H.J. Huneycutt

Pennsylvania REIT: A Bargain in the Retail Sphere

Trane,

There is no "technical analysis" in the article --- abstruse or simplistic. PREIT's properties probably will not "perk up" at any point in the near future. They don't really need to for the stock to be worthwhile.

P.S. I did mention that they own malls in small urban areas. There's competition everywhere --- the bigger advantage to small urban areas is that there likelihood of significant property value depreciation is much slimer.

Looking for the REIT Bargain

REITBull,

Good reasoning. The reason I go in a different direction is that I expect inflation to rise significantly, which will force interest rates upwards. That might deter many potential homeowners from entering the market; driving up the number of renters, but not having significant long-term impacts on the underlying value of residential properties.

Looking for the REIT Bargain

User,

It's in my profile, but it's [e-mail]

Looking for the REIT Bargain

Trane,

That was basically the same conclusion I came to, was it not?

DEI looks like a good company --- I just don't want to touch LA with a hundred-foot pole.

I regret that the SA editors managed to change my title to completely alter the meaning of it. Not sure why they do that occasionally. It was originally titled, "Douglas Emmett - Navigating In Trouble Seas"


On Mar 25 10:57 AM Trane250 wrote:

> First rate analysis, but I would not touch anything having to do
> with the LA market.

Looking for the REIT Bargain

REITBull,

In the abstract, residental RE got hammered earlier than commercial RE and has probably endured more of the carnage thus far. However, I think the US economy will struggle for years to come. You might call me an economic bear and an inflation bull, though, so I think certain hard asset investments will benefit.

People will always need places to live and as less people are buying homes, they have to go somewhere. As such, I think residential REITs can actually benefit moving forward. The value of commercial RE, on the other hand, is highly dependent on the cash flows that can be collected from tenants. Rising vacancy rates will push down leasing rates so that commercial RE will continue to flounder for a while in my view.

At the same time, valuation is key to me, so when looking at investments, there are a lot of factors that I would look at. As far as stocks go, there are some commercial RE stocks that have been hit so hard, that they probably will be more profitable to investors than residential RE counterparts. In fact, it seems like most of my articles (and most of the ones I'm planning) deal with REITs that focus on commercial RE. Mr. Market really hates commercial right now. And if Mr. Market is overly punishing a company, I like to take advantage, even if the outlook looks dim.

I've been fishing for bargains in other sectors with dim outlooks, as well, such as palladium and platinum miners like North American Palladium (PAL) and Stillwater Mining (SWC) and shipping companies like TBS International (TBSI) and Global Ship Lease (GSL). My belief is that people often overly discount companies based on the sector's current outlook while ignoring the value of their hard assets. Even in the worst-case, the market seems to go way overboard at times.

Looking for the REIT Bargain

User,

Why's that?