REITBull

Decline in REIT Prices Is Likely to Continue

What are you using as a cap rate to get to $20-$27 on IYR?


On Sep 26 12:36 PM Anthony Alfidi wrote:

> Forget about the 50-day MA and look at the cap rate instead. Evaluate
> a REIT or ETF like a physical piece of property. Fair value IMHO
> for IYR is somewhere between $20-27 depending on how you calculate
> the yield.

Real Estate in the Midst of Bull Market

I'd still be buying IYR or URE. The recent IRS ruling on REMIC makes loan mods on CMBS more feasible. Longer term, supply-demand fundamentals would favor rent increases on many of the properties held by the REITs in IYR, with the Residential REITs being the exception.

XHB looks dangerous to me. The Fed buying up bonds has propped this market up as other readers have pointed out. Not to sound like a broken record, but the supply-demand fundamental on the Res side is a mess.

Commercial Real Estate - Make Up Your Own Mind

"Almost 60% of the loans out there, at least, were securitized in nature."

User,

I have to disagree with you on this. At the end of Q1 only 21.4% of CRE loans were securitized (MBA). New loans are getting done at 60% LTV for class A, infill markets. I wouldn't take Sam Zell's comments at face value either. Remember that he called a bottom in Residential real estate in Spring 2008.


On Aug 03 09:09 PM User 465743 wrote:

> Good article. But you are missing something. The lending at 60% is
> a fantasy. If you have a Class A office building in a major city,
> you may be 50%. If you have a hotel, a strip mall, a big box retail
> center, an asset located in a small town, etc, forget it. There is
> no financing. The banks are not lending the money that the Feds gave
> them. The only money available, really is money for apartments from
> HUD, Fannie Mae or Freddie Mac. Securitization expanded the credit
> markets so that assets that previously did not get financed were
> financed. Almost 60% of the loans out there, at least, were securitized
> in nature. So, maybe TALF will work, but I don't see the same focus
> on the dangers as I did when AIG was going bust. They focused on
> housing first, because it is politically correct. But they are missing
> the boat on commercial in terms of urgency and this will bring on
> a double dip. Commercial real estate doesn't work without debt. And
> the banks are not helping and the Feds are not helping. If there
> is no debt, there is no market and values are suspect. The jobs multiplier
> for commercial real estate is huge. Big players are taking advantage
> of low Libor rates and sitting on assets. Debt service is being paid
> but their values are in the tank. Zell is right. Eventually assets
> have to be refinanced and it will be a bloodbath. Write your Congressman,
> because they aren't focused on this and are clueless.

How to Profit from the Commercial Real Estate Fallout

I agree with seeking and Ezee. It's also important to note that SRS's underlying index, IYR, is constantly being rebalanced in favor of long positions and it's current holdings are some of the stronger REITs. The time for SRS was last year before your average Joe was talking about the coming crisis in CRE.

I am just starting some research on this, but I think the next play may be to short Residential Apartment REITs (that hold B and C class properties) using long dated puts.

Disclosure: Long IYR

On Jun 18 03:29 PM seekingnothing wrote:

> David, I second Ezee's comments. The SRS has been a poor way to short
> CRE. the SRS is the double inverse of the IYR. SPG is one of the
> major holdings in the IYR. You point out the SPG should be a beneficiary
> of the fall out. Any better plays?

General Growth Properties Files for Bankruptcy

Okay, I feel like a total hypocrite, but I just put a very small position on SRS. It was just too attractive at 26 and change. I still have a much larger position on the long side and will continue to buy URE....Just a short term trade but I thought I would come clean.

General Growth Properties Files for Bankruptcy

Or are the dilutions already priced in? Everyone and their mother saw the offerings coming.

General Growth Properties Files for Bankruptcy

Take a look at the holdings in IYR for your answer on SRS. GGP is nowhere to be found and is the exception not the rule. SPG, KIM, AMB have had success raising capital in the public markets. SRS was bled dry a long time ago. When your average Joe is talking about getting in on the action (i.e. shorting CRE) the bubble is about to pop or already has.

Disclosure: long URE


On Apr 16 11:49 AM [e-mail] wrote:

> Can someone ... ANYONE ... explain to me why GGP, the second largest
> mall operator in the US, is declaring bankruptcy and SRS is within
> spitting distance of an all-time low on the same day?

S&P Lowers Insurers Ratings, What About Banks' $400B CMBS Losses?

I could be wrong on this, but I believe a large portion of that 5% delinquency rate is tied to residential construction/developme... loans. It's still bad news for the banks, but it may not be an effective indicator of future CRE loan performance. As you can tell I am taking the contrarian bet on CRE and I am long URE, but I do enjoy your articles.

Housing Prices: Not the Bottom, But Close

Good call on the ratios falling more...the pendulum never swings to the middle

Housing Bubble: The Sequel

I'm not sure that IYR and SRS will give you the desired results as they track commercial real estate. A better alternative may be to short the XHB on any short term rally.

A Sign That Housing Is Approaching Bottom

You have to have rocks in your head to think IYR is correlated to residential housing. XHB below $5 might be a better bet.


On Jan 29 08:54 AM JE wrote:

> You have to have rocks in your headtothink that we are at the bottom
> of housing.
>
> The IYR is headed below $20

Housing: Not Cheap Enough?

Hi Judy and Bill,

I agree that residential real estate does have some influence on IYR. And in all fairness, Annaly Capital, one of the top holdings rely heavily on residential mortgages. Thank you for the feedback!

CMBS Delinquencies Rise: Should the Government Step In?

Something to think about....According to CMBS.org, in 2007 RMBS accounted for almost 60% of single family loans and CMBS accounted for only 30% of total commercial loans. This implies that 70% of commercial loans are portfolio loans. Lenders of portfolio loans have greater flexibility on loan modification and may choose to extend the terms as opposed to foreclosure. Not trying to make any predictions here. CRE will face some pain but maybe not to the magnitude being reported in the media.

My disclaimer: I am a very inexperienced investor and I am long URE so take this with a grain of salt!

Housing: Not Cheap Enough?

billddrummer,

Here is why I ask the question about IYR:

Top Holdings in IYR as of 1/7/09
6.71% SIMON PROPERTY GROUP INC
5.23% PUBLIC STORAGE
4.98% ANNALY CAPITAL MANAGEMENT IN
4.96% VORNADO REALTY TRUST
4.33% EQUITY RESIDENTIAL
3.73% BOSTON PROPERTIES INC
3.69% HCP INC
3.21% PLUM CREEK TIMBER CO
2.72% KIMCO REALTY CORP
2.67% AVALONBAY COMMUNITIES INC

Top Sectors as of 1/07/09:
22.89% Specialty REITs
19.69% Industrial & Office REITs
19.58% Retail REITs
14.40% Residential REITs
6.96% Diversified REITs
6.85% Mortgage REITs
3.95% Hotel & Lodging REITs
2.75% Real Estate Holding & Development
1.26% Real Estate Services
0.03% S-T Securities
(source iShares website)

There certainly is some exposure to residential real estate, however, the majority of the residential real estate is apartment REITs such as Avalonbay and Equity Residential. I only point this out because the dynamics in the commercial real estate market are very different than those in residential. Not a big deal, just thought I'd point it out.

Housing: Not Cheap Enough?

Hi Judy,

I enjoy the articles on SA, but why is IYR consistently linked to residential real estate and homebuilders?