I really think q4 will be ugly for TRZ when they announce and try to explain their TI/commission numbers. If they follow thru and literally choose to fill space at any cost it is short term cash flow sacrificing long term value.
This was the state of the average office reit circa late 80s/early 90s. All those office reits went away and the new generation was born with its core thesis of lower leverage. I believe we are getting very close to the low points in vacancy and if these lower levered office reits are able to hold their dividends BUT MORE IMPORTANTLY continue to display the discipline of not giving away the store and signing leases that make economic sense we will have survived the first major test of the new generation of office reits.
TRZ and Munk unfortunately are functioning from the old platform. The analysts whether you like them or not have focused like a laser on these issues of the exercise of discipline and economics of new leases.
TRZ's leverage simply leaves it any room to conduct such exercises. I hope very much that I am wrong.
Those that know my posts know of my distate for apartmt reits. I owned SMT a long time ago at 10% yield and sold out in the $20s.
In order for me to consider apartmt reits I would want 10% yield to match risk w/reward.
My main reason is that I do not believe the capex and imprmt numbers reported by apartmt reits. Its so easy for them to finagle or rig that number to make ffo come out where they want it to. I always assume that number is understated.
I don't make that assumption for other sectors because business tenants in office, industrial, healthcare (although most are nnn leases) will not take crap from the landlord in terms of TI and capex. Individual aprtmt lessees are more inclined to put up with a drag on capex as long as the rent isn't going up or its going up by small amounts.
If I were to pick an aprtmt reit today that I would buy at a 10% yield it would be AIV. Reason, they have taken the opportunity to sell off a lot of assets at favorable cap rates during the depths of this depression in the apartmt market. I like a reit that knows when to recycle capital and wait for another day to invest in more accretive ppties down the road.
Most apartmt reits appear overvalued to me in terms of risks going forward.
Watch that capex number and compare the projections for the current period with actual. I am very wary of the leverage used by the apartmt reits in light of this historical shift from apartmt dwelling to house purchasers. The longer rates stay down the more pain to be felt by apartmt reits.