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Strategies & Market Trends : Graham and Doddsville -- Value Investing In The New Era -- Ignore unavailable to you. Want to Upgrade?

To: Bonnie Bear who wrote (489)	7/9/1998 10:41:00 PM
From: porcupine --''''>	Respond to of 1722

I'm no "expert", and I don't follow REIT's. But, from what I've read, there are two problems with the current REIT market. 1st, there have been a flood of new REIT's, which depresses prices in the whole market. 2nd, to compete for higher yields, REIT's are increasingly leveraging their portfolios. And they are taking on the leverage to buy properties with real estate prices at a peak, not a trough. Supposedly, the fact that REIT's are no longer local, but now have portfolios that are geographically diversified, they are less subject to a downturn in a single real estate market. But, this only increases my concern described below. The first two are, I believe, the basic concerns that Mr. Market has with REIT's at the moment. I have two of my own. 1st, I don't know what's in their portfolios. With Boeing, GM, IBM, and AT&T, all of their products have certain problems, but I have a pretty good idea of what these are from press accounts. With a REIT, I have no idea of what kind of shape their properties are in, how firm the rental market is, etc. (And there have been some real horror stories in this area.) 2nd, this may be my ignorance, but my impression is that REIT's don't give investors the same degree of tax advantages that, say, a limited partnership provides.