REITs finally taking a dive??

[brewer12345]

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]

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]

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]

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]

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]

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

 

[Sam]

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.

OK. I'll pass. I don't see any advantage in stability at all. My FRESX did better, performance wise. Thanks for the clarification.

 

[clifp]

I got in to REITs near the bottom, but missed the top by several years.

The only two I own are Realty Company (O) which I intend to hold forever. I think they are a very shareholder friendly company. And CSE which is technically a REIT, but acts more like a commercial bank and pays a very nice 9%+ dividend.

 

[mathjak107]

OK. I'll pass. I don't see any advantage in stability at all. My FRESX did better, performance wise. Thanks for the clarification.

well the advantage is most reits have fallen 20% or more off their highs and its based on pure perception and investor sentiment not reality.

again your trying to compare stability of bonds with stability of stocks. these are 2 different vehicles. the unlisted reits are really income generators and if thats all they did then even thats a great return at 8-1/2%. the fact there may be a sweetner at the end is only a bonus.

 

[saluki9]

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

Funny you should mention IRC. I have several clients and family members who bought it when it used to be an untraded REIT. Thry bought the shares at $9.50 and collected a 9-10% dividend all the way until the IPO. They have made out pretty well

 

[Sam]

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 .

OK. I'll pass. I don't see any advantage in stability at all. My FRESX did better, performance wise. Thanks for the clarification.

again your trying to compare stability of bonds with stability of stocks. these are 2 different vehicles. the unlisted reits are really income generators and if thats all they did then even thats a great return at 8-1/2%. the fact there may be a sweetner at the end is only a bonus.

For the record, I never tried to compare Apple Hospitality with bonds. You did.


Anyway, what I was really interested in is finding out what makes Apple Hospitality more stable than run-of-the-mill REITs like FRESX. So far I have not seen any tangible indication that it is.

 

[cute fuzzy bunny]

I got in to REITs near the bottom, but missed the top by several years.

Yeah me too, but then again ya stay rich by selling too soon.

When I cant find a single person who can explain the valuation on an asset class while keeping a straight face, I'm done with it. No remorse about it continuing to rise without any valid reason other than inertia.

 

[Sam]

FWIW, the DJ Equity REIT Total Return Index (.REIT or ^REIT) is up 1.27% right now. Whew!

 

[Hamlet]

I'm a big fan of O as well. They have a good record of increasing their dividends. As a little bonus to the ER crowd, they pay their dividends monthly.

I got in to REITs near the bottom, but missed the top by several years.

The only two I own are Realty Company (O) which I intend to hold forever. I think they are a very shareholder friendly company. And CSE which is technically a REIT, but acts more like a commercial bank and pays a very nice 9%+ dividend.

 

[bright eyed]

there are only two real estate funds in my 403b, i have the van kampen...one month is about neg .4% and 3 mth is neg 3% and one year is about 3% positive, previous year was about 30% pos!!!

guess it's a good thing i'm young and i'm buyin' it cheaper... but given the previous steap climb, seems it has a long way to go down!!!

it's about 13% of my 403b for now...

 

[mathjak107]

For the record, I never tried to compare Apple Hospitality with bonds. You did.


Anyway, what I was really interested in is finding out what makes Apple Hospitality more stable than run-of-the-mill REITs like FRESX. So far I have not seen any tangible indication that it is.

the fact is a reit is a stock and is very volatile, it swings wildly for many reasons, sometimes moving 5% in a day or 20% in 6 weeks . . because unlisted reits dont trade they tend to stay in a very narrow range just like your house or personal business .you dont revalue your house daily and have it worth less or more over a two week period unless you were selling it. the unlisted reits spin off income from the business operation and as long as the business makes enough money dividends can go up, or down if they dont. thru the recession of the 2,000's the interest rate varied from a low of 7 to 8-1/2% depending on business no daily price changes to make you cringe. could prices be lower in 7 years when the properties are sold? sure. is it likely? very unlikely over a 7 year period. but even if not the 8-1/2% return aint bad either.

for a conservative income generator i find it supurb... the fact that it may have a capital gain at the end is just an added bonus not something i would even count on.

on the other hand my publically traded reits were one heck of a ride with spectaular gains over the years and maybe some spectacular loses. some are already down over 20%

 

[mathjak107]

to funny as i was typing the last post i got a call from david lerner. with the sale of apple 2 to ing bank about 2 months ago most people just rolled it into apple vii and they called to say apple vii has reached its limit and will be closing. if anyone wanted to take a shot you have to wait and see if they start apple viii

 

[theoldwizard]

well the advantage is most reits have fallen 20% or more off their highs and its based on pure perception and investor sentiment not reality. ...

Could you expand on that statement (i.e., what perception, what sentiment ?)

 

[theoldwizard]

FRESX mad a nice bounce the past couple of day. Almost back to where it was at the beginning of the year.

Off topic, I really like Yahoo Finance's new style charts !

 

[mathjak107]

Could you expand on that statement (i.e., what perception, what sentiment ?)

stocks trade not only on reality of what actually is at the moment but on pereception of the future too. a company misses earnings by a penny and they get pummeled by 20% in a day like this is forever. next week back up again on no news. . the markets always look ahead and are always reacting big time to things that may or may not ever happen. the markets always have a tendency to over do things both on the upside and the down. stocks swing daily based on things that may never come to pass in the future, in fact the same news has already made stocks sink one day and rise the next just last week with the retail sales report. same news killed us on thursday and rallied us on friday.

on the other hand real brick and morter sells for the exact real value at that moment or based on the real cash flow of the property. there may be a little blue sky added to the price but basically the price dosnt swing 10-20% from one month to the next.

comparing a traded reit and un-traded reit is a little like comparing an income fund to a growth fund. there are wild swings and big loss or gain potential in a traded reit, the un-traded is usually designed for income and price stability eliminating the swings .. of course most of the time as always reduced risk is traded for reduced potential gains.

i use 15% un-traded reits and 5% traded reits in my mix .

.

 

[HFWR]

If, like me, you're holding for the indefinite future, the daily fluctuations don't matter so much.