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Chasing Value: Newcastle up 500% -- why?

They say you should not look a gift horse in the mouth. Sorry folks, sometimes you do. In the case of the recently catapulting Newcastle Investment Corp. (NYSE: NCT), which I bought at 60 cents a share, I am.

I have been following this company for a while and have both made and lost money. Although it started out as a penny stock for me it has jumped over 150% in a week and closed today at $3.61 up $0.39 (12.11%) -- for a total gain to date of 502%. So why am I complaining?

Continue reading Chasing Value: Newcastle up 500% -- why?

Vornado looks to raise $1 billion to invest in distressed properties

Vornado Realty Trust (NYSE: VNO) has watched its share price get pummeled along with the rest of the commercial real estate sector. But its reasonably strong financial position has left it well-prepared to take advantage of others' weaknesses and get ready for a turnaround.

Now the company just needs some cash. Bloomberg reports that the REIT "is trying to raise $1 billion to invest in real estate assets, according to a person with knowledge of the fundraising."

Continue reading Vornado looks to raise $1 billion to invest in distressed properties

REITs have a record second quarter: Who saw that coming?

The Wall Street Journal reports (subscription required) that "The Dow Jones Equity All REIT Total Return Index, which tracks 114 publicly traded REIT stocks, rose 28.9% in the April-June period, the biggest quarterly gain for the index since it debuted in 1989."

REITs still have a long, long way to go until they've regained the ground they've lost during the real estate rout -- they were down 31.6% in the first quarter and 38.8% in the fourth quarter of last year.

Continue reading REITs have a record second quarter: Who saw that coming?

Developers Diversified (DDR) deal signals pain level for undercapitalized REITs

The Buffalo News reports that shopping center owner Developers Diversified (NYSE: DDR) is set to close on a deal to sell back 11 properties in upstate New York that it bought from privately-held Benderson Development in early 2004. The kicker: on a price-per-square foot basis, Developers Diversified will be selling out at a steep discount to its original purchase price.

Continue reading Developers Diversified (DDR) deal signals pain level for undercapitalized REITs

Time to buy REITs? Maybe, but be careful

Jim Cramer can't seem to make up his mind on where housing is going. In his email newsletter, author and fund manager Whitney Tilson writes this:

I can't figure out what Cramer's saying on housing prices. Today he wrote "Housing-price stabilization isn't in the cards at all," but yesterday he wrote "I am thinking of calling the housing decline over right now on this data. There are very few regions that haven't bottomed."

Cramer's theatrics aside, many investors are looking to buy back into real estate investment trusts (REITs), whose stock prices have been absolutely hammered over the past two years. Even if home prices aren't done falling, the sub-liquidation valuations assigned by the market to many of these companies could make them good investments.

Continue reading Time to buy REITs? Maybe, but be careful

REITs ready for mergers and acquisitions?

Real estate investment trusts have been, as you might expect, pulverized by the downturn in housing but the Wall Street Journal reports (subscription required) that that may be setting the stage for a wave of consolidation in the field.

30% of REITs are trading at prices below $5 per share, and experts say that those are the companies most likely to be the target of acquisitions.
For most investors though, the sub-$5 REIT strategy probably isn't such a hot idea. The Journal piece mentions General Growth Properties (NASDAQ: GGP) but the problem with that is that the company is very likely destined for bankruptcy court unless it can make a deal. The best strategy is to find good companies with good long-term prospects with low valuations that will make them attractive to potential acquirers. Buying junk companies in the hope that they'll be acquired by a bigger player is just too speculative -- especially in an environment where credit is so tight.

Continue reading REITs ready for mergers and acquisitions?

Simon (SPG) says stock - not cash - for dividend

When the largest publicly traded real estate investment trust (REIT) in the United States speaks, investors listen.

Simon Properties Group (NYSE: SPG) announced in January that it would be paying dividends in stock rather than cash for the current quarter and, presumably, in future quarters. The company's board of directors voted a 90-cent quarterly dividend, with 90% to be paid in stock and the remainder to be paid in cash.

REITs have long been a favorite for dividend savvy investors looking for a tax-advantaged return from the companies in which they invest. The move by Simon Property has stirred unease in the REIT marketplace in general, and for Simon in particular.

Continue reading Simon (SPG) says stock - not cash - for dividend

Chasing Value: Worried Annaly Capital investor

In December when I posted Chasing Value: Annaly Capital Mgmt -- from watch list to buy I was not just recommending Annaly Capital Management (NYSE: NLY), I actually was buying it.This residential REIT buys secured home mortgages, leveraging short term against long term rates.

Continue reading Chasing Value: Worried Annaly Capital investor

Public Storage (PSA): A good play on moving, adjustment to less space

There are a number of ways to play the recession / depression on the market that might seem, at first, counter-intuitive but on second glance make sense. Here's one -- Public Storage (NYSE: PSA), a REIT focused on ownership of public storage facilities.

Like the rest of the real estate market, it's been hammered -- down just over 52% from 52-week highs of $110 per share. But public / self storage facilities should actually prosper in this market. Here's why: People still have a lot of stuff, but many of them are going to have less house very soon. Same goes for businesses that are putting off plans to expand offices or rent warehouses and need a place to park things.

Continue reading Public Storage (PSA): A good play on moving, adjustment to less space

REITs screw investors with taxable stock dividends

A recent ruling allowed real estate investment trusts (REITs) to take a one-year break from paying out 90% of their pretax income to shareholders in the form of dividend. Instead, some cash-strapped REITs are paying out their dividends with 10% cash and 90% stock.

Here's where it gets really messed up: Those stock dividends are taxed as though they were cash. But the problem is that those stock dividends are really worth nothing because they go to all investors. Stock dividends are the exact same thing as stock splits. The number of shares outstanding increases and the dividend does not increase anyone's stake in the company.

Continue reading REITs screw investors with taxable stock dividends

Retailers vs. mall owners: Who is winning?

There's no doubt that retailers are struggling to stay in business. This is creating a "tug of war" between retailers who are leasing space in shopping centers and mall owners who are also struggling to keep stores from closing and creating added vacancies.

Some mall owners are having to refinance debt coming due to stay open. Just to point out how dire circumstances are, General Growth Properties, the country's second largest mall owner warned that it may be forced to file for bankruptcy if it cannot reschedule its huge debt. On Wall Street, the prices of REIT's (real estate investment trusts) have fallen by 44% during the past year (added: as a Dow Jones index tracking 22 REITS indicates).

Now, on the other side, retailers are trying to renegotiate their leases to lower their overhead. These include such names as Office Depot (NYSE: ODP), Chico's Fas Inc. (NYSE: CHS), Pier 1 Imports Inc. (NYSE: PIR), and The Gap (NYSE: GPS). Some mall owners are helping retailers by lowering "square feet" prices in their leases, while others are saying "no."

Vacancy rates are rising and some analysts are predicting that a growing number of mall owners will default on their mortgages and thereby put additional pressure on our banking system.

Do you own a business in a shopping mall? What are your present circumstances?

Chasing Value: Annaly Capital Mgmt -- from watch list to buy

It was only a couple of days ago I posted Serious Money: What's on your watch list? suggesting you had to be ready because you never know when an opportunity might arise to acquire a value proposition.

Then yesterday the market was up but sluggish in anticipation of Federal Reserve chairman Ben Bernanke possibly announcing a cut in the overnight rate, so I pulled the trigger on the one stock I could get at the right right price that was the most interest rate sensitive.

  • Annaly Capital Management (NYSE: NLY) is one of the stocks mentioned in Fortune Magazines "Ten Promising Stocks for 2009" and is currently paying almost a 15% yield at Friday's closing price of $14.92. The company borrows money at short term rates and only invests in long-term Federally backed mortgages. They have avoided subprime loans and derivatives entirely.
I bought NLY for $14.80 per share locking in at an actual yield of 15.01%. Sure enough, Bernanke slashed rates to the bone letting the rate float from 0% to .5% and the DJIA jumped finishing the day up several hundred points, while Annally closed at $15.84, one of my big gainers for the day.

Continue reading Chasing Value: Annaly Capital Mgmt -- from watch list to buy

Neuberger Berman (NRO): The right REIT for real estate

"Not all REITs are created equal," notes Richard Lehmann, who looks at the Neuberger Berman Real Estate Income Trust (NYSE: NRO) in his The ETF Trader.

"The decline in Real Estate Investment Trusts (REITs) has been sharp, reacting to the mortgage crisis and the associated financial meltdown. However, here are sectors of the real estate market that have not been affected by the mortgage crisis.

"Such sectors like health care and multi-family projects and self-storage buildings are relatively less sensitive to the economic cycle. In addition, these sectors may have an inverse benefit from foreclosures such as rental properties and self-storage.

"The Neuberger Berman Real Estate Securities Income Trust fund invests in REITs in defensive areas such as health care and multi-family projects. Common stocks of REITs are trading at a discount to the properties they own, a reversal of premiums evident in last year.

"This closed end fund trades at 9% discount to its net asset value. In essence, a shareholder gets a portfolio of REITs that trade at a discount to their real estate value at another discount. In addition to the double discount, the fund yields an astounding 24.89% paid monthly.

"The fund trades at $7.38 versus its net asset value of $8.11. Should the real estate market see a decline, fund holders are doubly protected by the high yield and double discount. The fund's top holdings are Ventas Inc. (5.7%), Omega Healthcare Investors (4.8%) and Nationwide Health Properties (4.8%)."

Steven Halpern's TheStockAdvisors.com offers a daily look at the latest market commentary and favorite stock picks and investment ideas from the nation's leading financial newsletter advisors.

Self-storage sector not glamorous, just profitable

Despite large and growing declines in both the commercial and residential real estate markets, one part of the real estate sector is having a good year. Self-storage companies, which are often structured as REITs, are posting some good numbers. Face it, American's have way too much stuff and not enough space to store it at home. Americans move, go away to college, get divorced, join the military and/or lose their homes in foreclosure with alarming regularity. All of these life events require short-term storage. According to a survey in Investment News, self-storage REITs have generated total returns of 20% or more YTD. This compares very favorably with the 5% or more drop in the S&P 500 stock index YTD.

A snapshot of the sector shows four of the largest self-storage companies on the upswing. Sovran Storage Incorporated (NYSE: SSS) at $40.88 is up 1.95% YTD. Most other self-storage REITs have more impressive returns. Extra Space Storage (NYSE: EXR) at $15.11, up 6.90% YTD. Public Storage Incorporated (NYSE: PSA) at $83.55 is one of the most expensive self-storage stocks. It is up 7.59% YTD. The bargain in the self-storage sector is U Store It Trust (NYSE: YSI). At $11.54 the stock is up a whopping 28.82% YTD. Investors should call around to self-storage companies in their areas. Chances are they will not find many vacant units.

Chasing Value: Newcastle announces dividend

Newcastle Investments (NYSE: NTC) logo Checking on one of my big calls of the year:Newcastle Investments (NYSE: NCT), which is down significantly so far through mid June, it is nice to see that a dividend will be paid for this past quarter of $0.25 per share. This amounts to a current yield of over 12%.

I started writing about NCT last November when I posted Chasing Value: Newcastle's 21.9% yield too good to be true?.

In late December I made it one of my Chasing Value: Final list -- 8 stocks for 2008.

Some would say it was to good to be true as the stock price drifted downward and the dividend was cut. I maintain that this is just a waiting game until the real estate market migrates back to a more sure footing while you collect a healthy dividend.

Most advisers would remind investors not to try and catch a falling knife and I would agree, but at some point there is real value and I have taken several "stabs" at this one trying to dollar cost average while a I wait.


Sheldon Liber
is the CEO of a small private investment company and the principal for design and research at an architecture & planning firm. He writes the columns Chasing Value and Serious Money. Disclosure: I own shares of NCT.

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Last updated: November 24, 2009: 02:31 PM

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