REITs - Real Estate Investment Trusts - Info & Discussion
- Happy
- JenL_2
- JenL_2
- mitelo
- JenL_2
- Oaktoad
- JenL_2
- JenL_2
- Oaktoad
- JenL_2
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» Happy - Kirk, this company owns apartments in Northern California.
Kirk, this company owns apartments in Northern California. It is up lately, but still not higher than a few years ago. Landlord friends in the City tell me they are getting re-rents on 2 bedrooms of $3500 per month. A couple of years ago these were going for $1500. I think big institutional investors like Avalon Bay (AVB), probably have only just begun to pass thru massive rent increases that are coming. Future looks good for cash flow, which is what these kinds of cos. sell on. What do you think?AvalonBay has about 25% of their apartments in the Bay Area. Another large apartment REIT is Essex Property (ESS). They are only on the West coast.
Does anyone know of any other REIT apartment owners, more concentrated in the Bay Area?
-- posted by Happy
» JenL_2 - Hard assets, harder call
Wanted to bring this thread up again to check in on how REITs are doing. This from 3/6 MarketWatch.com:Real estate funds have soared; can they keep it up?
By Justin Wiser
Real estate mutual funds may be based on terra firma, but their performance in recent years has been as flighty as any sector.
As a group, funds holding shares of real estate investment trusts have avoided the market's slide. The average fund soared 25.8 percent in 2000, they remain in positive territory this year and they led all fund categories with a 2.8 percent gain last week.
The group's trailing 12-month return of 29.7 percent lags only the financial services group at 40.2 percent, according to Morningstar.
Even with its gains, many experts say the sector is still undervalued, though its volatility makes performance extremely hard to call.
"As with any other sector play, it comes in and out-of-fashion, and you never know when the next move will be," said Kunal Kapoor, a senior analyst at Morningstar.
Leaner times
A general market shift to value stocks and renewed interest in income-bearing securities helped fuel last year's fund returns. The group also was coming off a weak stretch as investors ignored REITs during the fast-rising bull market. Real estate funds lost an average of 15.8 percent in 1998 and dropped 3.3 percent in 1999.
Those setbacks have resulted in a rather tame five-year average return of 10.3 percent, compared to 15.8 percent for the S&P 500.
Cohen & Steers Realty fund (CSRSX) manager Martin Cohen expects the group's recent strong performance to continue.
"The fundamentals are pretty solid," Cohen said. During his 25 years in the real estate business, he can't remember any point where this late in the economic cycle the country wasn't suffering from overbuilding, he said.
The market avoided overbuilding due to an increased flow of information and increased caution among lenders who haven't been extending loans as freely as in the past, Cohen said.
Cohen, whose fund rose 26.6 percent in 2000, said he likes the prospects for office REITs such as Vornado (VNO) and Equity Office Properties (EOP) , because of tight markets in New York, Washington and other large cities.
REITs are publicly traded companies that manage a portfolio of real estate. Many concentrate holdings in one area, such as offices, apartments, retail centers and even prisons.
"REITs still look cheap," Lehman Brothers analyst David Shulman said. "On a total-return basis, they'll probably generate returns of 10 to 15 percent by year's end."
"We like apartments and office REITs over retail because we worry about excess capacity in retail," Shulman said. "It's less of an issue now in offices and apartments."
Lehman has strong buy ratings on Boston Properties (BXP) , SL Green Realty Corp. (SLG) , and AvalonBay Communities (AVB) , among others.
Asset Allocation
Kapoor cautioned that apparent value in the REIT area may not be the best reason to invest in the space now.
"That's totally irrelevant," he said. "The question is do you want to own REITs as part of your portfolio. Pick good funds and hold them and you'll have the best chance to benefit from upswings."
An asset allocation of 5 to 10 percent in real estate is appropriate for most investors, he said, though younger investors may want to keep all their money in more growth-oriented areas.
A few of Kapoor's favorite real estate funds are Security Capital U.S. Real Estate (SUSIX) , MSDW U.S. Real Estate (MSUSX) and Columbia Real Estate Equity (CREEX) .
"It might be sensible to put real estate funds in a tax-deferred account because they do throw off a lot of income," Kapoor added. REITs often yield as much as 6 or 7 percent.
This chart should show total returns:
<img src="http://qccharts.quicken.com/bin/graphcgi..." width=475 height=220>
CSRSX, SUSIX, MSUSX, CREEX 3 YR Chart
This chart doesn't...
<img src="http://pvcharts.quicken.com/bin/icenter...." width=470 height=250>
REIT Funds, S&P500, Nasdaq 1 YR Chart
In Dec '99 the REIT Investors in the group said to Buy REITs - Good Call! What say you now?.....Jen
-- posted by JenL_2
» JenL_2 - REITs Plan to Issue Stock
This from 5/16 WSJ:Growing Number of REITs Are Planning to Issue Stock
By RAY A. SMITH
Spring is certainly here in the REIT world, as evidenced by the meager but significant rash of stock offerings conducted of late. As real-estate investment trusts continue to outperform companies in the S&P 500 -- they have done so for more than a year now -- a growing number of REITs are feeling the time is right to go fund raising on Wall Street.
In the past month alone, six REITs, most recently Health Care Property Investors Inc., have issued common stock. Another of those six, shopping-center owner Weingarten Realty Investors, Houston, also issued equity back in January.
More such offerings are in the pipeline. Glimcher Realty Trust, a mall REIT based in Columbus, Ohio, is busy planning a public offering of five million shares.
The offerings come amid a few but significant consolidation deals in the REIT industry. Three big deals have been announced so far this year, creating large players in the hotel, apartment and office sectors.
FelCor Lodging Trust Inc. announced last week it agreed to buy MeriStar Hospitality Corp. for $1.1 billion in stock and cash. A week earlier, Archstone Communities Trust announced plans to acquire Charles E. Smith Residential Realty Inc. in a stock deal valued at $2.2 billion. Both deals follow plans announced by Equity Office Properties Trust, the nation's largest publicly held office-building owner, to buy Spieker Properties Inc., the leading publicly owned office-building owner on the West Coast, in a cash-and-stock deal valued at $4.48 billion plus debt.
Consolidation has been a major issue in the industry since 1998, when REIT stocks began their two-year slump. But consolidation isn't nearly as contentious as discussions about stock issuance can get.
Analysts and investors were generally ambivalent about offerings during the industry's bear market. However, they were highly critical of those conducted by companies whose stocks were trading below the value of their underlying assets. The number of offerings fell to eight in 2000 from 28 in 1999 and 220 in 1998, according to SNL Securities LC, a financial-information research firm in Charlottesville, Va. With almost half of 2001 gone, seven offerings already completed and Glimcher's on the way, the pace of offerings will be way ahead of last year, if stocks keep rising.
"The mere fact that your stock is trading above net-asset value doesn't mean you should issue equity, but it does give you a green light," says Mike Kirby, principal at Green Street Advisors. "If you're trading above NAV, you can at least consider the possibility, but only if you have value-enhancing investments to take advantage of."
Kenneth B. Roath, chairman and chief executive officer of Health Care Property Investors, says the company was pleased with the price at which it issued 3.5 million shares -- $34.80 -- above analysts' estimates for the Newport Beach, Calif., REIT's net-asset value.
The $115 million in net proceeds from the offering will be used to acquire properties, particularly nursing homes and assisted-living centers, and retire short-term debt. Mr. Roath believes reinvesting the proceeds into acquisitions will boost the company's long-term growth rate.
For those REITs searching for ways to raise capital without the benefit of a stock that trades at a premium to net-asset value and a compelling use of proceeds, Salomon Smith Barney analyst Jonathan Litt suggests "why not just sell some assets and buy back stock if you want to create shareholder value?"
Mr. Litt, a longtime advocate of stock buybacks as a way to create shareholder value, cites diversified REIT Crescent Real Estate Equities Co., Fort Worth, Texas, as an example of a REIT that trades at a significant discount to net-asset value and uses asset sales to actively buy back stock. "Disposing of selected properties to improve the balance sheet is a logical choice to raising equity" for these companies, he says.
Subscribe to WSJ Online @ http://www.wsj.com
....Jen
-- posted by JenL_2
» mitelo - Re: REITs Plan to Issue Stock
In response to message posted by JenL_2:I appreciate this article, Jen. I have HMT, HR, and Cohen and Steers Realty Shares. So far, they have all been good to me.
I have heard of disastrous periods for REIT's in the past, so I am always cautious and a little leery of individual issues. The insiders seem to have a big advantage, as always. The officers' salaries are sometimes outlandish.
This type of article is very helpful. Thanks.
I promise, I am not following you.
-- posted by mitelo
» JenL_2 - Re: REITs Plan to Issue Stock
In response to message posted by mitelo:Mitelo - Unfortunately I don't know much about investing in REITs but we do have some knowledgeable REIT investors, like Rhyne, Paul & Norm, as you can see from reading back on this thread. As I remember, they were pounding the table to buy REITs in Dec '99, which just happened to be the REIT bottom, and it's been almost uphill ever since...Let's take a look at the REIT Index (RMS)...
<img src="http://chart.bigcharts.com/bc3/quickchar..." width=579 height=335>
RMS 2 YR Chart
'twould be nice to get some REIT discussion going again on this thread......Jen
-- posted by JenL_2
» Oaktoad - Re: REITs a time to hold, maybe to buy
personally I am just holding my REIT stocks for the dividends. The yields can be quite good, but look for dividend payments of 75% of FFO or less...These are better for us old guys who might want more income. I use them as part of my bond portfolio as they give a bit more inflation protection, but again high inflation is a very tough environment to invest in ..
I get the sense that many of the folks here are younger, but once you hit 50 starting to increase your positions in bonds could include REITs are part of this stategy.
If the economy picks up based on the interest rate cuts and the tax cut ($100B is not a lot, but a start), then REITs might do better as there will less chance of vacancies...
If you don't want to spend much time following them, then consider the Vanguard REIT index .. you can also open an annuity with Vanguard (the only annuity that I would reccomend to anyone, low fees, no surrender charges) and that way avoid current taxation on the dividends which for many would be a big drawback .. you can also put bond funds in these too. The Vanguard annuity is a very good way to defer income if you are sitting on money that is taxable and don't need it for 5-10 years or more.
If you do decide to buy individual stocks make sure you diversify .. lower yields means lower risks, but there are a few with yields over 8-10% that are pretty secure.
-- posted by Oaktoad
» JenL_2 - Rus2K Reshuffling & REITS
this from 5/22 WSJ:Shuffle in Russell Indexes Could Help Some REITs
By JANET MORRISSEY
A number of smaller real-estate investment trusts and companies stand to see big gains, at least in the short-term, as names within the Russell indexes are reshuffled.
Expect to see a surge in demand for shares in companies being added to the index, especially in June, which should propel their stock prices. A preliminary list of candidates for entry into the Russell universe will be drawn up on June 8, and revised several times before an actual list is finalized on June 29.
Real-estate mogul Carl Berg, who founded Mission West Properties Inc. (MSW), which itself is expected to be added to the Russell 2000, said any real-estate company admitted to the index would likely garner greater investor interest from outside the traditional real-estate community.
As new stocks are brought into the indexes, index investors will need to snap up shares of these companies in order to mirror the index.
The selections are based primarily on their market capitalizations at the end of May. Their weightings within the indexes are based on public float, which excludes insider ownership.
In 2000, stocks added to the Russell 2000 rose 38% on average between May 31 and June 29, and then declined slightly -- 3.2% -- after the names were finalized on June 30, according to a Merrill Lynch report. Those added to the Russell 1000 last year jumped almost 37% on average between May 31 and June 29, and gained another 4.3% on June 30, the report said.
Sam Lieber, chief executive of Alpine Management & Research LLC, said he takes into account the Russell reconstitution when making purchases at this time of year. However, he said he will only purchase shares in companies that he's comfortable with and whose stocks are cheap. In general, he said, he doesn't purchase shares for a quick flip unless he will see returns of at least 10%.
About 500 companies are expected to enter the Russell universe, estimates Merrill Lynch derivative strategist Steve Kim in a report. Of those, 487 will be added to the Russell 2000 while about 13 will join the Russell 1000.
As a cautionary note though, Mr. Kim's team declined to say how accurate they had been in the past at forecasting the correct names that wound up in the index.
Mr. Kim is predicting about 17 new real estate names will be added to the Russell universe this year.
By contrast, only one REIT, Plum Creek Timber Co. (PCL), was added last year, according to Russell spokesman Steve Claiborne. There are currently 114 real estate names in the Russell universe altogether.
Among the real-estate names Mr. Kim expects will be added to the Russell 2000 this year are Mission West(MSW), Excel Legacy Corp.(XLG), Crown American Realty Trust(CWN), Mid-Atlantic Realty Trust(MRR), Kramont Realty Trust(KRT), Acadia Realty Trust(AKR), Corporate Office Properties Trust(OFC), Wellsford Properties Inc.(WRP), U.S. Restaurant Properties Inc.(USV), Winston Hotels Inc.(WXH), Associated Estates Realty Corp.(AEC), Investors Real Estate Trust(IRETS), Meritage Corp.(MTH), Universal Health Realty Income Trust(UHT), Annaly Mortgage Management Inc.(NLY), Anthracite Capital Inc.(AHR), Redwood Trust Inc.(RWT) and Thornburg Mortgage Inc.(TMA)
Mission West, one of the strongest performers in 2000 with a total return of more than 90%, is a Cupertino, Calif., REIT that invests in research and development properties primarily in the San Francisco Bay area.
Excel Legacy, Crown American, Mid-Atlantic Realty and Kramont are retail REITs. Corporate Office is an office REIT while Wellsford is a real estate company that owns office, industrial and one apartment property.
U.S. Restaurant owns properties that are leased to big-name restaurant and gas station franchisees such as Burger King Corp., Texaco Inc. and Shell. Winston Hotels owns limited service hotels while Associated Estates and Investors Real Estate own apartments. Meritage is a home builder while Universal Health Realty is a health care REIT.
The remaining names -- Annaly, Anthracite, Redwood and Thornburg -- are mortgage REITs that have been among the top performers in the REIT world in 2001.
In many cases, the volume of shares purchased by index investors will be significantly higher than the stocks' average daily trading volume. Merrill Lynch real-estate analyst Steve Sakwa estimates index investors would need to buy more than 566,000 shares of Mission West in order to maintain a market weight position in the stock. "This 566,000 shares of buying power is significantly above the company's average daily trading volume of 58,000 shares a day over the last three months," he said. "It represents about 13 trading days."
Several other names will see even more dramatic trading. Mr. Sakwa estimates Excel Legacy's volume will equate to 161 days, Acadia to 163 days, Investors Real Estate to 95 days, Wellsford to 88 days and Universal Health Realty to 45 days.
Last year, it was the larger, so-called blue-chip REITs that became the darlings of Wall Street as investors sought out an anti-tech play. However, 2001 has seen a rebound among the smaller-cap names.
In general, smaller-cap, less-liquid REITs with big dividend yields have been outperforming the blue-chip REITs in 2001, and, for some of those names, the additional bump from being added to the Russell universe could push their already robust returns even higher.
Mortgage REITs, for example, have posted total returns, including dividends, of 43% on average in 2001 while REITs in general are up only 6%, according to the National Association of Real Estate Investment Trusts.
About two real estate names -- Pacific Gulf Properties Inc.(PAG) and Corrections Corp. of America (CXW) -- will be deleted from the Russell universe, according to Merrill Lynch's strategist.
Subscribe to WSJ Online @ http://www.wsj.com
Let's make 2 charts of these REITs:
<img src="http://pvcharts.quicken.com/bin/icenter...." width=470 height=250>
REITs YTD Chart
<img src="http://pvcharts.quicken.com/bin/icenter...." width=470 height=250>
More REITs YTD Chart
......Jen
-- posted by JenL_2
-- posted by JenL_2
» Oaktoad - Some REITs to consider
A brokerage house gave out this list as good REITs for the present. All have reasonable yields (5.5%-6.4%) and very good dividend coverage as a percent of FFO.The broker feels that these stocks may benefit from lower interest rates as well as providing an inflation hedge over time.
Personally, I suggest that if you only have limited funds, buy the Vanguard REIT index funds. If you have enough, buy an assortment giving you both geographical diversity as well as industry diversity (apts, commercial property, malls, strip centers, etc)
The list is amb, avb, eop, slg, asn, bxp, ggp, vno
I know that these don't seem very exciting, but my REIT mini mutual fund is up about 5% this year. Throw in the dividends and for five months it is about 7%...
Given that most predictors are indicating that the days of 15% annual gains are over and that we may be returning the the old 9-10% per year.. REITs offer a decent return.
-- posted by Oaktoad
» JenL_2 - Re: Some REITs to consider
In response to message posted by Oaktoad:Thanks Paul - Let's compare these stocks with the the iShares Cohen & Steers Realty Majors Fund (ICF):
http://www2.marketwatch.com/news/story.a...
<img src="http://pvcharts.quicken.com/bin/icenter...." width=470 height=250>
Some REITs to consider, ICF, S&P500, DJIA YTD Chart
But since these charts don't show dividends reinvested the REIT performance is even better.....Jen
-- posted by JenL_2
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