Jeffrey Bernstein

Is There a REIT Reverse Inquiry Conspiracy?

You fail to discuss one topic. REIT valuations versus underlying commercial real estate prices. There is a significant discount embedded in REIT prices....partially to reflect maturity default risk. However, part of the discount is also a discounting of future weakness in CRE prices....which is being driven by to a great degree by over-leverage and both maturity default risk as well as cash flow risk, not significant over-building of CRE. So maturity default risk is being baked in twice. This is why some large investors like Equity One are now looking at buying REITs as a way to buy commercial real estate at or near bottom dollar valuations. Yes we all know Wall Street has an excess of back scratching and that it looks even more excessive now that there are only a couple of backs to scratch, but their is a fundamental story here based REIT's discounted valuations vs. underlying CRE. I'm not sure I'm a believer in it, but one must acknowledge it.