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Brad Case

 
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  • Extra Storage Space: Diversify Your Portfolio With a Self-Storage Leader [View article]
    Very good, omaha--thanks.
    Feb 5 09:50 AM | Likes Like |Link to Comment
  • More Good News for REIT Investors: Private Real Estate Investment 'Floundering' [View article]
    Mitch,
    Unfortunately the NCREIF data are available only to members. But you've raised another interesting question, one which may well have been investigated independently by an academic real estate economist--and if not, I would be interested in looking at it provided I have the time. Let's trade e-mails about it, since I can't easily do something along those lines when I'm not in the office.
    --Brad
    Feb 5 09:48 AM | Likes Like |Link to Comment
  • ING: Global REIT Returns Estimated at 8%-12% for 2011 [View article]
    tweedn,
    K1 forms are for partnerships (LPs and MLPs), not for ETFs, publicly traded stocks, or REIT mutual funds. Investing in a publicly traded REIT or a REIT ETF (such as VNQ) is just like investing in any other publicly traded stock, and you won't have a K1. (Some REITs that are not publicly traded may be organized as LPs and may involve a K1, but if you're investing in publicly traded REITs, REIT ETFs, and REIT mutual funds, that won't apply to you.)
    The dividend from a publicly traded REIT has three parts: ordinary income, long-term capital gain, and return of capital. Return of capital reduces your basis, so it has essentially the same tax treatment as long-term capital gain. So your wife is correct that there is return of capital, but in the case of publicly traded REITs that's just a matter of how the 1099-DIV is allocated--it's just the same as with any other ETF or mutual fund, and still doesn't involve a K1.
    --Brad
    Feb 5 09:35 AM | 1 Like Like |Link to Comment
  • 3 High Yield REITs: High Return or High Risk? [View article]
    Bravo, User 427801. That's using diversification between the two parts of the REIT market (equity REITs and mortgage REITs) along with granularity (relatively small exposure to each asset in the category) to avoid making a bad bet on a single exposure. Every investor wants to be able to say the s/he picked the right company, but the truth is that most investors pick the wrong company, so exposure through broad-based investments such as REM and VNQ protect investors from the mistakes that most of them do, in fact, otherwise make.
    Feb 5 06:40 AM | 3 Likes Like |Link to Comment
  • More Good News for REIT Investors: Private Real Estate Investment 'Floundering' [View article]
    mitchb,
    You've raised very astute questions.

    I'm comparing fees and expenses by focusing on the difference between the return that's reported ("gross") and the return that's actually received by the investor ("net"). For an investment in a private equity real estate fund, that difference fully represents the cost of investing in real estate, because the "gross" return is the return thrown off by the property investments (income plus appraised capital appreciation) and the fund manager then subtracts money (management fee, promote, acquisition fee, disposition fee) before sending the remainder to the investors. For an investment in a publicly traded REIT, though, the "gross" return is not the return thrown off by the property investments--in fact, it's already largely "net" in the sense that most of the cost of investing in real estate (G&A) has already been subtracted. That is, on the publicly traded REIT side, the "gross" return is actually "net" of everything except the investor's cost of making the REIT investment (transaction fees and asset management fees), which is to say 0.13% in the case of VNQ (plus the transaction cost of buying the shares, say $7.95).

    So it's not an apples-to-apples comparison of how much it costs to accomplish an investment in commercial property--it's just an apples-to-apples comparison of the difference between the return that's reported by the investment and the return that's actually received by the investor.

    As you point out, an acquisition fee or a disposition fee is a one-time fee, and if you amortize it over a longer holding period then you reduce it as a share of the total. On the other hand, many funds that charge acquisition and disposition fees (especially the latter) have a fixed holding period (such as seven or ten years), so the investor doesn't get the opportunity to amortize it down by holding it for a longer time.

    I should note that the data on the fees and expenses of investment in private equity real estate funds come from three indexes published by the National Council of Real Estate Investment Fiduciaries (NCREIF): the ODCE index of core funds and the NCREIF/Townsend Indices of value added and opportunistic funds. In each case NCREIF reports both gross and net total return, so the average amount of fees and expenses is simply the difference between the two. For publicly traded REITs there is no index of net returns, so I've chosen VNQ because it is a widely held way of accessing REITs. Funds are active managers, though, while VNQ is a passive index fund; an actively managed REIT mutual fund, ETF, or separately managed portfolio would be more expensive. For example, the PowerShares Active U.S. Real Estate Fund (PSR) has an expense ratio of 0.80%.

    I believe you're right about the difference in infrastructure between publicly traded REITs and most private real estate investment managers. But I don't know it for sure, and certainly some core fund managers (such as TIAA-CREF) have the capability of developing equally sophisticated infrastructure. The fact that the returns of core funds are typically quite poor on average suggests that perhaps they haven't developed as good a property management infrastructure even though they could, but I'm just speculating.

    I agree with your final point: you could imagine a situation in which publicly traded REITs were overvalued enough relative to private equity real estate funds to make the private side worthwhile--but I think it would be tough to find any time in history when that has been true.

    Thanks for very good comments,
    --Brad
    Feb 5 06:37 AM | 4 Likes Like |Link to Comment
  • ING: Global REIT Returns Estimated at 8%-12% for 2011 [View article]
    Great, WorldlyPatriot. Glad to have been able to help out.
    Feb 4 09:14 PM | 2 Likes Like |Link to Comment
  • Commercial Real Estate: Good Fundamentals, Increased Default Rates - Why the Disconnect? [View article]
    AlphaJon.blogspot,
    Which are the companies in the DJ US Real Estate Index that don't belong?
    The indexes I know are the FTSE NAREIT and FTSE EPRA/NAREIT, and they certainly are restricted to commercial real estate--especially the FTSE NAREIT (domestic), which are strictly REITs, whereas the global indexes include real estate operating companies, some of which (especially in Asia) have significant revenue from sources (including development) other than lease rents.
    --Brad
    Feb 4 04:20 PM | Likes Like |Link to Comment
  • Best REIT Dividends Come From Healthcare Sector [View article]
    Bert,
    The publicly traded health care REITs (from largest to smallest) are:
    HCP Inc. (HCP)
    Ventas (VTR)
    Health Care REIT (HCN)
    Nationwide Health Properties (NHP)
    Senior Housing Properties Trust (SNH)
    Omega Healthcare Investors (OHI)
    Healthcare Realty Trust (HR)
    National Health Investors (NHI)
    Medical Properties Trust (MPW)
    LTC Properties (LTC)
    Universal Health Realty Income Trust (UHT)
    Sabra Healthcare REIT (SBRA)
    Cogdell Spencer (CSA)

    There's a searchable directory of REITs, with links to the web sites of many of them, at www.reit.com/AboutREIT....
    --Brad
    Feb 4 03:49 PM | Likes Like |Link to Comment
  • Extra Storage Space: Diversify Your Portfolio With a Self-Storage Leader [View article]
    Turner, Brad T., and omaha,
    I haven't seen any data, but I don't believe that the younger generation is less interested in storing things. The older generation stored things because they were frugal and didn't want to throw away anything that might still be of value. The younger generation stores things because they're wealthy and able to buy more things than they can fit in their houses or apartments. I truly don't see any significant tapering off in the demand for storage space.

    Also, I agree with BT: I expect that technology will be a significant driver of earnings for publicly traded storage REITs such as EXR at the expense of mom-and-pop operations. To be able to view the available storage spaces online, choose the right one without driving to the location to scope it out, and reserve it rather than finding out it's been rented while you were in your car--all those give EXR and the other publicly traded REITs a competitive advantage over the rest of the industry.
    --Brad
    Feb 4 03:41 PM | Likes Like |Link to Comment
  • ETF Focus: iShares Developed Europe REIT ETF Ideal for Diversification [View article]
    You flatter me, Ho'opono. Personally, I would be very surprised to see any effect whatsoever on volume!
    Feb 4 03:27 PM | 1 Like Like |Link to Comment
  • 2011 Stock Picks: REIT ETFs [View article]
    It's the essence of diversification, RicoJay13, in the sense that diversification is not a matter of having "some" exposure to different asset classes but of having "enough" exposure to them. Publicly traded REITs are a way of investing in an asset class--real estate--that's different from the stock market even though you invest in it through the stock market. Even though total market indexes include REITs, that's at a very small level, and for diversification you need to have the right amount of investment in each asset class. The way to do that is to have one allocation to the stock market (VTSMX/VTI) and a separate allocation to publicly traded REITs (VNQ) for exposure to the real estate market.
    Feb 4 09:55 AM | 2 Likes Like |Link to Comment
  • Commercial Real Estate: Good Fundamentals, Increased Default Rates - Why the Disconnect? [View article]
    Amen, BT. I actually believe a large reason why this sort of thing keeps happening is simply generational change: the people who learned the lesson the last time around (the late 1980s and early 1990s) have either retired or moved up in an organization to where they don't have day-to-day operational responsibilities any more, and the lesson doesn't get passed on to the incoming generation.
    Feb 3 12:34 PM | 3 Likes Like |Link to Comment
  • Commercial Real Estate: Good Fundamentals, Increased Default Rates - Why the Disconnect? [View article]
    What we've seen so far, apberusdisvet, is just the beginning of an improvement in occupancy rates and rent growth--and that's a nationwide average, not necessarily the case in all markets. Also, keep in mind that the improvement hits higher-quality properties first, and those are the ones where vacancy rates generally never got as dramatically high as in the lower-quality bulk of the market. Unfortunately, those properties (and locations) where vacancies got their worst are also likely to be those where they persist the longest. So we're likely to continue seeing vacant storefronts--in those shopping malls that had lots of them--until long after conditions have improved dramatically in the higher-quality market segments.
    Feb 3 12:32 PM | 4 Likes Like |Link to Comment
  • Commercial Real Estate: Good Fundamentals, Increased Default Rates - Why the Disconnect? [View article]
    Thanks, Jim, I totally agree with you. Just to clarify my article, 5-10 years is generally the maturity, but (as you say) the amortization is generally 25-30, which is why there's a big balloon payment at maturity.
    Feb 3 12:28 PM | 1 Like Like |Link to Comment
  • Commercial Real Estate: Good Fundamentals, Increased Default Rates - Why the Disconnect? [View article]
    My article links to it, doubleot. Just click on the word "Trepp."
    Feb 3 12:26 PM | Likes Like |Link to Comment
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