Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Grommit who wrote (32879)	11/26/2008 11:50:12 PM
From: Spekulatius	Read Replies (1) \| Respond to of 78747

I am not that sure about the REIT sector, While it is true that the REIT's are priced for Armageddon I am not that sure that Armageddon will not come. I snooped around bonds and found for example that KIMCO senior bonds were yielding 12%. This is an A- rated firm !. Well they can get secured mortgages for less of course but that only works with a certain asset coverage (I believe you can borrow 80% of NAV). The concern with commercial real estate is that the default of the weaker companies or REITS sets up a forclosure cascade that brings down RE values, similar to what is happening in residential RE. So I am not buying the totally irrational market. Even if a REIT is home free for two years in terms of financing - if RE prices fall until then such that mortgages are not available (due to lack of coverage) it is going to be game over for a lot of those entities we are looking at. FWIW I expect this XMAS season to be abysmal. CNBC today was talking about -5% GNP growth in the 4th quarter (annualized). -10% would constitute a depression per most definitions so we are almost 1/2 way there. If -5% is the bottom than we are fine but if things spiral down from here we do have a real risk of a depression that is closer to a 1930's depression style than a 1982 or 1974 recession which were deep but short lived. I hope it never comes to this, but the recent rally does not dispel my concerns. I raised quite a bit of cash during he last 2 days because I think we are going to bear quite a bit of bad news soon.

To: Grommit who wrote (32879)	11/27/2008 1:44:04 PM
From: E_K_S	1 Recommendation Read Replies (1) \| Respond to of 78747

Hi Grommit - Colonial Properties Trust (CLP) looks interesting but I do not like their regional exposure for their real estate holdings, specifically for their residential portfolio ( colonialprop.com ). They appear to have heavy exposure in Texas and North & South Carolina . Their mixed use and commercial property exposure also includes several projects in Florida which may be impacted more than other regions if we have a prolonged recession. It's hard to determine from their web page their costs and revenues on their different projects to determine if any one region is impacting their total portfolio holdings. Finally, from a cursory inspection, many of their projects seem to have been built within the last five years which indicates that the company has a relatively high acquisition cost when compared to other more established REITs like HRP. Therefore, BV may be overstated for CLP and significantly understated for HRP. That said, I did notice some very large and recent insider Buys for CLP ( finance.yahoo.com ) which indicates to me that management believes the stock is quite undervalued. Both FIRST IND RLTY INC (NYSE:FR) and HRPT PROPERTIES (NYSE:HRP) are of interest to me as these companies have several properties that were acquired years ago with a very low cost basis. finance.yahoo.com Although these companies have levered up on debt in the last five years, they are working down their exposure to more reasonable levels. So far, rental incomes remain stable w/ good (staggered) long term leases while vacancy rates remain low (about 5%). The only insider buying I have seen is for FR of 1 million shares by SHIDLER JAY H a director during November 2008 ( finance.yahoo.com ) at prices between $5.50/share and $6.00/share. That's a lot of skin in the game for a director. I have CLP on my watch list. When calculating my dividend income for 2009, I have cut my REIT income amounts by 50% so I will not be too disappointed on any future dividend cuts. EKS