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No. of Recommendations: 5
It always amazes me how public REITs announce their intentions to exit certain geographic markets or market segments.

I guess under the disclosure rules that public companies have to operate under, they really don't have a choice.

I have seen VTR and others announce their plans to exit the SNF segment with adverse effects on FFO/AFFO. So they sold at a high cap rate and reinvested at a lower one, albeit they did side step the recent SNF segment problems.

LXP has announced to the world that they are decreasing their exposure to offices and increasing exposure to industrial. Again selling at a higher cap rate than they are reinvesting in with similar results on FFO/AFFO.

SHO, a hotel REIT, sold off a lot of hotels to improve their balance sheet. A few years ago SHO had the strongest balance sheet of any REIT I knew off. Strong balance sheets are great when "it hits the fan", but are a drag on performance during good economic times. SHO would have been hailed as being a genius if they had sold off properties to improve their balance sheet from 2005 to 2007, but they did it from 2010 to 2012. You know what they say about being early - at least way early? Its the same thing as being wrong!

I am teaching my son that the best seller to buy from is a forced seller and the second best is a motivated seller.

When a REIT announces it is going to sell off a large segment of properties, it is telling the world that it is a motivated seller. This will seldom be in their best interests.
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