Nomadd

UltraShort Real Estate ETF: The Only Safe Haven for Commercial REITs

Many of you might not remember but following the Vietnam debacle, and the political decision to wage it on credit (i.e. increase the national debt) Jimmy Carter walked into a meat grinder of skyrocketing interest rates. I was personally on prime +2 points with my banks and all too painfully recall making 21%-22% interest payments - before having to finally relinquish my properties and begin litigation. Consequently, high interest rates oblitereaed the REIT industry in the 70s. Flash back to the present: as the acknowledged present War costs, again on credit, near $1 trillion dollars - with Stiglitz and others predicting that they could be $3 trillions - what do you suppose the Post-Bush president and economy is about to experience - and the REIT industry?

Another factor: the primary investor in commercial real estate has been insurance companies and (ironically) large retirement funds. Again in the late 60s, early to mid-70s, I was involved in major commercial (office/retail) development in prime Florida Central Business District locations. At the time, those properties were pro-forma $20 sq foot, with the tenant resposible for taxes, maintenance, utilities, insurance etc. In the more than 30 years since, not a single property has operated fully leased (90%-95%) at the full pro-forma lease price - and, vacancy rates are 14% or greater, with declining vacancies. Anecdotally, my attorney has just re-leased on the top floor in a "trophy" downtown property (that I co-developed) at $16 per foot full service. Today, major domestic and foreign insurance companies and retirement trusts own these properties and I would be willing to wager that their book value is pure fantasy.

Now comes a seminal event in human history, the retiring U.S. baby boomers - and all of those retirees demands against their whole life insurance policies,annuities, retirement accounts etc.. It seems to me that someone is going to have to dump properties - which could be unrealistically valued on the books - to create liquidity to meet these unprecedented cash demands. I will greatly appreciate hearing some of you obviously bright guys response...