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Post by johnsmith on Mar 17, 2023 16:22:39 GMT
Hey, I decided to post my thoughts here instead of on the Buy,Sell, why board.
REITs are highly sensitive to long rates.
So. Inflation goes up, Interest rates go up, REITs go down!
As with all businesses - the more debt, the riskier it is. Many reits take on way too much debt and they are definitely riskier.
Some REIT sectors are dogs in bad times - like Hotels. In the US shopping malls have been particular dogs in the last decade as more shopping moved online. A lot of it moved online because online businesses didn't have to pay sales tax. That was a 4 - 8% cost advantage to online stores. That's a huge advantage.
Offices are bad, because of reduced demand (covid took a huge toll on office demand) and it's not likely to come back.
Also US REITs are not expected to do well in the 10 - 12 year scenario.
That was the bad news  -------------------
The good news, there are REITs with good management, low debt, decent demand tailwinds
Grocery Anchored Shopping Malls, LifeSciences, Industrials, Housing
Some of the good REITs I would look at are
GASH - ROIC, KIM, BRX LifeSciences - ARE Industrials - STAG, PLD, REXR Housing - (I can't recommend any as I haven't looked deeply)
I'd stay away from Office, Shopping Malls, high debt laden REITs. Other good REITs exist.
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Now let's say you want even more safety & income- Go for REIT preferreds from the short list you create.
The easy way to figure out if the preferred dividend is safe: - is there a dividend on the common? - Yes (preferred should be safe)
Just remember just like a bond - the price of the preferred will move inversely to the interest rate (+ inflation). As long as you are happy with the current yield and can ignore the price movement, you should be fine generally.
Do your own Due Diligence, ask if you have any questions.
PS - I have a much higher tolerance for risk, I balance that with having lots of cash/cds/treasury bonds etc.
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Post by johnsmith on Mar 17, 2023 16:29:07 GMT
I also wanted to tell you how I thought about the purchase of BRX.
First I already decided it was a good purchase.
At the current price of ~$19.99
the dividend yield is around 5%+
So it's as good as a Treasury Bill, without the safety.
I get the same income as a Treasury Bill, with an option on future capital gains.
If the price goes down, I'll hold the stock and keep collecting the 5%+ dividend, if the stock goes up, I might get a capital gain.
BRX has - good management now, is paying a low percentage of AFFO as dividend, is reinvesting in the business entirely from income.
If you wanted even more safety - KIM (good management, lower debt, same sector, has preferreds)
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Post by retiredat48 on Mar 17, 2023 22:03:16 GMT
johnsmith,...Thanks for info. But my question, unaddressed, is: What about HEADLINE RISK? That is, if a REIT of any kind goes under, people will be throwing out the babies with the bathwater. Like people telling their broker...if its a REIT, sell. I will consider REITs AFTER a major bad-news fundamental blow...like a bankruptcy. R48
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Post by johnsmith on Mar 17, 2023 22:07:02 GMT
johnsmith ,...Thanks for info. But my question, unaddressed, is: What about HEADLINE RISK? That is, if a REIT of any kind goes under, people will be throwing out the babies with the bathwater. Like people telling their broker...if its a REIT, sell. I will consider REITs AFTER a major bad-news fundamental blow...like a bankruptcy. R48 I personally don't consider headline risk, there definitely can be headline risk. |
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Post by bb2 on Mar 18, 2023 19:46:18 GMT
Too early I'm thinking, expecially retail, no matter the anchor. Edit: But I'm waiting on all risk now. I like ARE ever since I heard on the radio about demand for life science space in the SF Bay Area. But now, with maybe some funding issues, I'm waiting/watching. Start up scene might not be great for a bit.
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Post by bb2 on Mar 21, 2023 18:15:13 GMT
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Post by johnsmith on Mar 22, 2023 12:56:40 GMT
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Post by johnsmith on Mar 22, 2023 22:22:20 GMT
seekingalpha.com/article/4589223-reading-the-real-estate-tea-leaves"Decelerating growth presents near-term challenges - but we believe they could be temporary. Seasonality or slowdown? That’s the question real estate investors are asking as they wrestle with valuations in the face of declining growth in most subsectors, especially the short-duration sort. Consider: Apartments: Rents fell every month from August 2022 to January 2023, before rising modestly in February. (Year-over-year growth in February was the lowest since April 2021.)1 Storage: Since September 2022, the four large public storage REITs have suffered double-digit year-over-year declines in street rates for a 10ft x10ft unit. (In February, rates dropped by 15%.)2 Lodging: Wells Fargo reported that foot traffic at hotels (based on cellphone-location data from Placer.ai) slowed in 1Q23 vs. 1Q19, compared with 4Q22 vs. 4Q19.3 (The Omicron variant is creating easy year-over-year comps in lodging that may be masking a slowdown in demand, so indexing to pre-COVID 2019 may paint a clearer picture.) Office: Leasing volume at public-office REITs declined 37% in 4Q22 vs. 4Q21, and 5% between 1Q23 and 4Q22.4 Other sectors have more idiosyncratic drivers for near-term revenue growth, but most are decelerating from elevated levels in 2022. Slowdowns in some sectors don’t come as a great surprise. In apartments and storage, for example, the winter months tend to see less demand, and rates often soften to drive occupancy. Regarding hotels, travel patterns were likely to normalize as COVID-related disruptions eased. Yet, in our view, while the slowdown is normal, the pace is abnormal, and there lies the concern. We believe rising cap rates are another worry. In the apartment, industrial and office sectors, cap rates are 30-55 bps higher than a year ago.5 With real Treasury yields highly volatile, Fed policy increasingly uncertain, and lending markets likely to be impacted by recent bank failures, it seems unlikely that cap rates will retreat anytime soon. In our view, this combination of slowing growth and rising cap rates will likely create headwinds for real estate investors in the near term. But if recent slowdowns prove little more than seasonal trends - and the capital markets manage to stabilize when the Fed reaches its terminal rate - we believe the second half of 2023 could prove an ideal time to deploy capital into real estate. Notes: (1) Apartment List as of 2/28/23; (2) Truist research as of 2/28/23; (3) Wells Fargo as of 3/6/23; (4) ISI research as of 3/5/23; (5) Real Capital Analytics and Bloomberg as of 3/7/23."
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Post by bb2 on Mar 23, 2023 19:37:58 GMT
RE the old podcast - I'd listen to Sam Zell any day, old or new. However....
Love it when after wasting 4 mintutes and 9 seconds of their listener's time, (which is why I normally don't do podcasts), she says, "I guess we should just dive in".
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Post by mnfish on Apr 20, 2023 12:51:15 GMT
GTY - Getty Realty Corp popped up on one of my saved screeners. publicly traded, net lease REIT specializing in the acquisition, financing and development of convenience stores (72% of port), car washes (12% of port), legacy gas and repair shops (10% port) 5% yield - Anyone holding or considering? johnsmith?? |
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Post by johnsmith on Apr 20, 2023 15:11:06 GMT
What made it up on your screener?
What do you like about it? Want to share a few more financial details about it?
PS - I'll have a look at it later when I have some time and give you more thoughts.
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Post by bb2 on Apr 21, 2023 21:03:19 GMT
Thanks for posting about GTY. Looks interesting but off the top of my head and what I'll see if they adress in calls or SEC doc risk sections is how they're thinking about EV adoption and effects on auto servicing. Land left over from a gas and oil/servicing business closing might be expensive to clean up as well. Just wondering out loud with only basic info on the REIT at this point.
For sure, longer term concerns and one thing nice about property is that it doesn't really need to be as innovative as business, so less risky. But then things happen where specific property types are impacted by innovation; office for example. Brick and mortar.
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Post by johnsmith on Apr 22, 2023 14:42:50 GMT
So I took a brief look at GTY and I don’t find anything special to recommend it vs say NNN or O
They have a decent balance sheet. They’ve been able to raise unsecured debt at 3.65% of 10 year term in Jan 2023.
They’ve made forward share sales to cover investments. All that being said, the returns should probably be similar to the other two.
I’d rather invest in NNN instead, just a preference.
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Post by bb2 on Apr 22, 2023 17:58:14 GMT
And yes, all my concerns above (and more) are indeed discussed in the 10-K. They're in the process of diversifying but not an ideal situation to be in. At least the future of autos is well telegraphed, unlike WFH but still....
So I think I'll move on but thanks for the post. I'll keep in my REIT watch portfolio for now.
an example from the 10-K:
"The majority of the properties owned or controlled by us are leased as convenience store and gasoline station properties, and therefore may contain, or
may have contained, USTs for the storage of petroleum products and other hazardous or toxic substances, which creates a potential for the release of such
products or substances. Some of our properties are subject to regulations regarding the retirement and decommissioning or removal of long-lived assets
including buildings containing hazardous materials, USTs and other equipment. Some of the properties may be adjacent to or near properties that have contained
or currently contain USTs used to store petroleum products or other hazardous or toxic substances. In addition, certain of the properties are on, adjacent to, or
near properties upon which others have engaged or may in the future engage in activities that may release petroleum products or other hazardous or toxic substances. There may
be other environmental problems associated with our properties of which we are unaware. These problems may make it more difficult for us to re-lease or sell
our properties on favorable terms, or at all."
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Post by mnfish on Apr 23, 2023 12:03:53 GMT
Thanks for the replies on GTY.
I didn't like the possible environmental issues either -
" Specifically, the Company concluded that there was no material continued risk of having to satisfy contractual obligations relating to preexisting unknown environmental contamination at certain properties."
" Accordingly, during the quarter and year ended December 31, 2022, the Company removed $6,412 and $23,543, respectively, of unknown reserve liabilities which had previously been accrued for these properties which resulted in net credits of $5,576 and $22,193"
For a 5.3% dividend and a stock that has basically traded flat for 4 years I think I'll buy 6mo T-bills instead.
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Post by bb2 on Sept 27, 2023 17:14:16 GMT
A book, "Educated REIT Investing" has a chart showing REIT outperformance, (which I think means price), correlation to 10-yr. From 1998 to 2011, R2 was 0.0. The dots are all over the place. From 2012 to 2018 it was .70. The dots make a nice line. And this last rising rate environment has certainly been bad for REITs. But maybe the old days sticks in the minds of some REIT analysts as they continue with their "buys". The book doesn't try to explain the change.
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