PAD

Commercial Mortgage REIT IPOs: Coming Up Short

Can somebody quantify these "enormous" fee's taken by the managers of the funds?

i've read the S-1's of CLNY and STWD and it looks like they take 20% profits above a stated threshold (i think CLNY's was 8% ROE for the opco). Doesn't seem like that high a fee to pay to invest alongside the private equity folks managing the opco to me.

I haven't done enough work on these new REIT ipo's to make any bold claims but i will offer one observation: This is the most hated sub-sector out there.

Every blog and news source out there hates these new REIT ipo's and they all mention the same things: Blind trust with no track record (not true for CLNY, whose mgt team led the hugely profitable buying from RTC 20 years ago), no dividends (yet), private equity selling to common/retail holders (even though pvt eq not cashing out a penny of the proceeds) and the "wave of IPO's" as a sure sign of a top just like dot-com (no comparison on any book value or other valuation metric).

And finally, the sell-side initiations by the bankers, i mean research analysts, have also been fairly muted (short 5-6 page initiations, not bullish at all).

I'm a buyer of anything this hated. Portfolio strategy--small positions in 4-5 names. Time will tell.