenL_2

Top 74. Mar 20, 2000 12:24 PM

» Roger_Babson - Jen . . .,

. . ., you need not remind me of the positive
impact of immigrants. Recall, I hire them and
work with them every single day. And not just Indians, but Germans, Dutch, Swiss, Russians, Taiwanese, Argentines, Japanese, Israelis, Iranians, and Pakistani, too!

But you must understand that these individuals in
every nation, developed or otherwise, make up the
very smallest percentage of the entire labor market of respective nations, including ours. They are the high-profile new middle class, so called (and not so rich most of the time).

But I must also remind you that I am directly involved in development work (computer systems security in one case) utilizing some of the most
brilliant minds that India and Pakistan can offer.

These young men and women (mostly men, of course) work for as little as one-fifth to one-third what they earn here in the U.S. And they may be supporting a family of 6-8 people, and perhaps even contributing to a younger sibling's
education costs. I can provide them meals, transportation, health care and paid vacation, additional training, and in some cases housing and still the costs are a fraction of U.S. costs.

Furthermore, these jobs we provide are more than jobs, they are an entree into the developed world's fraternity of the knowledge-worker elite, a member of which they are likely to remain for their entire lives.

However, these people do not and will not for a generation or two have the disposable incomes to become consumers like Americans. Forget this American-centric fantasy. It won't happen.

However, based on slower U.S. growth and faster
Asian growth (despite depression in the next 10-20 years), a country like Thailand will equal and pass Australia in GDP by the 2030s-50s (not in per capita, of course), while China will also pass the U.S. in GDP during that time (again, not per capita).

By then, there will be dramatic strides in alternative energy, water purification (which my partners and I are funding and developing), pollution control, advances in food science, a reformulation of urban development (which I am participating in with NGOs in Asia funded by the UN), which will reduce birth rates, per capita energy consumption, and chronic disease.

So, the future is indeed bright, but not tomorrow or even next decade, for that matter, which today's stock market is incorrectly anticipating.

Yet, the stock market is correct about the long term, as I have often stated, but like the 1870s and 1920s, prices are discounting 10-20 years of corporate profits and fundamental economic growth that will require 30-50 years to achieve. Prices must correct in the next decade or two to balance capital's share of output with labor and a more liquid equity base. But the growth the stock market is forecasting long term will happen.

During this time, however, the U.S. policymakers and corporate leaders must accept China's role as
emerging hegemon, which I and many of my colleagues throughout the world believe is inevitable, and we are activiely working in the context of such an eventuality. The great danger, of course, is protectionism, ethnic tensions, financial, economic, and geopolitical instability in the depression ahead leading to the inevitable Long Wave trough war (cold war or otherwise) late in this decade or in the 2010s.

This would be a sickening tragedy, but I can assure you in no uncertain terms that U.S. policymakers have been and are currently working overtime to prepare for and win (at least the stability of the Pacific region) just such a confrontation. We will "win the peace", so to speak, but eventually lose the war for Pacific hegemony.

China and its lesser allies North Korea and Russia are well on their way to hegemony from Australia to Mongolia, Micronesia to Kazakstan, and from Japan to the Himalayan frontier. This need not be feared, per se, but I expect a wave of immigration from Japan, South Korea, Australia and New Zealand and elsewhere in SE Asia fleeing from the rising Chinese imperial influence to the U.S. and Canada in the decades ahead.

This will be the immigration we and Canada need to make up for our record low births per 100,000 population and assist us in our social and economic development to permit us to adapt to the changing balance of global power with China.

Regards,

-- posted by Roger_Babson

Top 75. Apr 6, 2000 8:18 PM

» RhyneN - REITs on the rise????

REIT stocks seem to be moving up from the low base formed last December. Look at the Morgan Stanley REIT Index (RMS at bigcharts.com). The index broke through 300 today. It hit resistance at 300 earlier this year.

A couple of REITs which analysts expect to have a high AFFO (adjusted funds from operations) growth rate from 2000 to 2001 are SUS (self-storage) and SLG (class B offices in NY). SUS yields about 8.9% and AFFO is expected to grow at a 15% rate. SLG yields 5.9% and its AFFO is also expected to grow about 15%. If the stock price increases in line with the AFFO growth rate, you could have a 20+% total return. Of course, based on the past two years, REIT stocks have not increased in value along with the AFFO growth rate, but sometimes the turnaround must come. SUS is selling a a Price/2000AFFO multiple of about 9X, and SLG is around a 13X multiple.

I own a few shares of both of these. Do your own due diligence. I am not pushing these, just trying to get some discussion on specific stocks started by tossing out an idea or two.

-- posted by RhyneN

Top 76. Apr 6, 2000 9:18 PM

» JenL_2 - Morgan Stanley Reit Index : RMS

Rhyne - You are correct Sir. Nice upward movement in the REIT Index in March & continuing into April:

RMS 1 YR Chart

....Jen

-- posted by JenL_2

REITs Hold Their Ground Amidst Market's Turmoil

Top 77. Apr 6, 2000 9:53 PM

» JenL_2 - REITs Hold Their Ground

This from 4/5 WSJ:

By BARBARA MARTINEZ

What goes around comes around.

As stock prices across the board plummeted midday Tuesday, real-estate investment trust shares held surprisingly steady, a vindication that investors and analysts of this beaten-down industry have been waiting months for.

"We're walking around the office kind of happy here," said John Lutzius, analyst at Green Street Advisors, Newport Beach, Calif. In the middle of the day, when the Nasdaq Composite Index had plunged 13% and the Dow Jones Industrials were down nearly 4%, the Morgan Stanley REIT Index was down only 0.6%.

By the end of the day, the REIT index had risen 0.1%, while the Nasdaq composite fell 1.8% and the Dow industrials declined 0.5%.

For months, REIT investors have had to watch technology stocks -- some with no profits and no assets -- soar while REITs, which own real properties and are posting increased earnings, have watched their share prices erode.

But on Tuesday, the tables turned, and REIT stocks were finally sitting pretty. Trading volume on many of the largest REIT stocks was more than double the average. That means "folks were in some cases taking shelter in this group," says Larry Raiman, analyst at Donaldson, Lufkin & Jenrette Inc.

The reasons why REITs held up in the storm Tuesday are quite simple. "We didn't have the kind of run-up the market had last year and the year before," says Dan Pine, senior vice president and portfolio manager at Alliance Capital Management. Mr. Pine added that much of the fear that took hold of technology investors Tuesday has already been worked into REIT stock prices.

Also, the potential REIT sellers "already did sell" their shares some time ago, says Joseph M. Harvey, senior vice president of Cohen & Steers Capital Management, which manages about $4 billion of real-estate securities. "Everyone rotated out of REITs last year or the year before," he says. "The sellers are done."

Mr. Harvey says investors may now have to adjust their thinking about investments. The current mindset has been: "Give me high beta [volatility]. Give me capital appreciation. I don't care about income. I'm not factoring risk into my investment decision," says Mr. Harvey. "I think the market activity over the past several days reminds everybody that you should be thinking about valuation and you should be thinking about risk and income."

Analysts and investors note that REITs today are offering benefits that highflying high-tech shares simply can't. "The earnings are growing 7% to 8%, REITs are increasing their dividends, the average dividend yield is now 8.5%," says James Trowbridge, portfolio manager at Invesco Realty Advisors, which manages about $850 million in real-estate securities.

What's more, investors can get a good sense of a REIT's underlying worth by its net asset value, or the value of the underlying real estate. Most analysts believe REIT stocks are trading at a 10% to 20% discount to net asset value, when they should more appropriately be trading at net asset value or a little above.

Prospects for REITs had begun to brighten even before Tuesday. DLJ's Mr. Raiman reports that over the past few months, clients have mostly stopped calling to ask him which REIT stocks to sell. Last week, the influential Abby Joseph Cohen, chief U.S. equity strategist at Goldman Sachs, suggested in a television interview that down-and-out real-estate stocks might be a good buy. "Of all the sectors that have been beaten up, that's one of the ones she isolated," says Jonathan Litt, analyst at Salomon Smith Barney.

But what happens Wednesday and in the near term for REIT stocks? Few REIT investors care to hazard a guess after such a short time. Mr. Litt thinks "the more people get cautious about the broader market, the more they're going to look to invest in REITs."

Subscribe to WSJ Online @ http://www.wsj.com

.....Jen

-- posted by JenL_2

Top 78. Apr 15, 2000 11:12 AM

» Hugs - Woulda, coulda, shoulda...

Sold more tech and bought more of this "dull" stuff.

Sleep better at night.

-- posted by Hugs

While Tech Stocks Were Being Trashed, REIT Shares Surged; Is This Another Head-Fake?

Top 79. Apr 23, 2000 7:40 PM

» JenL_2 - REIT Shares Surged

This from 4/24 Barron's:

By Barry Vinocur

Marty Cohen, president of Cohen & Steers Capital Management, is convinced that this time the bounce in the stocks of real-estate investment trusts is the real thing. He concedes that last spring, when REITs soared following the news that Warren Buffett had taken a stake in two REITs-Tanger Factory Outlet Centers and Town & Country Trust -- he and his longtime partner in the property-stocks investment firm, Bob Steers, had thought the two-year drought for REIT stocks was over. "It turned out to be a head-fake," Cohen acknowledges.

REITs certainly have been drawing investor interest in recent days. While the market was trashing tech stocks, REITs held their own and then some. On April 14, when the market melted down -- the Dow Jones Industrial Average was off 5.7%, the S&P 500 5.8% and the Russell 2000 7.3% -- REITs barely budged. The widely followed Morgan Stanley REIT Index finished the day down a scant 0.6%.

Year-to-date, the index has outperformed the broader averages, but it has been only in recent weeks -- as tech stocks have weakened -- that REIT shares have shown a burst of strength. In fact, as recently as March 15, the index was off for the year by 1.1%. Through last week, though, it was up more than 7% for the year. It closed last week at 310.04.

Such a performance has contributed to REITs' growing image as defensive stocks. But not everyone agrees with that designation or shares Cohen's enthusiasm. The REITs' recent steadfastness amid the market turmoil proved only that it's tough to commit suicide by jumping out of a basement window, according to one bear, a portfolio manager who invests in REITs for institutions. "This has been the deepest and longest bear market for the stocks in a quarter-century," he says. "In the face of that sort of performance, it's tough to argue that because REITs didn't go down further they're suddenly defensive. We all have to be careful not to blur the line between what we want to believe and what's supported by data."

Cohen and other REIT investors cite four reasons for their belief that the current rally has legs:

- Property fundamentals are good. In fact, they have remained strong throughout the stocks' two down years. Buoyed by their mid-1990s stock-price runups, REITs went on a buying spree, using their richly valued stock as currency. The assets they acquired with that stock added to earnings per share. But the stocks had grown plainly overvalued, and when multiples contracted, prices came back to earth, the buying binge ended and REITs had to return to the sort of growth that comes from running real estate. "Earnings kept growing, just not by as much as they had been," Cohen points out, and stock prices continued their slide. Concerns over possible overbuilding further contributed to the slump in shares.
Now, however, REITs have settled into reasonable long-term growth rates, with the possibility that earnings could start trending up late this year or early in 2001.

- Despite the robust recovery in property prices, which benefited REITs, overbuilding didn't materialize as it typically does at that point in the real-estate cycle. Had developers become uncharacteristically prudent? Chicago billionaire Sam Zell, chairman of three publicly traded REITs, has long argued that the inevitable byproduct of so many real-estate companies going public would be "transparency," or, in saltier terms, an "open kimono." In other words, says Zell, the public market would serve as an effective regulator. In the past, lenders lent because it was profitable and because they often saw only the tip of the iceberg. With greater public scrutiny of the business, money doesn't flow so freely. Rising interest rates have also served as a brake on new construction.

- Cohen and others believe the steady returns REITs have produced over the years will appeal to investors looking for something to anchor volatile portfolios. "Investors shouldn't expect REITs to deliver the 36%-plus sort of returns they did in 1996," Cohen says, but they should look for total returns in the 12%-15% range most years. Applying only modest leverage by historic real-estate standards, Cohen and others maintain, companies should be able to increase their earnings by 6%-8% a year. Tack on a dividend yield in the range of 6%-7% and you get 12%-15% total returns.

- Though REITs have ratcheted up their borrowing in recent years, their leverage is still historically moderate. Gone are the days when companies could get away with leveraging themselves to the hilt. Again, Zell and others argue that the open kimono will keep borrowing within prudent bounds. Every now and again, they concede, a company here or there will run into a problem. But that, they stress, happens elsewhere in the public market, as well. Late last week the Morgan Stanley Index, which tracks the total returns of some 130 non-health-care REITs, stood just south of 310. Cohen expects the index to close out the year in the 350 range, implying a total return this year of 20%-plus. Next year, Cohen says, REITs should deliver a total return in the 18%-20% range. He notes that when REITs emerge from a bear market, it's usually with a vengeance. In 1990, for example, equity- or property-owning-companies posted a negative total return of 15.4%. The next year, equity REITs delivered a 35.7% total return.

The REIT market's current strength is attracting institutional interest. Larry Raiman, who heads the REIT research team at Donaldson Lufkin & Jenrette, says he has been getting a lot more calls than usual lately from big investors asking that he pay them a visit. "Six months ago," he adds, "those folks hardly ever called."

In the less bullish camp is David Shulman, who recently took over as the head REIT analyst at Lehman Brothers. He thinks the stocks might climb some more by the end of the year, but he doesn't see them rising by as much as Cohen does. "The Morgan Stanley REIT Index should finish the year in the 310-320 range," he says, and do better next year. Shulman expects the index to finish 2001 in the 350 range. "The bear market is over," he agrees, but he believes the same "transparency" that has helped hold the supply/demand balance of real estate in check is likely to keep the stocks from running up as they have in the past.

Chris Haley, who follows REITs and other property stocks for First Union Securities, is less convinced that the recent REIT rally will hold. He says the recent run-up in share prices is as much the result of a lack of liquidity in the stocks as it is faith in them. "The stocks," he believes, "have been helped by their steady cash flows and cheap valuations."

Further, adds Haley, though it looks as if the downward slide in REITs' earnings momentum is at an end, REIT earnings estimate revisions for this year have been running 2-to-1 negative, as opposed to 2-to-1 positive for the S&P 500.

"Net-net," says Haley, "we believe it's a bit early to support large-scale investment in REITs." For the time being, he advises overweighting apartment and office REITs with positive earnings momentum, companies such as Equity Residential, Liberty Property Trust and Spieker Properties. He also likes the bigger-cap industrial REITs, which he says should be direct beneficiaries of the growth in ecommerce.

"If I had $100 to invest," Haley declares, "I'd put $25-$33 into the sector today, and invest the rest throughout the year." He'd look for dips, which he views as inevitable.

BARRY VINOCUR is editor-in-chief of Realty Stock Review and Property magazine, published by Rainmaker Publications Group in Ocean, New Jersey.

Subscribe to WSJ & Barron's Online @ http://www.wsj.com

.....Jen

-- posted by JenL_2