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Trizec Properties, Inc. (TRZ) Message Board

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  • pcmsearch pcmsearch Jan 29, 2003 8:49 AM Flag

    I feel for you guys

    Thanks for your sympathy.
    By the way, which apartments reits do you like now?

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    • 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.

      • 1 Reply to ferdiefor
      • AIV is a good deal in the apartment reit field for another, more significant reason - their 2 biggest investments made in the past year were the Casden portfolio (LA) and the Flatley portfolio (Boston and 'burbs).

        Both of these position the company with greater concentration in "high barrier" areas. The major apt reits are too heavily concentrated in the south - where anyone can build with little restriction. Try finding a building site in LA or a Boston suburb. Land costs are hig; zoning is impossible.

        Ultimately, the driving force in real estate is "locatio, location, location". I'd rather invest in LA than in Screw-Your-Sister, North Carolina, or Grits, Georgia