Scott F

Real-Estate Veteran Sees a Rare Opportunity to Buy Quality REITs - Barron's

Adding to the chorus of negative commentators, I have to say that the set of two closed-end funds they suggest are a joke.

AWP was issued less than two years ago at $20 and is now at $3, but they are still charging 1.5% management fee annually to sit on the 20% of original capital they haven't lost yet. In other words they burned through $40 million dollars of investors' money so they could lose $4B in the process. What a great deal. Even though they recently cut their dividend by 78%, some suckers are still going to get lured by their 12% fictitious return-of-capital-esqu... yield. These guys are fools, and so will you be if you buy them, thinking you're getting something at a discount.

IGR is slightly less horrible. It has the same rate of loss and nonsensical dividend but a less obnoxious excess management fee of 1.2%. It makes up for this with the riskiness of leverage.

If you are still compelled to buy any of this crap, maybe on a trading basis, perhaps Seligman LaSalle International Real Estate Fund (NYSE: SLS) is a better bet. More reasonable management fee, given its size and a better discount. At least in its case half of its dividend is actually real, and its smaller size might make it more versatile. Same lousy return record, though. The only other CEFs that look rational are the Asian ones, RAF and RAP. But those are run by RMR Advisors, Inc., as incompetent a bunch of jackanapes as I've ever come across.

CEF vs. ETF Arbitrage in the Real Estate Sector

I don't know; this is pretty thin gruel. ETFs and CEFs are not highly comparable because of CEFs' extensive use of leverage and ludicrous management fees. CEfs should be heavily discounted, considering their poor performance and unresponsive management (have any of you listened to one of their conference calls?). When you factor in their suspension of dividend payments for not meeting asset requirements, you really wonder if the author has done his homework. Lastly, what is the point of an article on arbitrage when you cannot borrow the shares? This does seem like random thoughts with unreadable graphs versus any concerted thinking.