REITs, bargains or value trap ??

[lowesthangingfruit]

This forum's opinion is probably as good as any.

Anyone been looking at Residential/Commercial REITs recently ? Taken out back to the wood shed and beaten up is an understatement. Been nibbling away at NPR.UN, HR.UN, CWT.UN and looking also at FCR and AX.UN or maybe I just buy the whole index.

Downside I see is:

1) Access to credit/debt is gonna be tougher
2) A deep global recession would potentially hurt commercial tenancy
3) Has the words "real estate" in them and with this market psychology,....who knows how ppl react.

Upside I see is:

1) Most trading well below NAV
2) Compelling yields
3) Contiuned tax exemption past 2011
4) No matter what happens, we still need to live and operate business somewhere.

So are these assets being beaten up for good reasons or is this a case of "throwing out the baby with the bath water" ??

Thanks.

 

[Bentley]

The way I see it (keep in mind I'm slightly biased, I trade equities quite a bit) is that it's just not compelling enough to invest my money in.

If you're a property owner (not an REIT owner, an actual asset owner) and you're leveraged, your ROI can be significant. But otherwise what sort of returns are you making? These days the big commercial properties are selling at a 5 or 6 cap, and they're getting bought up. I don't see how that is a compelling enough investment to want to be involved in. A basic index fund will usually give a better return.

If you like real estate because it's a safe investment, then buy yourself an actual income property as opposed to buying into these garbage REIT's. If you're going to play the market, at least invest in something that has a chance of giving you high returns.

Shit, Apple is low right now and they'll go back up once consumer confidence is restored. I'd even look into buying into the banks. Seems like they aren't out of the fire yet, but they will be soon (I expect early to mid summer) and at that point you'll be able to get in at at a very compelling level. All of these will over time be a better investment than those REIT's you've listed.

PS - The visa IPO (biggest in US history) is coming out next week, and a significant portion of the capital raised will go to a lot of these struggling banks (Bank of America, Citigroup, etc). It won't be enough to even make a dent in the shit they're sitting in, but investors are stupid and will probably think it will, so when the IPO is listed I expect the banks to get a bit of a boost. But don't quote me, I'm only guessing.