Howdy All,
We hold FRIRX, which is a fairly conservative real estate fund that includes related bonds, too. The fund is +5% YTD, and nothing to complain about. However, this fund along with the listed eft's are all moving downward in the past few weeks. The list is a various mix for comparison purposes.
I am trying to determine why this area is moving as it is. Are monies just coming off the table with these? Has or is the money moving to more traditional equity plays; or is this a sign of something else?
IYR ROOF PSR URE RWO RWX
Comments appreciated from those who may also hold real estate funds.
Thank you and regards,
Catch
Comments
Thank you. I see OREAX had a big move today. I have not had time to look around into other funds tonight for similar actions. Strange........
Take care,
Catch
"Atlanta’s 55-story Bank of America Plaza, the tallest tower in the Southeast, is set to be sold at an open outcry auction on the steps of the Fulton County Courthouse tomorrow after landlord BentleyForbes missed mortgage payments. It bought the skyscraper in 2006 for $436 million from Bank of America Corp. (BAC) and Cousins Properties Inc. (CUZ) in the city’s biggest property deal.
Since the property market peaked a year later, the 1.25 million-square-foot (116,000-square-meter) building has lost 54 percent of its value, Bank of America, its largest tenant, has reduced space and bond investors who helped finance the purchase are on the hook for losses, according to data compiled by Bloomberg."
“We’re hitting a tremendous amount of that debt coming due,” William Yowell, a vice chairman with CBRE Group Inc. in Atlanta, said in a telephone interview. That will cause “more distressed assets that come to market this year” and may lower the price per square foot on buildings, he said.
While lenders may face more losses, real estate investment trusts are seeking to take advantage by purchasing buildings, said Jim Sullivan, managing director of REIT research at Newport Beach, California-based Green Street Advisors."
and finally: "Even with improvements, only 27 percent of loans originated in 2007 at the peak of the market that had so-called balloon maturities in January “managed to pay off,” according to Trepp LLC, a mortgage data provider."
http://www.bloomberg.com/news/2012-02-06/american-foreclosure-hits-bottom-with-tower-auction-in-atlanta-mortgages.html
I still think that prime real estate does have the potential to offer some manner of protection (replacement cost, etc) if significant inflation becomes an issue. That said, I think it's tough to be in funds, because I think with a fund you get a mix of various RE companies, but I think you really want the best and the ones with the strongest balance sheets to be able to take advantage of opportunities. As I've said before, I'm not a huge fan of retail, but I do like some EM real estate plays and I do like some of the bigger US re companies.
The above Bloomberg article is a good read though, in terms of the current situation.
That's why I'm just not into retail REITs, and as I noted in another thread, I think the era of 10 generic strip malls within a few miles of each other is over; mall operators are going to have to evolve the experience and evolve the selection. There are some apps that reward people for coming into stores (Shopkick), but I don't think that's going to be the entire answer and I question the business plans of a lot of these sorts of apps/social media companies and how long they are going to be sustainable (Groupon, etc.)
Finally, if oil continues higher, more people are going to shop online and I think the Wal-Mart numbers are concerning on a number of levels.
As for Wal-Mart, WalMex is apparently not doing too bad at all:
http://finance.yahoo.com/news/Wal-Mart-de-Mexico-4Q-profit-apf-1831700464.html?x=0
BTW: Things we buy that you might not normally associate with Amazon (Hate to sound like a AD) coffee, flashlight batteries, and vitamins. You'll notice - all consumables.
The price for the 774,000 square foot building was $134.7 million, or about $174 per square foot. The replacement cost is about $315 to $320 a square foot, Larry Gellerstedt, Cousins’ chief executive officer, wrote in an e-mail. "
I think there could be significant volatilty in the short-to-mid term and issues with debt and other commercial RE issues, but in the longer-term, the question regarding a giant office building in Midtown Manhattan or Atlanta or any major city becomes, how much would it cost to build it today, right now. Is that more than it's currently selling for? I think that is a main interest in my opinion - hard assets in prime locations. The question does become what is prime and that's going to vary - I think major city commercial properties (things like Vornado, Boston Properties and Brookfield, as well as some others, especially those who can be opportunistic - Blackstone hasn't fared well, but their real estate arm may be an example of this) are of far more interest than dime-a-dozen malls and especially strip malls, in my opinion. If looking at real estate, I'd look at the largest players only.
Amazon still has the no sales tax advantage, which I'm surprised is still there - they must really be pushing/lobbying hard to keep that. Once that goes, I think that's something of a game changer, especially with larger items - Best Buy would probably love it with electronics. Wal-Mart can ship-to-store, but that still means sales tax and driving to get it.
In terms of a REIT I don't particularly like, I don't particularly like DDR (whose largest tennant is Wal-Mart. A retail REIT I like and would consider if it really came down would be Tanger Factory Outlets - SKT)
Appears there are some sellers working on that status............
I agree. Not a hot-dog fund, but that is okay. I, and I am sure, you as well; prefer that our monies continue a smooth and safer ride upward with a decent yield, too.
Take care down there in "A",
Catch