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Thank you both for your thoughtful replies. Now, the next(BIG) question. How to invest the proceeds should they materialize? In the last several months I have not purchased a new Reit or added to one I already own.** I've been in a state of thoughtful paralysis......** except for new purchases of NHP and CEI which I considered sort of special situations at the time I bought them.
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<Now, the next(BIG) question. How to invest the proceeds should they materialize?>

I don't know if Ken or anyone else can offer any suggestions on how to effectively tap into our data base. We have had many good discussions on preferred issues. Several new ones have been mentioned in previous threads, but I have no idea how to easily refind them.

One of the nuances of preferred shares is that if your brokerage is not an underwriter, you generally have to wait for the shares to start trading to buy in. What I have noticed (and maybe Ron can comment on this) is that there is typically a 30 day period between the official close of the offering and the first day of public trading. On several occasions I have tried to put the new symbol on my watch list so that when it trades for the first time, I am aware of it. Unfortunately, since the symbol is not an active one, my watch list will not accept the new symbol. What I would like is to have some mechanism where we can know exactly when the first trading day will be in order to be prepared.

I notice that many times the first day or two of trading on a new preferred is often at a decent discount. What that tells me is that some of those who bought the shares at par want out at the first opportunity. Logically, one could ask why the hell they bought a security like this in the first place only to sell on the first trading day. However, I have long given up on trying to apply logic to such matters. Instead I just try to take advantage of such opportunities. Since most people who would be buyers are unaware of the situation, the ones who are really on the ball provide a textbook example of the early bird getting the worm.

One example that comes to mind was the issue AIV-T last fall. Its first day of trading was as low as 24.25. It had a face rate of 8% with a FC in July of 2008. Those who were able to get in early were able to juice up their yield to 8.25%. Of course you always have to consider the market we are in. The AIV-T shares eventually found their way into the 25.50-26.00 range. In theory, all new issues with competive interest rates should be able to hold their price at par. In practice, the action described here is clearly from having some desperate sellers without too many buyers out there. Had their been some equilibrium between buyers and sellers, the initial trading price would have been closer to par. Anyway, does anyone remember any of the new issues that were mentioned here that should be starting to trade very soon?

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Here are some preferred shares that seem to be recently issued, at least if the call date is indicative of a five year callable preferred,
which is pretty standard.  These are part of a much larger report on 120 REIT preferred shares I wrote for an online REIT data site.
In deference to the Fool's regulations, I will not name that site in this post.

REIT and Series              Coupon     Rating       Call Date     
BRE Properties Series C	      6.75      BAA3/BBB-    3/15/09
Public Storage Series Z	      6.250     BAA2/BBB+     3/5/09
Brandywine Realty Series D    7.375	BA3	     2/27/09
Winston Hotels Series         8.000	B3/NR	     2/24/09
Glimcher Realty Series G      8.125 	             2/23/09
Duke Weeks Realty K	      6.500	BAA2/BBB     2/13/09
PS Business Parks Series F    7.000	BA1/BBB-     1/30/09
Brandywine Realty Series C    7.500	BA3	    12/30/08
Kramont Realty  Series E      8.250	B3/BB-	    12/30/08
Prologis Trust Series G	      6.750	BAA2/BBB    12/30/08
Corporate Office Prop. H      7.500 	NR/NR	    12/18/08
Capital Automotive Series A   7.500     NR/NR	    12/11/08
Kilroy Property Trust  E      7.800	NR/NR	    12/11/08
Health Care Prop. F	      7.100	BAA3/BBB    12/3/08

I am sure that the formatting is now messed up, but you may try to figure it out and start looking for these to see if they 
are actively trading at this point.  Sometimes the delay in trading is even larger, as with the Essex Properties Series F, 
which was issued in September and does not appear to be widely available.  Remember, someone has to be willing to sell before 
you can buy.

Hope this helps.

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By the way, I took a look at the Essex I mentioned in the previous post and it is an unusual case. The prospectus notes that it was an issue placed with one institutional advisor for its clients. So, in theory it would probably not even be listed or have any activity, but I was able to see activity in the stock. It is difficult to get a quote, and there is no bid ask spread. My only guess is that the activity I have seen is some negotiated transactions among institutional investors, who need to post the transaction but who do not need to expose the issue to public market bid ask spreads. This does happen, and the result is that there are some tempting securities that will come up on a search of preferred shares that are not truly available in the public market.

I recognize that all of this detail is probably superfluous to most readers, but since I had pointed out the security as one to look at, it made sense to tell you that you wil probably not be able to buy any, at least for a while. At some point, the institutions will probably reshuffle and some shares will hit the market. But, there is no way of telling where the pricing and the preferred market will be at that time.

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I like the preferreds issued by I-Star Financial (SFI), which is a mezzanine financier organized as a REIT. Their preferreds trade as high-quality junk, well over 7 percent, but it is generally anticipated that their securities will be upgraded to investment grade in the next year or so. I bought some SFI_pg near par (for my mother), when it was issued, and it is trading about $25.65 with a 7.2 percent yield. I figured that 7-plus percent with a possible investment grade rating was a good bet for Mom.

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Here's one you probably don't want:

PSA-E $27.95 callable 1/31/05 coupon 10%

It will probably be called because the 6.25% Series Z preferred was issued on 2/27/2004. That's almost 4% lower.

Assuming it is called, it goes xdiv March 11, so it pays dividends on 3/31, 6/30, 9/30, 12/30. That's a total of $2.50. Jan 05 yields another $0.21. So, you lose $0.24.

Why wouldn't anyone who owns this sell it now and take the extra cash?

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<<Why wouldn't anyone who owns this sell it now and take the extra cash?

It might be because there is no one around to buy at that price. Today's volume was a whole 300 shares from a total of two transactions(100 and 200 shares). For all we know it might have been some broker finding a customer to unload it on. I don't know what the latest bid and ask sizes/prices were, but I bet any appreciable sale would be priced to give a low one-year yield minus a slight premium for the long shot chance of no redemption.

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<Why wouldn't anyone who owns this sell it now and take the extra cash?>

I agree that trading volumes could easily play into all of this. A stategy can only work if there are enough people on the other side of the transaction. OTOH, I have seen many instances where a buyer would make such a purchase even after the call was announced. While logic may tell you that the price should come down and stay down after these shares go ex-dividend tomorrow, that may not be the case. There are always yield chasers out there who do not do their homework. I see absolutely nothing wrong with taking advantage of such a situation. I call it a premium for doing your homework as opposed to the penalty for not doing it on the part of the buyer.


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So far today, 1600 shares of PSA-pe have traded at prices from 28.05 to 28.08. Go figure.

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<I recognize that all of this detail is probably superfluous to most readers, but since I had pointed out the security as one to look at, it made sense to tell you that you wil probably not be able to buy any, at least for a while.>

Thank you for taking the time to share your knowledge and experiences on this subject. Some of the shares you listed provide an excellent opportunity to expand on what you were saying. I checked some of them out on Quantom. What I like about their site is that it will recognize the symbol even if it has not yet begun trading. The BRE-C was issued and will trade within 30 days. It is hard to pin down the hows and whys of this. Some shares do not trade until exactly 30 days after the initial issue. Others seem to start at different points without any rhyme or reason to it. The PSA-Z shares were issued at the same time, yet they started trading yesterday.

The Brandywine shares further illustrate a point I was trying to make. The "C" shares traded at 24.93 when they first opened on 1/2. They moved higher quickly and are a full dollar higher today. The "D" shares show the same thing more starkly. They traded at 25.06 on their first day 3/2. They were 25.75 earlier today. The Glimcher "G" shares are even more dramatic, but there may have been a special case there as their initial price of 24.35 moved to over 25.25 by the end of its first trading day. There were also huge blocks traded, which leads me to believe that they were institutional trades. Still, what all this tells me is that the early bird still gets the worm.

The CARS shares you mentioned were interesting as they are not listed as CARS-A as I would have thought. They are traded under the GRH symbol. They are listed as a Third Party Trust Preferred. Maybe you can fill us in on why a company would set things up this way? Does the extra layer put the buyer at a disadvantage? It seems to me in my laymens mind that such a structure would add some cost, but maybe that is offset by some additional savings elsewhere?

One other point that I would like to address is the process of doing ones homework. The PLD-G shares you mention have a coupon rate of 6.75%. When last I looked they were trading at 25.65. The PSA-Z shares with their coupon rate of 6.25% were trading at 24.85. Most people not doing their homework would take the higher face rate. The PLD shares pay 12.5 cents per year more than the PSA shares. The 80 cent premium you would pay over the PSA shares would take 6.4 years to cover. Since the PLD shares have a first call date in 4.5 years, your YTFC would actually be lower than it would be with the PSA shares.

I know that this is only one element of making a preferred purchase. Ones expectations of interest rates, inflation and budget deficits should also go into the equation. For me personally, my chrystal ball has proven to be generally unreliable.<grin> So, I usually look to be call neutral when it comes to preferreds. IOW, I don't want to make a purchase with the idea that the first call must happen. OTOH, I don't want to delude myself into believing that the call won't or can't happen either.

A recent example for me would be PPS-C. It was called in last Friday. I bought my shares last summer at 24.50. This was my third go round with them and all were very profitable. The first two were made with an emphasis on CGs with the income being secondary. The last purchase was made with the focus on the income. It was already five months past the FC date, but the potential call was neutral to me since I bought at a discount. If it happened I had a modest CG. If it didn't, I continued to earn 7.7%. As it turned out, I collected three dividend payments and had a small CG equal to a fourth payment. If the shares had been selling for 25.50 last summer, I would have passed on them.

Hopefully this thread has been useful to those who want to continue building their base of knowledge in preferred issues. Thanks again Ron for all of your valuable input.

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