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Strategies & Market Trends : Value Investing

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To: Paul Senior who wrote (32873)	11/30/2008 2:54:50 AM
From: Spekulatius	Read Replies (3) of 78751

REIT's there is something wrong with commercial real estate and it's not just the REIT prices. blogs.wsj.com Some where I read in the WSj that some AAA mortgages were yielding 14% ! I do understand that AAA probably does not man much at this point. I also found that senior debt of prime REIT's trades at almost 12% yield. So there is clearly a substantial cost of capital issue with REIT's. Since most REIT's operate with cap rates in the single digit's it is apparent that REIT's cannot earn their cost of capital if current conditions persist for a significant time. If commercial real estate indeed goes downhill there is a lot of pain for banks ahead as well and this time it's going to hit many smaller banks as well. I have no idea how this is going to work out.

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