Cheap Equity REITS

[adios]

Came up with the following "cheap" equity reits. Just passing along with what I came up with as so far the hotel/motel REITs have been doing well this week. Bulk of my holdings are in low price-to-book, high yield securities. Mortgage and equity REITs that fit this criteria have done well this year:

Glenborough Realty Trust (NYSE:GLB)
Price to Book: .69
Yield: 11%
Price per Share: $15.97

Highwoods Properties,Inc. (NYSE:HIW)
Price to Book: .97
Yield: 10.96%
Price per Share: $21.58

RFS Hotel Investors, Inc. (NYSE:RFS)
Price to Book: .93
Yield: 10.13%
Price per Share: $10.03

HRPT Properties Trust (NYSE:HRP)
Price to Book: .79
Yield: 10.13%
Price per Share: $8.90

BRT Realty Trust (NYSE:BRT)
Price to Book: .87
Yield: 8.79%
Price per Share: $13.75

Senior Housing Properties (NYSE:SNH)
Price to Book: .92
Yield: 10.44%
Price per Share: $12.03

Boykin Lodging Company (NYSE:BOY)
Price to Book: .53
Yield: 9.74%
Price per Share: $7.64

Equity Inns, Inc (NYSE:ENN)
Price to Book: .82
Yield: 8.67%
Price per Share: $6.07

FelCor Lodging Trust Inc. (NYSE:FCH)
Price to Book: .26
Yield: 9.16%
Price per Share: $6.65

Winston Hotels, Inc. (NYSE:WXH)
Price to Book: .70
Yield: 8.90%
Price per Share: $6.95

[Wildbill]

Tom,

The expectations for these are low and dividends are almost certain to be cut. REITs in this field usually don't rebound until at least 6 months after the sector picks up. BOY and FCH could be longer as their exposure is to very poor sectors. BOY is dependent on Silicon Valley extended stay properties, now I would be hard pressed to think of a tougher market than that as the tech downturn has made demand weak in so many ways as long term training has just about disappeared and people have stopped moving into the area just as a ton of supply hit the market in the last 3 years.

Problem here is that you are looking at yield, but the basic rule is ignore the listed yield. If you buy a stock today you are basically buying its future dividends and yield. These companies all have high and probably unsustainable yields and they will be cut soon. REITs pay out all their income so you have to crunch the numbers and read their reports to get an idea of what you are really buying.

I think long-term investors have at least 9 months to slowly move into this sector. It will be good eventually, supply is growing so slowly. Still it has a ways to go and you won't miss much return by waiting.

[adios]

Ah there's always some risk. Actually the yield percentages are based on future earnings projections. To be honsest I'm looking past the bad news as I think most of that is priced in already. Definitely could be wrong. They're having good week at least especially FCH.

[AceHigh]

Do you think these are better than NFI? I bought some NFI, back in Febuary when you were talking about it, and at a quick glance it's numbers look better than these guys.

And thanks for the NFI tip. /forums/images/icons/cool.gif

[adios]

Before I answer your question let's see how these have done since I posted them on April 3, 2003. I think a few have paid divis but I'm not sure. So the numbers I give will be in capital gain percentages and I'll include divis that I catch:


Glenborough Realty Trust (NYSE:GLB)
Price to Book: .69
Yield: 11%
Price per Share: $15.97

Up 3.82%

Highwoods Properties,Inc. (NYSE:HIW)
Price to Book: .97
Yield: 10.96%
Price per Share: $21.58

Down 6.16%


RFS Hotel Investors, Inc. (NYSE:RFS)
Price to Book: .93
Yield: 10.13%
Price per Share: $10.03

Up 7.08%

HRPT Properties Trust (NYSE:HRP)
Price to Book: .79
Yield: 10.13%
Price per Share: $8.90

HRPT has paid a divy of $0.20 a share since I posted so I'll add it in as part of the return.

Up 3.71%

BRT Realty Trust (NYSE:BRT)
Price to Book: .87
Yield: 8.79%
Price per Share: $13.75

UP 10.98%

Senior Housing Properties (NYSE:SNH)
Price to Book: .92
Yield: 10.44%
Price per Share: $12.03

They've also paid a divy of $0.31 a share so I'll add in too.

Up 6.33%

Boykin Lodging Company (NYSE:BOY)
Price to Book: .53
Yield: 9.74%
Price per Share: $7.64

Up 7.55%

Equity Inns, Inc (NYSE:ENN)
Price to Book: .82
Yield: 8.67%
Price per Share: $6.07

Up 9.54%


FelCor Lodging Trust Inc. (NYSE:FCH)
Price to Book: .26
Yield: 9.16%
Price per Share: $6.65


Up 5.57% [\b]

Winston Hotels, Inc. (NYSE:WXH)
Price to Book: .70
Yield: 8.90%
Price per Share: $6.95

[b]Up 10.79%

Average return is about 5.92%

In that time frame DJIA up 3.2%

S&P 500 up 4.7%

QQQ up 4.72%

NFI (I'll add in $2.25 a share divy since it went x-divy last week) is up 36.27% so I guess NFI is better /forums/images/icons/grin.gif

Seriously I still like NFI a whole bunch a lot. Even if it doesn't go anywhere from here I'll be happy to collect the $2.25 per share in divis every quarter.

As far as those doggy REITs I posted. It's a perfect example of what I call bottom fishing. I believe each one was selling at discount to BV and they probably still are. I look at it this way, the assets of these REITs aren't chicken liver, they own real estate. Felcor has discontinued it's divy to the common shares but is still paying a divvy on two preferred issues. I came up with several more after that where the theme was close to book value and paying a decent divy with hopefully a chance to increase them sometime down the road. I was just saying that I thought was a fairly low risk, decent reward type situation and a way to round out your portfolio perhaps.

Instead of picking them individually you might try a couple of CEF's that specialize in REITs although I'm not sure they're porfolio is as cheap BV wise:

RRE - AIM Select Real Estate Income Fund (http://www.etfconnect.com/select/fundPages/other.asp?MFID=92853)

SRQ - Scudder Real Estate Fund (http://www.etfconnect.com/select/fundPages/other.asp?MFID=102840)

Here's another hot one of that ilk but it's not a REIT.

PMA Capital Corporation, symbol PMACA, is an insurance holding company focused on specialty insurance markets. Through its operating subsidiaries, the Company is a provider of property and casualty reinsurance and a provider of commercial property and casualty insurance. The Company conducts its insurance and reinsurance business through PMA Re, which provides reinsurance coverage primarily under two arrangements, treaty and facultative; PMA Insurance Group, which provides workers' compensation insurance and integrated disability, as well as commercial automobile and multi-peril coverages, general liability and related services, and Caliber One, which offers liability coverages for low-frequency/high-severity classes. In January 2003, the Company sold Caliber One to Northern Homelands Company. In addition, PMA Capital has a Corporate and Other segment, which includes unallocated investment income and expenses, debt service, and the results of certain of the Company's real estate properties.


Do your own due diligence on that one but it's trading at a price to book of .47 but some of the asset value is good will so it's trading at a ratio of about .7 to tangible BV. I haven't done enough due diligence myself but I thought I'd pass it along. It was down some today but it has been hot lately.


Lastly there are 2 mortgage REITs besides NFI that I really like. One is IMPAC Mortgage Holdings, Inc., symbol IMH, is a mortgage real estate investment trust REIT). Together with its subsidiaries and affiliate, Impac Funding Corporation (IFC), the Company is a nationwide acquirer and originator of non-conforming Alt-A mortgage loans. Alt-A mortgage loans consist primarily of mortgage loans that are first-lien mortgage loans made to borrowers whose credit is generally within typical Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation guidelines, but that have loan characteristics that make them non-conforming under those guidelines.The Company also provides warehouse and repurchase financing to originators of mortgage loans. The Company operates three core businesses: long-term investment operations, mortgage operations and warehouse lending operations.

Also Anthracite Capital, Inc., symbol AHR, is a real estate finance company that generates income based on the spread between the interest income on its mortgage loans and securities investments and the interest expense from borrowings used to finance its investments. The Company seeks to earn high returns on a risk-adjusted basis to support a consistent quarterly dividend. Anthracite's business focuses on investing in below-investment-grade Commercial Mortgage Backed Securities (CMBS) where the Company has the right to control the foreclosure/workout process on the underlying loans, originating high yield commercial real estate loans, and acquiring investment grade real estate related securities. The CMBS portfolio provides diversification and high loss adjusted returns over a weighted average life of approximately 10 years, the commercial real estate loans provide high risk adjusted returns for shorter periods of time, and the investment grade securities is an actively managed portfolio.

I like NFI, IMH, and AHR much better than something NLY that has cut it's divi recently and has a lot of pre-pay risk which hurt their earnings. NFI, IMH and AHR aren't subject to the pre-pay risk.

Noticibly I don't have tech since I think it's too high in price and the fundamentals don't seem that good especially in big cap tech.

[Wildbill]

Fishing for a name or two might be a good idea, but I think in general even the experts are saying stay away or be very cautious about REITs. For one thing, the sector has outperformed the market and if you want a nice looking graph just look at the relative returns and you can see its played out very much in line. REITs outperform and then get money thrown at them. Because they don't want to turn investors away and other less astute people who couldn't get capital now have a shot at it, the REITs underperform and things go back to the way it was. Even more stunning is that they quite often are going down when the markets are up and vice versa. Its definitely a nice diversification tool if you are just building an all-weather portfolio, but right now is not the time in the cycle to expect much from them. These specific names you mention mostly did well for two reasons IMO. First off REITs were selling off quite a bit earlier in the year in the anticipation of dividend tax changes, basically blowing out of the water their reason to survive in their current structure. As it became clear that a 100% change in the law wasn't happening, people took that discount somewhat out of the equation. Second is that the names you gave were cheap precisely for war fears and those are getting wound out. Other REITs seen as less vulnerable haven't been quite as strong, nor should we expect it because they have held their value very well over the last 18 months while the market has been getting killed. Looks clear to me the markets turn to shine is here and the REITs will move back to the sideline. The fact is these act just like any sector in the market. They can be fairly obscure for periods of time and then smart investors like yourself Tom spot a bargain because its true, they indeed have valuable assets and not just intellectual capital. The bargain hunters jump in and create some momentum. The rest of the public wakes up to this and jumps on and that is about where I think we are right now. They jumped on about 3-6 months ago as the market has had multiple rallies and subsequent drops. You tell an investor through it all there is a sector that has held its own and made some money, not to mention pays a dividend and you get lots of interested investors who know diddly squat about the inevitable cycles. And as I said, its not just bad investors it brings in, it brings out bad managers of money who the market wisely priced out when times weren't so good. So anyone looking at this sector please pay heed. Even the best names in the REIT investing world see its at its top and at best it will tread water going forward, especially if the rest of the market gets going and the trendy investor needs funds to get into his momentum plays.

Believe me I know this industry cold, my first job was heavily involved in it working with a fund manager and I have followed many of the names since then as a source I still have from there emails me a couple of industry newsletters regularly.

[AceHigh]

Wow, good answer. I didn't mean to put down the REIT's you selected, I just thought NFI would be a better choice if someone was looking for just 1 stock to buy.

I'll have to look at the stocks you mentioned and see if I like them. Thanks for the leads.

I saw you were looking at chineese companies in another thread, did you see Warren Buffet is buying shares of Petrochina (PTR)? Don't know if it's a good company or not, I just saw something about Buffet purchasing a bunch of it in a newsletter.

[adios]

Golly Bill I was so happy making those returns too. I mean you're raining on my parade man /forums/images/icons/smile.gif . Seriously points well taken.

[adios]

It gets even better. I posted a model portfolio awhile back of longs for dealing with this non-bull market that I think has done well. I'll dig it up from the old posts and see.

[AceHigh]

What do you think of Pre Paid Legal Services (PPD)? I like that stock right now, although it was a better buy a couple of weeks ago.

[adios]

Haven't looked at it but I will.