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Strategies & Market Trends : REITS - Buying 1 - 2 weeks before going ex-dividend -- Ignore unavailable to you. Want to Upgrade?

To: bob s who wrote (1512)	9/21/1999 11:21:00 PM
From: Richard Barron	Read Replies (1) \| Respond to of 2561

Bob, Personally, I think almost any preferred stock on REITs is going to be safe long term. Staying away from stocks with dropping earnings like MT, GLR, AEC, and PAH(now WYN) and some health care REITs that may have questionable tenants or huge debt coming up soon(VTR, ETT, etc.), I think most REITs will be able to continue paying dividends on the common, barring more than a 15% drop in income. If so, then the preferreds would be safe, and the equity of the preferreds would be safe as long as the equity doesn't drop by more than 20-50% depending on the individual REITs leverage. The number of times that commercial real estate has dropped this much in this century has mostly been limited to the depression and the 88-92 real estate crunch, partially aided by the legislation encouraging syndications for tax reasons until the '86 tax bill killed this type of investment. Most of the REITs are much less leveraged than they were 10 years ago, and than private real estate is at any time. WDN Preferred "S" seems to be one of the safest of the 10%+ preferreds based on the leverage ratios and the relative STRENGTH of WDN common stock which isn't hitting new lows daily like many of the REITs. Someone is bailing out of the preferred "S" so fast that it is yielding more than 13% now. GLB and CEI should be very safe theoretically on the preferreds. I'd also look at companies with stock buybacks since they wouldn't(shouldn't) do that if they felt they couldn't meet the dividend payments. Based on stock movements of REITs, it is important to see how much debt is due in the next 2 years and how much is variable rate debt, as well as any expected lapses in income. I obviously am surprised at how deep the CEI drop has been since the earnings report and subsequent bankruptcy of Charter. Since Charter is only 8% of the revenues, how can that justify knocking 30% off the price. Not only that, the Charter properties are probably not going to turn out to be worthless. CEI has estimates for FFO of .66 and .85 in the next 2 quarters. If the .85 comes in only at .78, that would still be 10% better than last year. The leverage ratios are decent. The 12% dividend appears to be secure, and the preferreds even more so. GLB appears to be even more of a bargain, especially since it is trading at a huge discount to book and has good leverage ratios. In today's press release ASN announced another $50 million of stock buyback with a strong market for selling apartment buildings now. biz.yahoo.com ''The number of buyers, particularly institutions, competing to purchase apartment properties has increased dramatically during the last several months, and we are aggressively taking advantage of this opportunity to dispose of our non-core assets in secondary markets at very attractive prices,'' said R. Scot Sellers, chairman and chief executive officer. ''Our increased disposition volume will give us the opportunity to continue to invest significant capital in high-growth, supply-constrained markets, including Southern California, Chicago and Boston. We also have a compelling opportunity to repurchase additional shares of our stock at what we believe are very attractive prices.'' The S&P 500 is dancing near it's 200 day moving average, and if it violates this to the downside, it looks like a head and shoulders top. No way I can call a top after a this huge run since 1990, but I wonder how the REITs will respond when the market corrects more than 10-20% and value becomes fashionable. They are obviously treated like junk right now, and seem to have a very similar pattern to the utilities now, except they seem to be 4-6 months earlier in the phase. Richard p.s. I imagine that the ^TICK will hit a number between -1300 and -1700 in the next 2-3 sessions or faster to define the bottom of this swing. That may be a good entry point, but the darlings like INTC, GE, etc. will probably rebound faster.