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No. of Recommendations: 12
REITster,

I would like to refer you back to one your older threads, the Bluest of the Blue. I'm writing for that group of Reitsters, including me, who have not yet completed a portfolio. I see no reason to take a different tack now that REITs are trading at fair value. At these levels, this group may offer better security than they ever have. I would look to the B of B group for companies not yet represented in my portfolio and would start to dollar cost average into 2%-4% positions in some of those companies selling slightly above or below NAV.

If it would be helpful, I'll give you my take on the B of B list:

The purpose of this exercise is to generate discussion. I'm only half convinced of my own opinions.

The apartment sector has started to move recently. I would definitely establish positions over the next year in ASN, AVB, of EQR if I didn't already have 4% alloted to each of them.

KIM, WRI, and SPG (also GGP) are probably fully valued, but I wouldn't avoid them if I didn't own them.

The same goes for MHC.

In the office group, the least loved sector, probably all three; EOP, BXP, and CRE could be purchased now and dollar cost averaged for the rest of the year up to 4% positions.

In the industrials, probably AMB could be purchased now; and PLD presents an interesting opportunity as 30% of the shares may be coming to market soon. You may want to hold some cash until GE decides what to do with the 38% owned by SCZ. If they distribute most of it, there may be an opportunity based on the imbalance of shares being offered into the market to purchase this fine company with exposure to Europe, Japan, and Mexico.

CNT is off the charts. I hope you already own it and are enjoying your 4% dividend. Referring back to the "if pigs could fly" thread, CNT, PSA, and PSB investors have been happy with 4%(+/-) for a long time. I have been trimming my position in CNT to maintain 2%.


DRE is trading at about NAV and one probably wouldn't get hurt too much by purchasing a few shares, though mid-west office may be slower coming back and development risk is part of this company's M.O.

PSA is on a tear the last year, could have been purchased at $22 at the beginning of 2001 and is currently trading at $38, up more than 50% on share price only and pays a 4.5% dividend. This largest Self-Storage REIT is a well recognized brand, about as close to a brand name as we have in REITs, and clearly deserves an NAV premium. Sadly, I don't own it; but will if it ever pulls back a little (wishful thinking).

Among the diversified sector, both CUZ and VNO look fairly valued to me and could be purchased if you don't already own them; but I would purchase VNO first, in fact, probably first among the B of B now. My CUZ holding is about 1/2 of my VNO allotment (2% and 4%). I sold WRE at the end of 2000 and think it is too rich now compared to several of the other REITs. It's a great company, but, like PSA, I seem to be marching behind it, to the left, and out of step. At some point I would like to pull up beside them, fall in, do a stutter step, and march with them.

For those of you who don't remember the Bluest of the Blue list, this is from REITster's post earlier this year:



Presenting the 2002 Bluest of the Blue:

Apartments
ASN
AVB
CPT
EQR
HME

Shopping Ctrs
KIM
WRI

Malls
SPG

Mfg Homes
MHC

Offices
BXP
CRE
EOP

Industrial
AMB
CNT
PLD

Office/Industrial
DRE

Self Storage
PSA

Diversified
CUZ
VNO
WRE
Hon. Mention
HCP

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