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Brad Case

 
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  • Can REITs Keep Rolling? [View article]
    I disagree with you, BruceM. Part of the reason that current yields on REITs are so low is that current yields on all instruments are low--REIT yields are actually high relative to other assets, including income-oriented ones. Also, several REITs reduced their dividends during the liquidity crisis (and others paid them partly in the form of stock, which isn't counted in dividend yields) and some haven't fully restored them yet.

    But the main reason is that investors believe earnings growth will be particularly strong going forward, first because operating fundamentals will improve (a process that has already started) as the economy improves, and second because REITs will acquire properties at good prices from distressed sellers because of their superior access to capital. I've written about this several times, including at seekingalpha.com/artic....

    In short, I think the first reason you cite is the correct one: the current market anticipates strong FFO growth with associated growth in distributions (and stock price appreciation).
    --Brad
    Mar 8, 2011. 09:44 AM | 1 Like Like |Link to Comment
  • Can REITs Keep Rolling? [View article]
    I hold its mutual fund cousin, Winston. I'm a believer in asset allocation and diversification using low-cost (which means passively managed) broad-based instruments that get me exposure to the crucial asset classes, whether strategically or tactically. In my opinion every investor needs to have a meaningful allocation to the domestic REIT industry, and there's no better way to do it than VNQ (though there may be equally good ways).
    Mar 8, 2011. 09:34 AM | 1 Like Like |Link to Comment
  • REITs Will Benefit From 'Becoming a More Mature Asset Class' [View article]
    tweedn,
    That's a question that can't be answered except by taking into account information about your risk tolerance and the other holdings in your portfolio, among other questions. But here are some data points that may be helpful to you and/or your investment advisor:

    (1) David Swensen, who runs the Yale endowment and is very highly regarded among pension fund investors, said that "a pretty good portfolio" for an individual investor should have 20% invested in publicly traded REITs. (In 2009--just as the REIT rally started--he reduced that to 15%.)

    (2) The investment research company Morningstar (Ibbotson Associates, which they acquired) has done a series of studies sponsored by NAREIT using different optimization methods, and generally found that the real estate share should be around 20% for investors with moderate risk aversion.

    (3) PIMCO recommended (seekingalpha.com/artic...) that publicly traded REITs be 15% of the portfolio for younger investors, declining to 2.5% at retirement.

    (4) Various independent academic studies have put the REIT share at between 14% and 48%.

    (5) My own portfolio allocation to REITs is one-third. (I have above-average risk tolerance.)
    --Brad
    Mar 7, 2011. 11:08 AM | 1 Like Like |Link to Comment
  • 10 High-Yielding REITs Offering Safety and Growth [View article]
    gators,
    The requirement is that REITs distribute at least 90% of their taxable income. To finance acquisitions and other investments they can use both equity and debt; typically they maintain relationships with all parts of the capital market so they can finance growth with whichever form of capital is most favorable at the time that the growth opportunity arises.
    --Brad
    Feb 25, 2011. 11:35 PM | 1 Like Like |Link to Comment
  • Outlook for REITs Is Solid: Multifamily and Office Especially Strong [View article]
    User 427801,
    No, as far as I know there's no ETF or CEF focused on the self-storage sector. There are ETFs focused on multifamily, retail, and office/industrial. You can get info on REIT ETFs and mutual funds at NAREIT's web site, reit.com.
    --Brad
    Feb 25, 2011. 07:34 PM | 1 Like Like |Link to Comment
  • Outlook for REITs Is Solid: Multifamily and Office Especially Strong [View article]
    That's very interesting, tweedn. The available data suggest that publicly traded REITs may be better property managers than private real estate investment managers, as reflected in lower vacancy rates and better rent growth. That's especially important in a weak market: when the fundamentals are weak on average, there's likely to be a big divide between successful managers with relatively strong operating fundamentals and poor managers with extraordinarily weak fundamentals. But there's very little direct data, especially on why their occupancy and rent growth should be better. Your daughter's experience suggests some of the possible reasons.
    Thanks.
    Feb 25, 2011. 09:21 AM | 1 Like Like |Link to Comment
  • Outlook for REITs Is Solid: Multifamily and Office Especially Strong [View article]
    I think I can get you that, BT, but probably not until Monday when I return to the office.
    Feb 24, 2011. 09:55 PM | 1 Like Like |Link to Comment
  • Constructing a Better Real Estate Portfolio [View article]
    REITBull,
    I think their plan is poorly thought out: it'll actually increase risk, rather than reduce it, and likely reduce returns at the same time. Not to be subtle about it, their plan is as bad as it seems.
    --Brad
    Feb 15, 2011. 09:11 AM | 1 Like Like |Link to Comment
  • 3 High Yield REITs: High Return or High Risk? [View article]
    Well, I wouldn't call it Vegas: it was a strategic move, not a tactical one, and even with that my total REIT allocation is only 36%, which is still a little bit below my target. I was just substantially underallocated to REITs beforehand, because my main other thrift plan doesn't have any REIT option, and the third has a real estate option, but a poor one.
    Feb 10, 2011. 06:38 AM | 1 Like Like |Link to Comment
  • ING: Global REIT Returns Estimated at 8%-12% for 2011 [View article]
    Again, Doctorft, over the last five years the ING Global Real Estate Fund has averaged 2.19% per year compared to 1.84% per year for the FTSE EPRA/NAREIT Developed Index, and the Cohen & Steers Realty Shares Fund has averaged 3.50% per year compared to 2.42% per year for the FTSE NAREIT All Equity REITs Index. They don't seem to have been doing such a bad job in a very bad market situation. (The S&P 500 returned 2.24% per year.)
    Feb 8, 2011. 10:55 AM | 1 Like Like |Link to Comment
  • ING: Global REIT Returns Estimated at 8%-12% for 2011 [View article]
    Doctorft,
    I'm surprised. The returns on the ING Global Real Estate Fund have averaged 12.24% per year since inception, which is very slightly better than the average return of the FTSE EPRA/NAREIT Developed Real Estate Index at 12.06% per year. That's pretty darn good, especially for an investment that has a long-term correlation with the broad U.S. stock market of only about 66%.

    I'm not familiar with the ING Global Natural Resources Fund, but I see on ING's web site that its returns have averaged 7.93% per year since inception (12/1975) and 19.49% per year over the last 10 years. I don't have a benchmark to compare it to, so I can't say whether the fund outperformed a relevant benchmark, but that doesn't seem too bad.

    You didn't mention which Cohen & Steers fund you've been unhappy with, but perhaps their flagship fund, Cohen & Steers Realty Shares, has returned 12.51% per year since inception (7/91), slightly better than the FTSE NAREIT All Equity REITs Index (11.46%)--again, pretty good especially for an investment with a low long-term correlation with the broad U.S. stock market of about 57%.

    I wonder if your disappointing experience was simply the broad REIT/stock market downturn?
    Feb 7, 2011. 10:44 PM | 1 Like Like |Link to Comment
  • Recommended Reading: PIMCO on Diversified Portfolios for Retirement Investing [View article]
    I'm not in a position to give investment advice, Doughboy, only to pass along reports and other information that may help. In general, the allocations that PIMCO shows for people nearing or at retirement are pretty reflective of what investment advisors tend to recommend for people already in retirement: mostly fixed income (35% bonds, 35% TIPS), enough cash to meet liquidity needs (10%), and the rest diversified in equities, including REITs and commodities as well as domestic and international stocks (30%).

    You should definitely talk to an investment advisor, who can help you find assets that will help get the total return you need without making you overly uncomfortable about risking your money.
    Feb 7, 2011. 09:56 PM | 1 Like Like |Link to Comment
  • ING: Global REIT Returns Estimated at 8%-12% for 2011 [View article]
    Drizzt,
    In general, there's little or no systematic relationship between interest rates and equity REIT returns. For example, an increase in interest rates discourages new construction, which helps operating fundamentals for REITs, but can also discourage demand for commercial space.
    --Brad
    Feb 7, 2011. 09:50 PM | 1 Like Like |Link to Comment
  • ING: Global REIT Returns Estimated at 8%-12% for 2011 [View article]
    Yes, Drizzt, these are total returns. They do comment generally as to which portion of the total they think will come from income yield and which from capital appreciation.
    Feb 7, 2011. 06:45 PM | 1 Like Like |Link to Comment
  • Recommended Reading: PIMCO on Diversified Portfolios for Retirement Investing [View article]
    Gratian,
    My own portfolio allocation, like yours, is different from the one in PIMCO's report. But it's an excellent starting point for all investors (even the biggest pension funds).
    --Brad
    Feb 7, 2011. 09:38 AM | 1 Like Like |Link to Comment
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