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Old 05-16-2020, 08:26 AM   #1
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REITs

I'm considering changing my target asset allocation this year. Right now, my target allocation for REITs is 8%, although recent market changes put me considerably below that now. I'm invested in VGSLX and VGSNX.

I know nobody knows the future, but I'm curious what people guess will happen to REITs in the next 3, 5, and >10 years.
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Old 05-16-2020, 09:00 AM   #2
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... I know nobody knows the future, but I'm curious what people guess will happen to REITs in the next 3, 5, and >10 years.
I guess I don't have the slightest idea. I am happy to hold the REITs in my total market funds but beyond that I don't try to bet for or against any sector. The quilt charts illustrate.
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Old 05-16-2020, 09:18 AM   #3
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With retail bankrupting and (allegedly) 25% of restaurants never reopening, I wouldn't touch commercial REITs.
With the silliness in rent forgiveness until "6 months after the crisis ends" floating in various legislation, plus the wave of private property declines hasn't hit prices yet, I wouldn't use residential REITs either.
So that leaves healthcare focused REITs. LTC facilities: probably won't need ~10-15% of their capacity when this is all done.
Net: I'm bearish on REITS.
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Old 05-16-2020, 09:28 AM   #4
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Originally Posted by Spock View Post
With retail bankrupting and (allegedly) 25% of restaurants never reopening, I wouldn't touch commercial REITs.
With the silliness in rent forgiveness until "6 months after the crisis ends" floating in various legislation, plus the wave of private property declines hasn't hit prices yet, I wouldn't use residential REITs either.
So that leaves healthcare focused REITs. LTC facilities: probably won't need ~10-15% of their capacity when this is all done.
Net: I'm bearish on REITS.
With respect, everybody knows this. Do you think it is not already reflected in REIT prices?

I was re-reading Rick Ferri's "All About Asset Allocation" last night and ran across this:
"There is a classic saying on Wall Street, 'What everybody already knows is not worth knowing.' "
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Old 05-16-2020, 09:39 AM   #5
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With respect, everybody knows this. Do you think it is not already reflected in REIT prices?

I was re-reading Rick Ferri's "All About Asset Allocation" last night and ran across this:
"There is a classic saying on Wall Street, 'What everybody already knows is not worth knowing.' "

The question was what REITs will look like going forward. I don't see any upside unless REITs are dramatically undervalued now such they are bought "cheap".


Real Estate/Housing prices haven't fallen yet because its a slow indicator. Renters are only starting to punt.
I wouldn't expect REITs prices to have it fully baked in until the underlying assets reflect current conditions.
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Old 05-16-2020, 10:29 AM   #6
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I have a small chunk of VGSIX. It got pummeled more than any other holding I have. But there's a lot baked in now, and it's in my Roth IRA, so no reason to sell now. I certainly wouldn't buy more though, there's no reason to believe all the damage is built in yet...
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Old 05-18-2020, 08:50 PM   #7
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Thanks for sharing your opinions. Guess I'll wait longer and see what happens.

A friend of mine says he thinks there will be another drop (all stocks, not just REITs) after the election -- regardless of who wins. Now seems like a good time to hit pause on investing -- of course, that's how you miss the bottom.
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Old 05-18-2020, 09:00 PM   #8
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6% rally in REITs today due to vaccine hopes.
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Old 05-19-2020, 04:30 AM   #9
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Originally Posted by slowsaver View Post
I'm considering changing my target asset allocation this year. Right now, my target allocation for REITs is 8%, although recent market changes put me considerably below that now. I'm invested in VGSLX and VGSNX.

I know nobody knows the future, but I'm curious what people guess will happen to REITs in the next 3, 5, and >10 years.
REITs? They will be all over the place as the underlying businesses all have different prospects. Logistics REITs so as Prologis, cloud REITs like Cyrus One and Digital Realty, apartment REITs and probably good now. Retail is a crapshoot and I think office may be also. I may re-look at some specialty ones like Ryman Hospitality, and storage REITs. Not sure what they have done.

REIT preferred stocks may have clearer prospects. Right now I have a modest allocation but did add to DLR during the selloff.

In my opinion you would need to focus on individual names and segments.
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Old 05-19-2020, 04:48 AM   #10
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So that leaves healthcare focused REITs. LTC facilities: probably won't need ~10-15% of their capacity when this is all done.
Net: I'm bearish on REITS.
One REIT I dabble in (UBA/UBP) has been around for 50 years, is extremely conservative, and has most all of its portfolio in retail locations anchored by groceries and pharmacies. They've also increased their dividend annually for the past 25 years. The shares may still go somewhat lower, but they will still be around in 25 years and won't be one that goes through bankruptcy.

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REIT preferred stocks may have clearer prospects. Right now I have a modest allocation but did add to DLR during the selloff.
They also have two preferred issues paying nice dividends at this time, though their history is to call the preferred issues immediately at the first call date and refinance with new preferreds at lower yield.

This is not a recommendation to buy, just another alternative to investigate if you are looking for somewhere to put money that you want in REITs.
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Old 05-19-2020, 04:55 AM   #11
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The downside risk is that failed businesses and those with more people permanently working from home will need less space. Upside is that those using space need to spread people out more.
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Old 05-19-2020, 05:09 AM   #12
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Real Estate/Housing prices haven't fallen yet because its a slow indicator. Renters are only starting to punt.
I wouldn't expect REITs prices to have it fully baked in until the underlying assets reflect current conditions.
AvalonBay (AVB) and Mid-America Apartments (MAA) are both heavyweights in the sector, and will be around after this downward cycle. Check how they did after 2000 and 2009.

As with stock prices in general, if you wait for the worst of the news to hit, you will have missed the bottom. Probably still good money to be made, but the market is forward looking, even here.
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Old 05-19-2020, 06:15 AM   #13
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REITs are 8% of my asset allocation.

I'm not reflexively changing my asset allocation in any regard due to the current crisis.

Intellectually, I agree that REITs are likely to face a tough road. They've also gotten pounded down already. I'm not smart enough to know whether they're pound too much, just enough, or too little. So I continue to use fresh cash to nudge back towards my AA just like I always have.

I will revisit my AA in a structured, planful way at the end of this year. But that's driven by just being five years older and much closer to RE. Not anything to do with the current situation.
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Old 05-19-2020, 08:31 AM   #14
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6% rally in REITs today due to INSERT ANY NEWS STORY HERE.
Fixed it for you.
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Old 05-19-2020, 08:35 AM   #15
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Fixed it for you.
What??!!?!?

You mean the people that write those news stories have not interviewed the hundreds of traders that comprise the market to determine why the market moves? They just make this stuff up??!!?
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Old 05-19-2020, 08:53 AM   #16
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With respect, everybody knows this. Do you think it is not already reflected in REIT prices?

I was re-reading Rick Ferri's "All About Asset Allocation" last night and ran across this:
"There is a classic saying on Wall Street, 'What everybody already knows is not worth knowing.' "
.




Was not my post to begin with.... but no, I do not think it is priced in REITs yet...


Business going forward might not be the same... lots of companies are finding out they can operate with half or more of their workers working from home... that would have a huge impact on rents going forward...




As an example of info not being priced in a stock.. people knew for years that Sears and JCPenny were going to file for BK, but people kept buying those shares... I dabbled in JCP a few years back and even made money but decided the BK risk was too much and stopped.
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Old 05-19-2020, 09:06 AM   #17
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... but no, I do not think it is priced in REITs yet...
So you are loading up on REITs or buying puts?
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Old 05-19-2020, 10:47 AM   #18
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I think there "could" be some extreme value in certain REITS at some point soon. The key to remember is REITS stocks don't trade for Net Asset value. So you have to look at the prospectus understand when NAV was set, and what types of properties and location. Then look at how much of a discount to say Jan 1st 2020 NAV you can get.

If you can find a REIT at a huge discount to NAV in a sector that will be "less" crushed like apartments....it could be a good deal. But retail and hospitality. They could go bust. Remember most of these REITS use leverage, and the cashflow with high occupancy and paying tenants wasn't that great to start with. So you need to be careful.
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Old 05-19-2020, 11:13 AM   #19
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I have a few shares of Realty Income (O) which I purchased when the market was in a funk. I have been eying storage REITs such as Public Storage (PSA) and CubeSmart (CUBE). Cramer had the CEO of Alexandria (ARE) on his show a week or so ago - that REIT focuses on bioscience properties, its P/E is sky high and yield comparatively low - not a buy IMHO.
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Old 05-19-2020, 12:56 PM   #20
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So you are loading up on REITs or buying puts?



Nope, options are gambling and I do not gamble...


Also do not short sale as that is also gambling...
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