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

To: Grommit who wrote (57613)	7/25/2016 3:20:19 PM
From: E_K_S	Respond to of 78751

Re: REIT valuations I have been looking at the dividend yield spreads vs the 10 year Treasury. It's the highest that it has been and any reversion to the mean, this must shrink maybe 50%. For these yield spreads to shrink back to the historical mean; Rates must move higher, prices must move higher and/or dividends must be cut. I do not see prices going higher based on your observation of historical PE's. Even if Fed does one rate cut, historical yield spreads will still be at highest level in years. Therefore, dividends may be cut but REITs must pay out 90% of their earnings, so I am not sure what else would cause an industry/sector sell off. Maybe the big institutions would exit the sector if they found similar yields plays somewhere else. Selling would move prices lower. I sold all of my retail property REITs (ie malls) and now only hold medical, small office and hotel Reits. Many are special situations and one or two value plays in the hotel sector (SOHO and AHT). Until rent rolls fall and/or vacancy rates increase, this is probably a safe place to sit and collect the dividend. I have focused on the small cap REITs (other than OHI) and the properties they are buying. Every new property moves the needle for these companies and most are locking in cap rates of 7.5x-8.5x which is still very good for this market. The typical size is $25mln but no higher than $50mln. You might look at CHCT, CIO, AHT and SOHO. I have been trying to add to CIO as their adviser now has a board seat and just bought 2.5mln shares from the original limited partnership. The board owns a lot of shares now and has the same vested interest as the common shareholders. No more special adviser fees. From CIO 8K dated 7/20/2016 On July 15, 2016, in connection with the redemption of OP Units as described under Item 3.02 above, the Company announced that in two separate transactions Mr. Kohn and entities affiliated with James Balsillie purchased an aggregate 2.5 million shares of Common Stock at $13.00 per share from Second City. Good Investing EKS