HelloThis is the first time I post in this forum. I´m around 24, and builing a DGI portfolio, with around 30% REITs.Currently I own: O, HCP, HCN, CCP and VERI´m keen on W.P.Carrey, Realty Income, NNN and Digital..., Simon... more, but not sure which area to buy around "ish fair price".So, what´s your top 10 holdings and what do you think might be a ok entry (undervalued or fair) ?RegardsArne Magnus
Have you considered buying the book by Ralph Block: Investing in REITs (best investment ever!)I like things with a bit of monopoly/pricing power:1. ARE: has that. it's NAV is around 113, I think (from their presentations), so it may be a good buy.2. SKT: doesn't have a lot of pricing power, but it has something else: usually retailers are paying around 11% - 15% of retail sales as rent to mall owners. SKT currently is around the 9% level, so I see another 2% rise in total revenues easily available over the next few years. It's also trading at a fairly low P/FFO ratio. Management is honest, focused on costs.3. CLNS: This is a turn around/change story, at a cheap P/FFO of around 9; dividend yield of 8%+ (60 - 70% payout ratio). Looking to reduce/get debt to 50% of capitalization. Not sure what will happen but it's a cheap bet with an 8% kicker for waiting.IMO - Stay away from any entity that is related to RMR Grouphttp://www.rmrgroup.com/business-lines/default.aspx
So, what´s your top 10 holdings and what do you think might be a ok entry (undervalued or fair) ?VNQ makes up about 40% of my REIT allocation. Followed in order by;VTR, AVB, ROIC, STWD, HTA, O, HASI, NLY, CMO (NLY & CMO make up less than 1% each)If I had to buy something today, I would probably buy more VNQ. I'm with Cool on ARE. If that one drops down below $100 I think I would pick some up.Gup
Well, I'm keen on VTR. Probably the safest REIT is PSA (because all their funding is through issuing preferred stocks) and PSB is not far behind. Although I don't own any PSA common stock, I do have a couple of their preferreds (PSA-W that I bought below par and is currently in the money and PSA-D that I bought below par but it has dropped even further), but I am getting a dividend above 5% on my purchase, that is fine by me.. I used to be into PSB preferreds, but not at present.I also have some AMH. I bought it when experts on this board said it was attractive but we should wait for a pull back. I bought and it has cone well, currently up nearly 4% from my buying price last year. It may be pricey. I also have some ROIC, of course, but have pared back my holdings because it is so pricey. What I have is up nearly 6%.I also bought some STAG which is pretty flat (currently up about a quarter of a percent). Incidentally it pays a monthly dividend.I also have some TCO-J (currently up about $5 from my buying price. In my late wife's trust, there is quite a bit of DLR-G, up over $5/sh and above par.I wanted to own one retail REIT and my choice was SKT. I have been to their malls and am very impressed. It may be a good entry point now as it is down nearly 10% from my purchase price.Well, that is all my REIT holdings. People on this board are keen on an up-scale apartment REIT. I forget the symbol., but it makes me nervous. I've been in and out of it several times, making some money each time, but I should have had faith and just stayed in as I would have done better.brucedoe
Incidentally, I'm with Missouri on ARE. I had some and took m,y profits and was going to buy back in when it dropped below $100/sh too, but I got tered of waiting and bought other things. I'm 85 and don't have a lot of money on the sidelines , but I think ARE is a good one, though overpriced now.My largest holding by far is not a REIT but the Vanguard health care mutual fund. When I need some money, I'm selling some of that, though sales are restricted to prevent trading. My second largest holding is the Vanguard small cap mutual fund. Lately when I needed some money, I sold some of that because I couldn't sell from the health care fund. The small cap fund had a good run up, but that seems to be over.brucedoe
Coolprash: Thanks for the tip about Ralph Blocks book, just ordered it. Looking forward to digging deep into REITs.I haven´t heard about ARE to be honest. I can see that both you and brucedoe talking positive about it, so I should check it out. CLNS sounds interesting. I like turnover cases with experienced management (VER and CCP. MissouriGup: Thanks for the comment. So you invest in a REIT ETF instead of single stocks. I have thought about that too, but more interested in single stocks. It makes me feel more like a businesses owner than what ETF/indexes do.Going to read Ralph´s book before I comment more on this forum.
As you read Ralph’s book. You may like to know that a few his favorite REITS were STWD,ARE,ROIC,CUBE,STOR.and AVB. Sadly my friend is no longer with us and we miss his counsel tremendously.
Thank you for the tip and my condelences. Reading his book will have a more sentimental value since I have communicated with you guys.
Personally, I don't like anything health care related until the dust has settled from the government health care reforms. I like Data centers and industrial, and O. CONE, GPT, NRZ, are REITs I could consider today.
Since CLNS and GPT have come up on this board I thought I would mention that Jim Royal who used to run the recently shuttered Special Ops premium service has his own now public board I think where he continues to provide updates on those two REITs as well as several others (XHR and CTRE come to mind).http://boards.fool.com/hey-scoop-clns-is-a-huge-position-for...I think that link should work for anyone.David
I'd be a little nervous about a REIT that concentrated on shopping malls, with so much online competition and big retailers (like Sears and Macy's) closing stores. So that would mean at least Simon.
I saw that Simply Save Dividends gave CLNS a dividend safety score at 20. This falls into the worst category of "Extremely Unsafe". If the dividend is cut the stock price will tank. What do you guys think?
I personally feel more comfortable in the CLNS preferreds--currently CLNS-C.Any cut to the common dividend might cause a knee-jerk reaction in the preferreds,but would give them a greater margin of safety for continuation of the pref div.
I appreciate everyone's input. Thanks!Here's my two cents:I own CLNS, GPT, CAFD, CCPI'm looking into XHR, More GPT at $25, more CCP, CTRE below $15.Regarding CLNS dividend safety...CLNS is one of my larger holdings (started with NRF and NSAM). I don't know why they gave it such a low dividend safety score, but maybe it was was for the debt, which is considered a bit high by others (see seekingalpha articles).I continue to hold and have added more because I see the turnaround happening:* Their payout ratio is now in the 70% range.* They've replaced previous management with that from CLNY who had a much better reputation. * They have already demonstrated improved transparency, layout out their plan to increase the value/share price (see conference call), and they are following that plan.* They've accumulated a large amount of cash (around $1B I think). I think it's either to reduce debt, buyback stock, or maybe even new purchases at some point. * It's undervalued at these prices ($13ish/share) due to the hangover of bad reputation from NRF/NSAM history. And the general REIT downturn we seem to be in. It's something like 10% below the VNQ.The stock has an active community on Investor Village. you can get some additional information there.Good Luck!-srockaz
Hi arnemagnus!I have a lot of respect for the work that Brian does at SSD....however, trying to run his normal numbers on a merged situation like CLNS with incomplete/short merger historical numbers, as well as no reflection of their modified strategy, means that the "20" may be correct from a mathematical standpoint....but actually somewhat faulty/incomplete.Is CLNS a riskier REIT than O or ROIC...yes, indeed! Is the new combined company as risky as the "20" indicates? I don't think so.....but I could be wrong. Conclusion for me: hold what I have ( a smallish position) and don't add until I see how the new company performs.Please note that, as a Community Fool, I don't speak for TMF....just myself.Cheers!MurphII Community Lead(long CLNS)
Thank you all for the great responses. I appriciate it a lot. I also have great respect for Brian. His work is fenomenal, but I haven´t thought about your argument Murph, that it might be right from a mathematical standpoint, but maybe somewhat faulty. That´s interesting. Is it only the debt that makes Brian so negative, or is it more? I´m not sure. Would be interesting to know. I saw that Ben posted an analyses about CLNS. It was worth reading:http://suredividend.us8.list-manage.com/track/click?u=107c64...Any idea what CLNS is the almost the only REIT that falls today? everything else that I own (OHI, HCP, HCN, VER, CCP gained atleast 1 %). Well, I don´t really care that much about intradays, just a bit suprised maybe.See you,Arne Magnus
PrefferedInvesto,Don´t you feel uncomfertable owning a preffered stock that will be hit bad by interest rates? I mean, CLNS is a potential good investment, but buying the preffered stock seems scary in todays financial climate.But yeas, this discussion was not about CLNS (I think =) )
Don´t you feel uncomfertable owning a preffered stock that will be hit bad by interest rates? I mean, CLNS is a potential good investment, but buying the preffered stock seems scary in todays financial climate.Depends on what you're buying the preferred for. I also own preferreds and I feel comfortable owning them in a rising rate environment because I purchased them to provide a specific amount of income to pay a long term fixed rate debt - my mortgage. It still has 25+ years to go, and I'm sure rates will go through several cycles by then. AJ
Depends on what you're buying the preferred for. I also own preferreds and I feel comfortable owning them in a rising rate environment because I purchased them to provide a specific amount of income to pay a long term fixed rate debt - my mortgage. It still has 25+ years to go, and I'm sure rates will go through several cycles by then. Many years ago in the early 60's I used to work for a VERY wealthy man in the Real Estate business, managing his commercial real estate portfolio in Manhattan. He always paid down his mortgages and owned many pieces Free and Clear. He usually bought as part of a group and then bought out one partner after another as they ran into financial trouble and he was always paying down mortgages. I was talking to him one day and I asked why he never bought on his own and why he kept reducing the mortgages. His answer was If you owe a mortgage on a piece of property---You don't own the property--The bank does--If I didn't believe it, he said stop paying the bank for a few months and see what happens. Deducting interest payments as a tax deduction requires a principal payment to be paid with the interest, and that principal payment is not deductible. For example lets say the mortgage payment is $1000 a month, of which $50 is deductible interest on your taxes. For you to get the $1000 to pay the bank you have to earn maybe $1200 a month and pay maybe $200 taxes to then pay your bank $1000 to get the $50 interest deduction that might reduce your taxes $10. He taught me to get ahead of the curve not to stay behind the curve. Today the problem of many people is the debt load they carry and they end up getting overwhelmed by it.Typical working time these days is age 20 to 65--A 45 year timeframe.Medical science will keep the average person alive to from 85 to 95 or maybe more---20 to 30 years of retirement beyond the 45 year working timeframe They statistically will keep you alive, but they won't pay to keep you alive.Every 3 years of work has to support you for the 3 years of work plus the 2+ years of retirement after you stop working and the increasing FED and STATE tax burdens that will be on your shoulders from the money you earn to pay your bills while in retirement.So coming back to your original post---Do you really think you can support your banker's family for 25 years in addition to your own family and the government?b&w
His answer was If you owe a mortgage on a piece of property---You don't own the property--The bank does--If I didn't believe it, he said stop paying the bank for a few months and see what happens.Not really. You still own the property until the bank forecloses. If you can sell it in the meantime, you can pay off the bank. If the bank forecloses and sells the property, and makes money on the sale over and above what you owe them, they have to pay that to you. Yes, they can/will charge you fees for things like property preservation, late fees, etc. so you won't get as much money as if you sold it yourself. But it's still possible to get money from a property that was foreclosed on. And in states where there is no recourse, if the bank doesn't get enough money to pay what you owe them, they don't have the right to come after you for the difference.Deducting interest payments as a tax deduction requires a principal payment to be paid with the interest, and that principal payment is not deductible.So? I'm not doing this to get the interest deduction. I'm certainly not going to turn it down, but I didn't get a mortgage so I could get an interest deduction. I did it because by borrowing at 3.25%, I can make money on the spread by buying stocks like WFC-L, BAC-L and TCBIP, so I'm getting enough income to pay the mortgage. And the great thing is - these are qualified dividends, so I only pay taxes at the capital gains rates, while the interest is deducted at my marginal rate.For example lets say the mortgage payment is $1000 a month, of which $50 is deductible interest on your taxes.HAHAHAHA - my mortgage payment is $1145 a month, and I don't get to the point where my interest is less than $100/month until 2040 - during the last 2 years of my mortgage. So, why don't you try a little more realistic scenario like a $700 in interest and $300 in principal, or even $500/$500?For you to get the $1000 to pay the bank you have to earn maybe $1200 a month and pay maybe $200 taxes to then pay your bank $1000 to get the $50 interest deduction that might reduce your taxes $10.Nope, I don't have to work at all to make my mortgage payment (unless you call tracking and transferring income between a couple of different accounts and setting up automatic payments to the mortgage "work"). I have enough income from my taxable stock portfolio to have made mortgage payments on several different mortgages for over 7 years. And the interest deduction that I am getting from the mortgage payment offsets the taxes that I owe on the income. I recently reached the point where if I cashed out the investment portfolio, I could pay off the mortgage. But I'm choosing not to, because I'm still making money on the spread and I would owe a chunk of capital gains taxes. Plus, then my money would be sunk in an illiquid piece of property that I would have to move out of and sell if I wanted to use the money for anything else.Today the problem of many people is the debt load they carry and they end up getting overwhelmed by it.Typical working time these days is age 20 to 65--A 45 year timeframe.Speak for yourself. I'm going to retire later this year from my career after less than 35 years. Yes, I might dabble in some other work after I retire, but I won't need to. And yes, I'm carrying debt, but as I said - it's not dependent on my work to pay for the debt. Every 3 years of work has to support you for the 3 years of work plus the 2+ years of retirement after you stop working and the increasing FED and STATE tax burdens that will be on your shoulders from the money you earn to pay your bills while in retirement.Well, I stopped living in states that I owed income tax to about 15 years ago, and don't plan to move back to one. And in the less than 35 years I've worked, I've managed to accumulate a portfolio that is more than 25 times my annual expenses. Plus, I'm doing my portfolio planning based on the assumption that I will live until 97 - which is longer than anyone in my family has lived to, and I will still likely have a large estate to distribute. So, I'm not too worried. So coming back to your original post---Do you really think you can support your banker's family for 25 years in addition to your own family and the government?As I said, I'm making money on the spread by having the banks pay me enough to pay back the money I borrowed using the mortgage, and the interest deduction offsets the taxes from that income. So, yes, I think it will work for me. YMMV.AJ
AJ, I like you keep my mortgage primarily for the spread, not hard to beat 3.00%. Although this Administration/Congress has stumbled out of the blocks on healthcare, I still give them a better than 50/50 chance of significant tax reform within the next two years. I think the tax arbitrage that you and I are playing is likely to be eliminated or have it effectiveness decreased. In between the Army and banking, I briefly worked for Treasury and keep in touch and know how to review proposed legislation. The original Trump Tax Plan proposed a $15k/$30k single/joint standard deduction, but eliminated personal exemptions. The Hatch Tax Plan, one of several in Congress, proposed eliminating advantages for qualified dividends altogether. In my opinion, the zero tax rate for LTCG and Qdivs for those in the 10/15% tax brackets makes no sense and is unlikely to survive any serious tax reform. Bottom line we are now getting the "spread" PLUS a tax benefit and I think that it will be going to the "spread" MINUS a tax cost.
Although this Administration/Congress has stumbled out of the blocks on healthcare, I still give them a better than 50/50 chance of significant tax reform within the next two years.Given that AHCA savings were supposed to provide a lot of the offset for the tax reforms, I'd probably take the other side of that bet.I think the tax arbitrage that you and I are playing is likely to be eliminated or have it effectiveness decreased....The original Trump Tax Plan proposed a $15k/$30k single/joint standard deduction, but eliminated personal exemptions. The Hatch Tax Plan, one of several in Congress, proposed eliminating advantages for qualified dividends altogether.Yes, it's possible that the tax advantage will be eliminated. I did look at the Trump plan, and determined that I would end up paying more in taxes. That said, I still don't find a compelling argument to pay off my mortgage. Bottom line we are now getting the "spread" PLUS a tax benefit and I think that it will be going to the "spread" MINUS a tax cost.I will re-evaluate if tax reform actually occurs. But even having to pay taxes at my marginal rate on dividends probably isn't going to push me to tie up another $200k+ in the form of an illiquid asset that I live in.AJ
Best Of |
Favorites & Replies |
Start a New Board |
My Fool |