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CBRE Clarion Global Real Estate Message Board

  • fxdudeinmia fxdudeinmia Oct 17, 2010 9:20 AM Flag

    On the subject of steep discounts to NAV

    I don't understand why some funds of reit's that pay such nice dividends trade at such steep discounts to NAV.

    I own IGR and love the 7% dividend, and especially love how in an environment where the underlying assets are rising steadily, that it also trades at a 9.5% discount to NAV. Even better when you consider that major reits like BXP VNO SLG SPG all trade with dividends of just 2.5-3.0% and are making new 52 week highs. IGR pays almost 3x those dividends, and sells at this lovely discount to NAV, which has a chance of moving much closer to par with NAV. Commercial real estate reit's have been perhaps the #1 beneficiary of the collapse in interest rates, allowing them to refi vast sums of their debt at much lower rates, therefore increasing their cash flow. Dividends have a reasonable chance of rising under this scenario, which if that happens will most assuredly drive up IGR"s NAV as investors will want to own reit's passing through their increased FFO in the form of dividends.

    What I really don't understand is how some funds of reits trade at some discount to NAV, and others at an even steeper discount to NAV. I also own AWP which I bought a few months ago same time as I bought IGR, and AWP has continued to maintain an incredibly steep 17% discount to NAV, while paying about a 5.5% dividend. AWP also raised its dividend back in the spring by 10%.

    While I love IGR, I love AWP even more with an additional potential 8% appreication shold it narrow it's discount to NAV. I saw recently that an activist shareholder forced DWS to merge 3 of their closed-end funds trading at steep discounts to NAV with open-ended funds resulting in a steep drop in price. If that happened with DWS, why can't that happen with others like IGR, AWP?

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