REITS owe more than they are valued at. They are executing secondary offerings and cutting dividends. Vacancies are rising and vultures will be sweeping in to buy bargain properties when banks defaults hit. Listen carefully, SELL URE
may not be the first out of the gate on the recovery since a lot of news of the stress in the commercial real estate markets hasn't hit the front page main street news (and might not), but as the economy as a whole recovers, REITS will be lifted. Could be a thumb dwidler for a while.
No problem, when it goes, it'll go. Worth waiting for. Risk to the downside is minimal, reward upside is skyward. Load up for the long haul...
this is not trade material.
it is good for long term investment...
(1) REITs normaly have around 50% leverage. (Or 0.5 to 1.)
(2) For tax reasons REITs take depriciation on their property even in years where the value goes up. As a result the "book" value it is carried could be lower than the market value even if the market value has gone down 25%.
your assessment is partially correct. commerical property values have declined about 25%. while this is true, many of those properties were purchased and owned by the REITS at a discount to todays value. the REITs are able to refinance at lower rates and if not, filing ch. 11 and forcing the debt restructuring. Don't you think a 90% reduction in the equity price reflects a 25% drop in the value of the property? overall average rents are dropping, however rents were inflated to begin with. I would assume few REITs are re-negoiating leases currently in place. URE has priced in as well vacany rates much higher then what the actuals currently are. All that you stated are a known. Now if you made these statements 6-8 months back, i would think you are a genius. since you are just re-stating the obvious and known, i have to think you are an idiot. you need to get ahead of the curve. the market is anticipating stability. the market sees economic conditions subsiding. ure is seeing higher lows, but still has resistance on the upper end. this week and next will be pivotal for URE.
Heres an important lesson free. You asked "Don't you think a 90% reduction in the equity price reflects a 25% drop in the value of the property?"
Answer: Lets say you had property valued at $1 billion a year ago and you owed $800 million at that time. Think of the $200 million equity as a 2nd lien against the property which it essentially is. Now, the property value is 25% less(according to your answer) putting the property value at $750 million and then loan is still $790 million(since REITS do not pay much towards debt reduction rather towards dividends). Whats your equity Sh!t for brains? Answer is: Negative $40 million equity!!!
Who's the idiot?