REITs finally taking a dive??

[megacorp-firee]

Quote:

Originally Posted by JustCurious Can you please let me know exactly when that happens.

Put me on the list too...

[mathjak107]

we need to vote in a designated bell ringer

[Sam]

Quote:

Originally Posted by mathjak107 thats where you are so wrong my friend. we collected 7to 8-1/2% interest for the last 7 years. thats in a world ranging from less than 1% to between 4-5% in bonds cd's mm . only 80% is taxable too as you get to share in the actual depreciation. the properties apple 2 had was just sold off and with the gains we got a total return per year of 17.5 % for 7 years . all with next to no risk a fixed 10.00 per share price if we want to sell early, it just goes in the reinvestment pool and no wild daily swings.

17.5% for 7 years is impressive. But Fidelity REIT (FRESX) returns 21% for the last 5 years (I'm too lazy to find the 7 years return).

Can you elaborate on all with next to no risk? I don't understand it at all. How did you come to that conclusion?

[audreyh1]

Wow - this post made me go look at my REIT funds, and sure 'nuff, they are actually negative YTD. I haven't seen something like that in a looooong time.

Funny thing - I hadn't even noticed, because my total portfolio keeps hitting all time highs.

Let them dwindle a bit more IMO. I started buying REIT funds back in 1998, 1999. I think they had a 20% correction one of those years. People hated them back then.

Audrey

P.S. Earlier this year, realizing that my REIT holdings were 8% of my equity allocation rather than the 6% I had intended, I sold the remaining amount I had in CREEX. Good move - it was up 7%+ YTD at the time, and now it's -4%.

Dumb luck!

[mathjak107]

Quote:

Originally Posted by Sam 17.5% for 7 years is impressive. But Fidelity REIT (FRESX) returns 21% for the last 5 years (I'm too lazy to find the 7 years return). Can you elaborate on all with next to no risk? I don't understand it at all. How did you come to that conclusion?

a publicly traded reit is a stock first and a play on real estate second. its subject to the wild swings every day , its has the potential for huge gains or loses and trades with investor sentiment.

i like to think of an un-listed reit as a kin to a quality corporate bond but on steriods

the un-listed reit sells for a fixed per share price, in my case 11.00 bucks. the interest rate it pays is derived from the income generated by the properities it owns. yes you own directly real bricks and morter and are even given a depreciation write off from the interest.

they strive to maintain the fixed 11.00 share price , if you need to sell early say before the 6-7 year time frame the properties are held before being sold then your shares just go into the dividend re-investment pool serving as a source for those who reinvest at the same 11.00 a share.

at the end of 6-7 years the properties are sold and anything over the value of 11 dollars a share is split. if market conditions arent favorible for a sale they can hold the properties longer but frankly i dont think we ever had a 7 year period real estate didnt appreciate something. i really wasnt expecting anymore than my 8-1/2% but when the properties were just sold it was a nice bonus.

as you see this is a very conservative investment unlike a public reit .

i use them as a bond proxy along with my bonds.

[Sam]

Thanks mathjak107. Did you address the next to no risk? Or is the answer already embedded in your reply?

If I read your reply correctly, the risk is there, just like any commercial real estate investment.

[mathjak107]

the low risk is the share price is fixed at a set price. the only risk is if business is bad at the extended stays your interest rate may get cut a little. at the end of 6-7 years the properties are sold. you get your fixed price back plus a seperate bonus check for additional profits.

this is in contrast to publicly traded reits where in 6 weeks you can be down 25%

[Sam]

1) So, you're saying that the price you paid for ($11 in this case) is the guaranteed minimum amount you'd get back when you bail out after 6-7 years? Correct? If so, is it written down in the contract?

2) What is the exact time frame? 6 years or 7 years?

[CybrMike]

Sounds like a great alternative to investing in commercial real estate directly. The biggest issue I see is the fact that your not using leverage, which IMO, is one of the most valuable return multipliers when investing in real estate.

[theoldwizard]

Quote:

Originally Posted by Sam My Fidelity REIT (FRESX) is behaving almost identically. This is the one fund that I least understand. Kind of going against the common wisdom of "not investing in something you don't understand"

I'm the "new kid on the block" around here, so I want everyone to know that the "wizard" part of my username has nothing to do with investing !

I hold a significant chunk of FRESX in my 401k, probably way more than I should now that I am retired, so I am "concerned" now that it is down 2% YTD after being up 13% YTD in Feb !

I've looked at the Top 10 holdings of FRESX. All most all are down YTD with Public Storage (PSA) (7th highest holding at 5.3%) down 15% YTD. Looking at the rest of the TOP 10, the companies all own/manage office building, shopping centers, apartment buildings and/or hotels. Nothing to do with single family housing. So I am a bit mystified as why it has dropped so far, so fast. I think long term, it is still a good bet.

Anyone have anymore insight on FRESX ?

[brewer12345]

Quote:

Originally Posted by mathjak107 the low risk is the share price is fixed at a set price. the only risk is if business is bad at the extended stays your interest rate may get cut a little. at the end of 6-7 years the properties are sold. you get your fixed price back plus a seperate bonus check for additional profits.

And if the property isn't sold at a profit, what then? I'm willing to bet you won't be seeing your "fixed price" back.

You know what they say about partnerships: at the beginning, the GP has all the experience and the LPs have all the money. At the end, the GP has all the money and the LPs have all the experience (of being screwed).

[mathjak107]

Quote:

Originally Posted by Sam 1) So, you're saying that the price you paid for ($11 in this case) is the guaranteed minimum amount you'd get back when you bail out after 6-7 years? Correct? If so, is it written down in the contract? 2) What is the exact time frame? 6 years or 7 years?

there are no guarantees just like a corporate bond. its what they strive to do and in the last 9 years of running them its exactly what they do. there never was an instant either where the property was worth less when sold. of course its in the prospectus that they can delay sales until things are more favorable.

all in all for the amount of risk involved i find it a worthwhile addition to my portfolio and another ave of adding stability to it.

[mathjak107]

Quote:

Originally Posted by CybrMike Sounds like a great alternative to investing in commercial real estate directly. The biggest issue I see is the fact that your not using leverage, which IMO, is one of the most valuable return multipliers when investing in real estate.

some unlisted reits do use leverage themselves. this particular one uses all cash buyouts

[mathjak107]

Quote:

Originally Posted by brewer12345 And if the property isn't sold at a profit, what then? I'm willing to bet you won't be seeing your "fixed price" back. You know what they say about partnerships: at the beginning, the GP has all the experience and the LPs have all the money. At the end, the GP has all the money and the LPs have all the experience (of being screwed).

the old partnerships were disasters. most were rip offs. these are nothing like them, these are also required to adhere to some pretty stiff accounting measures. all in all i know no one who was disapointed or burned in these.


i understand wells who's the biggest has some short comings but so far i know of no one in the apple reits who was unhappy

[cute fuzzy bunny]

So in other words, laid on the backdrop of an insanely skyrocketing real estate market, things have been good.

Hence theres low risk.

I guess if your presumption is that real estate will continue its high flying ways, then its low risk. Although you'd be a bit better off holding the real estate itself.

I think I can see where some of the downside risk is, given what you've disclosed. Property values drop and the sales of the property are delayed for 10-20 years "until things are more favorable".

Whoops.

[mathjak107]

always the risk but ill still bet if it was that bad id be light years ahead of what was lost in publicly traded reits.

[brewer12345]

Quote:

Originally Posted by mathjak107 the old partnerships were disasters. most were rip offs. these are nothing like them, these are also required to adhere to some pretty stiff accounting measures. all in all i know no one who was disapointed or burned in these.

The problem that I see with these things is that you do not have the SEC or SarbOx penalties on your side. Bad things happen with publicly traded companies sometimes, but if they involve fraud or accounting shams, someone is going to pound-me-in-the-@ss federal pentitentiary under the SarbOx laws. If your investment is not protected by SOx, best you can hope for is to sue in civil court and hope to recover something.

[Canadian Grunt]

Just a note on calculating yield.

Current yield, which many of you are discussing, affects new buyers.

If you already own the stock or fund your yield is based on the accumulated distributions over one year divided by the average cost of the stock or fund x 100.

If you are making decisions based on the current yield on a stock or fund you already own you are not going to make an informed decision.

REIT’s are normally negatively correlated with stocks so you are lowering your portfolio volatility over time. Buy them for the distributions and reinvest those in non-correlated assets to keep within your targeted portfolio mix.


Grunt

[audreyh1]

Quote:

Originally Posted by theoldwizard Anyone have anymore insight on FRESX ?

It's had a great run for many years. This is the only REIT fund I am still holding, and I will continue to hold it indefinitely. I think it's a good core REIT fund.

The bloom is finally off the rose in the REIT fund world - after many many years of amazing performance.

Audrey

[mathjak107]

my two favorite publiclly traded are icf and rwr. at 75 ill buy into rwr again