Paul, thank you for your praise, but I'll tell you one thing. LaSalle might have been a "Jim Clarke special" but only if you have Paul Senior's average cost. You clearly didn't buy it when I was pitching it. I am still a little bit underwater there, even though it has nearly doubled off its bottom which I bought way too lightly. But hell, the thing still has a 12% yield, management is honest and their properties are not the best in the industry but are performing well.
Your insights are right on the mark. There is nothing wrong with Mills - I just go with Chelsea - Mills executes the factory outlet concept a little differently, but these are the two best in that part of the retail real estate industry.
PSA, you are absolutely right, these guys are financial wheeler dealers. And it is hard to completely trust management to the extent I do with Colonial Properties. But I think this one is going to be a big winner long term because you can buy the company for the value of the properties, but your upside is that management does not manage the company as a real estate company - they are trying to become the McDonalds of the self storage business and I think they're halfway to doing it. None of the competitors is responding at all, which means that if PSA's vision is right you're going to do very well in this stock for the next five years.
Although I am not an expert on all the REITs you own, it sounds like you have a diversied group of them, maybe a little heavy in hotels, but that's where the value is. You haven't gotten tempted by the crap of the industry, which shows you've done your homework. I think the strategy on REITs now should be to diversify among three or four of them in different property types - buy very good properties provided you are not buying a REIT that is still being hyped by Wall Street (PSA would be my exception to that, but you should be able to find very high quality assets in any sector which will give you a 7% dividend yield.
In retail, its Mills or Chelsea. In office its Arden or Kilroy (I like the L.A. market a lot). In storage, buy PSA - the dividend is not the story there. Hotel I would do Host Marriott but understand the tax hit you are going to take in a month - might make sense waiting. Industrial (warehouse) is probably the most stable of all property types through cycles, and you've got a company there called EastGroup Properties (EGP) that yields close to 8% dividend and has an outstanding track record for shareholder value increasing. Apartment I have no view on. If you want to buy one REIT which diversifies you among property types (though not geography, which is also important) I don't see how you lose money on Colonial Properties (CLP) below 27.
I think I made my name on this thread with two real estate picks (I worked for Morgan Stanley Realty for three years, so that's not a coincidence) - St. Joe and Tejon Ranch a couple years ago. My REIT picks have not done my reputation any good so far - it has been a horrible sector this year. REITs are not the same game as St. Joe or Tejon. Those were investments for doubles, but REITs today are an out of favor sector that offers you a 7 or 8% dividend to wait for a 20% gain with limited downside. If that bores you, then look at the next post. REITs are for investors, not speculators. In this sector, I am looking for a safe and satisfactory return, but these aren't going to double.
Hope this is helpful.
Jim |
