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To: clm5 who wrote (58818)	1/1/2017 4:18:41 PM
From: staring	Respond to of 78744

First, you have to distinguish between accruals and cash flow. Some of the things you mention are explained by the difference in concepts. Second, note that banks and bondholders usually do careful analysis. Refinancing at attractive terms usually only happens if risk profile is attractive enough. Third, in Real estate usually you do not require reinvestment greater than that of the depreciation expenses.

To: clm5 who wrote (58818)	1/1/2017 5:57:14 PM
From: Graham Osborn	1 Recommendation Recommended By staring Read Replies (1) \| Respond to of 78744

I'm no expert on REITs, so others here will have more expert command of the terminology/ accounting conventions. But if we think about a REIT on a cash basis the concept is really no different than a bond or dividend-paying stock fund. The fund manager earns a fee (hence the existence of the fund) to buy yielding assets. Some percentage of the yield on assets is paid out to investors. Additionally, the fund can generate cash from selling assets, ideally at appreciated prices. If the fund does not sell assets and pays out more cash than it is taking in, it will ultimately have to raise new funds from investors - and once old investors are being paid out of the new funds the scheme has some degree of Ponziness. This pattern is rampant in venture capital and biotech companies. Your comments remind me of an analysis made by George Soros in the 60s, except he (ever the master of greater fool theory) bought REITs early in the cycle and made a killing. The important point is that legitimate business models degenerate into Ponzi schemes (intended or not) under certain business conditions, such as a sudden decline in the value of the assets portfolio or tenant defaults. A REIT is no more a flawed business model than a bank or mutual fund is, but it invites speculative behavior in the interest of maximizing short-term fees for the manager. I remember reading an article about a REIT manager 4 years ago and thinking to myself "this guy could be the poster-child for speculators." I take no position on the strategy other than to say it was smart 4-8 years ago but seems much less smart now, at least if one is looking at the cash yield of the assets.

To: clm5 who wrote (58818)	1/1/2017 6:47:02 PM
From: Elroy	1 Recommendation Recommended By staring Respond to of 78744

How are REITs (or any investment required to pay out 90% of its income for that matter) any different than a ponzi scheme? The REIT pays its investors out of earned income. The payment grows or shrinks as income grows or shrinks. The ponzi scheme pays its investors out of new investor's contribution. The payment grows and grows until there are no new investors (no new chumps), and then it collapses, and the founder somehow has relocated to a country without an extradition treaty.