sss has every thing;;;great income ,excellent income statement with money to increase divedend next year,no government business which is a positive,inflation resistant,a no brainer to hit 55 this year,low p/e etc.
THANK YOU FOR YOUR INFORMATIVE POST!! I really enjoyed leasing from RHEEF FUND (retired teachers pension fund, or something like that.) They worked with me on tenant improvemant, expansion, and on dissolving my lease, because the tenant ( in Kearney Mesa, ChesapeakeDr.@Ruffin Rd) wanted to take over my space.This Co is a Class Act!I was ther 5 years, and had no problem moving before my last 6 monthes.They probably ARE WORKING WITH TENANTS TO LOWER RENTS! GOOD POINT! I still like SSS (I'm in @ 30) For capital-preservation, not appreciation...How about DOM, WTU, or PLC(Dominion, Williams coalseal, plumcreek)?TTHX!
Actually, I know Reeef from my days in N CAL. They are a huge privately held ppty mgmt and operator and owner.
Space rentals are coming down for many reasons first of which is the slower economy. But they are also being brought down by smart reits that are lowering rents in return for longer term leases. This is yet another dynamic being played out right now. Many of the publically held reits including EOP have remarked for example that the they did not make major bets on the rent bubble being sustainable and did not purchase ppties on the basis of clearly inflated levels of rent. Nor did they believe that they could book sustainable long term rents at high levels. Now, landlords (reits) are making rent adjustmts because it is better to have a stable long term tenant in your ppty than a POed one that will leave if you try to enforce the ballooned rent on recently signed leases.
So, landlords are going back to tenants and making concessions in return for longer lease periods.
Another example. Some industrial tenants are actually growing in this environmt and are in need of more space in the same area where they presently lease. The landlord is doing what is referred to as "blended rate" leases where you take the higher lease rate entered into earlier and blend it with the lower rates now available in the market. The tenant is able to reduce rent on the older portion of a recently signed lease in return for leasing more space at a slightly higher to market rate in the same complex/facility AND sign on for a longer lease term.
There is a lot of things (tricks of the trade) that creative landlords are doing. But everyone forgets that in any given year you only have a percentage of your leases come up for renewal. So its not as though Kilroy for example has a 100% lease rollover problem in 02. I think its about 14% of which they have engaged their clients in advance to workout new terms..... making an effort not to let them getaway.
Also, many leases coming for renewal are indeed well below market rates even as these big reductions in rent are occurring. The landlord will be able to rent the space for more than they were obtaining beforehand.
We won't know how well office/industrial reits hold up until the recessionary period ends. SDiego is a hot market and rents are coming down but in Silicon Valley rents have crashed but are starting to stabilize at lower levels. Its all a mixed up bag.
I was only pointing out the Charles that SSS is not an island of one incredible reit that can double from its present price level. It will never sell near $60 based upon what I and many other long term reit investors know and understand about the sector. There are many many other great reits out there beside SSS. Charles just makes it sound like he stumbled into nirvana with SSS. I just wanted to point out many other possibilities. Possibilities that offer higher yields and higher rates of dividend growth which over time translate into higher share prices.
I don't have time from my dayjob, right now to fully reply, but one of our largest indust reits here in SDiego is REEFF This is a teachersunion p[ension, I believe.They have made many acquisitions, I hade class A ind.space underthem, until I moved my bus to home...My point is,I guess, space rentals, locally are coming down.I think Selfstorage, is always in demand,I like SSS but would hesitate with office/industrial right now, perhaps their dividend could be reducedSooory for spell'g, later...
No I diversified immediately after 9/11 when office reit prices were very depressed so I am so very far ahead of the game. The trick is to find office reits with good locations and low rollover leases in 02.
You have a general observation regarding office and industrial ppties which is absolutely a fact. But for the public reits there is a different dynamic going on at this time depending on the quality of the ppties AND the amount of their portfolio coming up for renewals in 02.
I see the vacancies rising too but again I stress that the big public reits are holding up very well to the stresses. This will be their test as to how well we hold up during this slowdown. FirstCall reduced Kilroy's 02 by two cents the other day. KRC also announced that Boing is leaving a big space at the end of 02. I keep a beat on this in terms of the reits I have chosen. But KRC's dividend looks very safe and the San Diego ppties are 99% occupied with few rollovers and they are darn good downtown ppties.
Example, last qtr BDN had an 88% retention rate on rollovers. LRY is experiencing fairly good retention rates (over 80%) on rollovers. These rollover issues are built into the ffo estimates including estimates of how much vacant space is anticipated and for how long. So we office reit owners are already getting a picture of anticipated worst case scenerios being built into the projections of 02. Could they get worse, YES. Will they get worse, its a distinct possibility but is the dividend safe? I think for the office reits I have chosen the answer is yes.
Suburban PHIL (BDN/LRY) is benefiting from anticipated largess in DC. DC market (VNO, BXP, EOP) is doing very well along with Northern VA (VNO and others).... again, beneficiaries of governmt largess to come in the name of national security.
I don't disagree with your statement that rents are being lowered but who are the ppty owners??? Do they have mgmts that work hard to replace tenants and hold out for higher rents a little longer or do they cave and take a lower quality tenant at too low of a rate? Lots and lots of issues involved.
If we all remember that at any given time there is a percentage of all portfolios that are underoccupied and/or vacant it just becomes a matter of how much more damage is being done to our portfolio during tough economic times. I always try to find out who the lead tenants are in buildings because they are a factor in how leased up a building can become. Example would be businesses that provide ancillary services to a large tenant locating in same building for ease of access.
Overall, the CA market is split. North is having real pain, south, less pain.
I wonder if you realize that much of the price appreciation for SSS is behind it now. The benefit of having most debt short term contributed many pennies of additional ffo to SSS. In addition, 11 interest rate cuts have lifted SSS.
More importantly, there are at least 50 other reits that display better overall characteristics than SSS. Don't get me wrong I have owned 4K shares since $17.125 but you post on this board as if you have stumbled into the only promising stock in the reit world. Those that know reits like myself will tell you that it is not going to increase its dividend very much next year and its dividend growth rate cannot carry the day to $55. That in fact SSS is considered the weakest of the 4 publically traded public storage reits (soon to become 3 publically traded storage reits).
If you are this up on this one reit there are others that afford good portfolio diversification. I own 20 different reits across a wide spectrum and spend all my time doing research because the bulk of my retirement income will come from reits.
But $55 is out of any spectrum. You cannot even get Public Storage or or Shurgard Storage to the price/yield equivalent and they are the top dogs in terms of dividend growth, ffo growth, creating value.
I welcome your enthusiasm but hope you take the time to read the book "Reits" by Ralph Block and also look into the many other reits that are out there.
I wonder if you are looking at a service called Vector Vest for information. Many new reit investors who come over on the basis of Vector Vest analysis can be misled as their analytical approach does not work for reits.
this again is a no brainer
1--- personally visit and compare the facility and service and evaluate which
is bettet run.
2---study the balance sheet and income statement of both. It is really impossible to understand psa while sss is straight forward.
Hey Ferdie, I would like to know which REITS you consider a good investment at this time. I am begining to be worried about the shopping mauls and apartments now. They are not doing very well in my home town, and perhaps nation wide??? Do you think this sector may be topped out and could even decline with prolonged economic trouble? Bought SSS to reach outside classical real estate. I do like CPV also, and own it, perhaps it will even go up a little because of aquisitions and even lower interest rates. Prisons are likely "recession-proof", but here one worries about state bugdets. So, what do you see? Where do you see opportunities to invest and to increase ones income? THanks for your views!
I AGREE! I'm in today 100 shares @ $30.24! This is, as much as I hate the term, a "no-brainer"! I dont, feel, stock asset value is going down.As I postedbefore, I compared to PSA, etc...I put my $ where my mouth is today!I would like you, Charles, to look @ DOM & WTU .These are naturalgas royalty trusts, paying 12 & 14 % respectively, in dividends.Bob Olstein, of his two Olstein Funds(up "01 15%) says:" NG prices will climb in 3rd Q "02" I concur! Pls reply, TNX!