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Brad Case  

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  • Study: REIT returns are the best [View news story]
    walterbyrd, I've done some research on that. Going back to the beginning of 1994, I looked for periods during which interest rates increased fairly substantially over a fairly long time. There were 16 of them, and it turns out equity REITs did well in 12 of them--and very well in 9 of those 12. The reason is that interest rates generally increase BECAUSE macroeconomic conditions are improving, which means rent growth and occupancy rates are improving, which means stronger earnings and increased dividends. It's not guaranteed that REITs will do well when interest rates go up, but that's what has happened most of the time.
    Oct 9, 2014. 07:50 PM | Likes Like |Link to Comment
  • 4 REITs Recommended by Morningstar [View article]
    Your REIT dividend will be apportioned into three types: (1) ordinary income, (2) long term capital gains, and (3) return of capital. The latter reduces the basis of your gain, and so ultimately has the same favorable tax treatment as long term capital gains. As a high-dividend investment it may make sense to put it in an IRA, but it's not the same problem as with other high-dividend investments where the entire dividend is treated as ordinary income.
    Jul 18, 2011. 03:15 PM | Likes Like |Link to Comment
  • R.W. Baird on REITs: 4 Top Picks and 7 Other Best Bets [View article]
    Thanks, Emerald. R.W. Baird points out that AVB is selling at a premium, but they think it's warranted. Do you have any picks, especially among industrial?
    By the way, the folks at R.W. Baird were kind enough to make their report, and a presentation that goes with it, available. The report is at, and the presentation is at
    Jun 30, 2011. 03:26 PM | Likes Like |Link to Comment
  • 4 Recommended REITs [View article]
    EXCELLENT thoughts. Yes, if what we're interested in is the change in the value of their real estate portfolios, then we would want to take their capital structure into account. All I'm doing is looking at the total returns on investments in their stock. Specifically, my numbers are computed from the levels of the total return versions of the FTSE NAREIT All REITs Index, FTSE NAREIT All Equity REITs Index, and FTSE NAREIT Mortgage REITs Index for February 7, 2007 (the peak), March 6, 2009 (the trough), and June 21, 2011.
    Along those lines, I'm working to introduce a new set of indices--which I believe will be in the market later this year--that do take into account the capital structure of each publicly traded equity REIT to measure the change in (unlevered) property values. Not only that, but with these indexes we'll measure the values of particular property types (office, retail, industrial, apartment, and hotel) in particular regions (Northeast, Midwest, South, and West), rather than simply the values of portfolios held by REITs that mostly concentrate in those property types.
    Thanks for your very astute comment.
    Jun 25, 2011. 09:48 PM | Likes Like |Link to Comment
  • Chilton: Time to Put REITs in the Portfolio [View article]
    Actually, Brad T., I meant to note in my article that there is a growing stack of portfolio optimization papers from organizations such as Morningstar, JPMorgan, and Wilshire (plus David Swensen, manager of the Yale endowment and author of "Unconventional Success: A Fundamental Approach to Personal Investment") with recommended REIT allocations for moderately risk-averse investors of 14% at the low end to well above 20% at the high end. I think I need to write a separate article summarizing those.
    Jun 23, 2011. 05:17 PM | 1 Like Like |Link to Comment
  • Chilton: Time to Put REITs in the Portfolio [View article]
    Sorry, Jake, but I'm not an equity analyst--I'm just not in a position to make long or short calls on particular companies. What I can do is point people toward others; I hope that's still useful.
    Jun 23, 2011. 05:12 PM | Likes Like |Link to Comment
  • REIT Market Bullish Despite Property Values Hitting a New Bottom [View article]
    REIT stock prices have run strong, but they're still 19% below where they were when the market hit its peak more than four years ago, in February 2007. For comparison, during the early 1990s downturn REITs lost 23.9% from peak to trough. So, despite the strength in REIT returns, they're not far ahead of where they were when the early 1990s REIT bull market STARTED.
    Jun 23, 2011. 04:25 PM | 1 Like Like |Link to Comment
  • 4 Recommended REITs [View article]
    That would be great, Brad T. Thanks.
    Jun 23, 2011. 01:02 PM | Likes Like |Link to Comment
  • 4 Recommended REITs [View article]
    I can compute correlations among the four, but in general they're likely to be fairly highly correlated because they all represent investments in the real estate asset class (even though they're in different property types). What's most important is that REITs will generally have a low correlation with the rest of the stock market, because the drivers of returns for the rest of the stock market are different from the drivers of returns for the real estate asset class, including REITs that are traded through the stock market.
    Jun 22, 2011. 07:14 PM | 1 Like Like |Link to Comment
  • 4 Recommended REITs [View article]
    Thanks, Ho'opono. I've been too busy to blog over the last few months, but I hope this is, as they say, a "new dawning."
    Jun 22, 2011. 11:50 AM | Likes Like |Link to Comment
  • 3 Small Cap REITs With Upside Potential [View article]
    The company was called First Union Real Estate when it started in 1960.
    Apr 7, 2011. 05:29 PM | Likes Like |Link to Comment
  • Using REITs to Generate Monthly Income With Little Downside Risk [View article]
    I know what you mean, but NAREIT hired Morningstar to study how to put together a mixed-asset portfolio (domestic and international stocks, bonds, REITs, etc.) to optimize returns while protecting against tail risk, meaning the risk of really terrible returns (as opposed to mere volatility). Surprisingly--at least it surprised me--the optimal allocation to U.S. REITs is even greater when you pay attention to tail risk than when you ignore it. What that means is that, even if REITs by themselves have significant tail risk, the way they interact with other assets means that they actually protect against tail risk at the level of the overall portfolio.
    Mar 22, 2011. 08:17 PM | Likes Like |Link to Comment
  • Dividend Champions: Focus on REITs [View article]
    Thanks for answering mdoolitt's question, David and Bruce. One thing to add: the definition of FFO, as you say, was developed by NAREIT and is quite standard by now, even though not GAPP--but the adjustments to create AFFO are done by individual equity analysts and not necessarily standard.
    Mar 20, 2011. 11:04 PM | 4 Likes Like |Link to Comment
  • Are REITs a Good Investment or the Next Bubble? [View article]
    The paper I described is already published, by different authors--I'll look for the citation and post it. My own paper is a little different, and looks at how the market reacted to announcements by REITs during the liquidity crisis regarding dividend cuts and dividend suspensions. In a normal market, of course a company's stock price would decline if it reduced or suspended its dividend, because both actions would signal a decline in its earnings going forward. During the liquidity crisis, though, REITs that either cut or suspended their dividends actually saw their stock price increase. The reason seems to be that everybody knew that earnings were declining (because of the Great Recession); what investors weren't sure about was whether each company would have the cash to avoid defaulting on maturing debts. Under those circumstances, reducing or suspending the dividend meant that the company's management had recognized the need to conserve cash, and therefore investors didn't need to worry so much about loan defaults.
    Mar 20, 2011. 11:00 PM | 1 Like Like |Link to Comment
  • Three REITs Tagged as Potential Takeover Targets [View article]
    The question--not just for health care REITs but for other REITs as well--is simply which will rise faster: stock prices or earnings (more specifically distributions). The fact that current yields, while larger than for most other assets, are also much smaller than historical REIT averages suggests that distributions will outpace stock price growth going forward. My own belief is that the forces that will drive earnings growth--improvement in commercial real estate operating fundamentals, and accretive acquisitions funded by access to capital on favorable terms--are common to all sectors of the publicly traded REIT industry, not just health care.
    Mar 20, 2011. 09:18 AM | 1 Like Like |Link to Comment