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Apollo Commercial Real Estate Finance, Inc. Message Board

  • iownsome iownsome Oct 8, 2002 9:54 PM Flag

    ferdiefor, about your post #320

    "You got to get to 9% yield to peak my interest in adding to my ARI."

    Are you still seeing ARI as a worthwhile buy at current price and yield? I'm weighing whether to add now or to try for another 1 1/2 drop in the stock (which would give about a 10% yield).

    What are the rest of you guys doing now regarding REITs? I only have added recently to FCH, haven't sold anything. I'll look at CTA mentioned here previously. I have MLS which I also see as a 'growth' play. And I notice that Ferdiefor has said he's added about 27; I'll look at MLS again to see if I want to add too.

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    • MLS is my biggest position.

      If you have a long term outlook ARI is a good hold. It has a strong balance sheet. However its occupancy has fallen resulting in affo very close to the dividend. I believe ARI would hold the dividend even if we dipped for a few qtrs below affo because their strong balance sheet can take a little extra debt.

      Its not going down on horrific volume. I think we are simply washing out newbies that overpaid for these stocks and simply couldn't hang in for a long term yield. After all, if you bought it with a 7% yield and sold it today you sold it off for today's yield. So what better investment today than ARI at today's yield unless you believe the world is coming to an end.

      We just have to get thru OCT madness and let the mutual funds clean their books. I suspect money will come back into reits although the office reits will stablize at lower levels (higher yields) to reflect their future prospects which are not that great at this time. Remember the economy was supposed to be recovering by now.

      • 1 Reply to ferdiefor
      • ARI has property which can't be duplicated for less than 150 - 175 percent of its costs; it is virtually impossible to get high density office zoning in the Wilshire corridor.

        The AFFO num is not the be-all and end-all of life on earth; it is, to a great degree, a function of what type of leasing deals are made - with TI or without.

        There is a recession on; in office buildings as well as in most other fields that cater to the business community.

        However, the long-term values of ARI's properties are quite impressive, particularly compared to most other office reits. There are few areas in the country with as vibrant, diverse, and profitable economies as the West LA space at ARI's core. The barriers to entry are exceeded only by 2 or three markets - Manhattan and SF (in recession but also high barrier) stand out.

        You can find office reits with seemingly better numbers, but you can't find any that have the geographic exclusivity of Beverly Hills and Westwood - not just fancy but immensely opposed to additional building.

 
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