Are the big Reits right? - Posted by Larry

Posted by tony on September 07, 2003 at 22:46:47:

You know if they can sell at 7-7.5 Cap rates…then its wise for them to do so. The market for apartments (in most cities right now) is overbuilt. Great time to sell!

Are the big Reits right? - Posted by Larry

Posted by Larry on September 07, 2003 at 18:38:30:

Anyone been following the moves of the big Reits? I have
and it has been very interesting. Not all but most of
the reits have been taking their money out of second-third
tier markets and putting into three major markets;Southern
California,Washington D.C and the New England area especially Boston.

They are getting rid of their non-core assets(read bad performers) and taking advantage of the low interest rate enviroment to get high prices for their junk. If you are out their buying be careful. Some of the markets that have been terrible performers are Las Vegas,New Mexico,Phoenix,
San Antonio,Texas and Tennesse.

This is not an all encompassing list but the amount of assets being sold in these markets is very high and many of these Reits are disposing of all their holdings in these

From what i read most of these assets are being sold for 7-7.5 cap rates for older properties in cities that have no to declining job growth. That does not sound like a recipe for successful investing.

Are the big Reits right, is Southern California,Boston and Washington D.C the place to be? What does everyone think?

Re: Are the big Reits right? - Posted by Nate(DC)

Posted by Nate(DC) on September 17, 2003 at 16:00:14:

Well, with most of the country’s apartment markets in the toilet, other than the three you mentioned, I can’t say I blame them. It seems like a downright excellent strategy on their part to sell low quality assets at high prices, and redeploy the money in higher quality assets.

The question to me, is, when, and why, will the second tier apartment markets begin to turn around. My guess is, not until we get job growth again, which so far we haven’t had, outside of selected metro areas such as DC, Boston, etc…


Re: Are the big Reits right? - Posted by Robert Turner

Posted by Robert Turner on September 12, 2003 at 16:06:33:

At least in Texas and the Midwest, it?s actually far worse than your low cap rate estimate would imply. REIT’s take “Standardized” real estate accounting to the extreme. They capitalize EVERYTHING and they account for non-capitalized expenses in ways that could artificially augment NOI and cash flow growth (at least to the inexperienced investor group). So ?real world? cap rates are actually much lower…

To make matters worse, the main buyers of these ?non-core? properties are non-REIT syndicators and private-equity groups. Most are investing OPM (Other Peoples Money) at ridiculously low rates of return and insanely high fees. The surge in OPM money is in itself an overreaction to the Tech/Internet investment meltdown ? now people want to foolishly invest their money in over-price real estate due to a perceived ?safety? in fixed assets. You can lose money in ?Fixed? assets just as easily as ?Financial? assets, but I would assume that wisdom doesn?t necessarily show-up in the current round of syndication documents.

It’s an extreme example of a Seller’s market ? for all property types in all classes. Low interest rates are just adding more fuel to an already out-of-control buying market.


Re: Are the big Reits right? - Posted by Jay (ny)

Posted by Jay (ny) on September 09, 2003 at 08:17:06:


Where do you get all your information from? Whats the website address where you can do all this research?


Re: Are the big Reits right? - Posted by Larry

Posted by Larry on September 07, 2003 at 18:56:07:

Please forgive me, I meant to say Apartment Reits.Lar

Re: Are the big Reits right? - Posted by Larry

Posted by Larry on September 18, 2003 at 14:45:30:

There is no doubt the strategy they’re following is smart as long as your not on the other side of the transaction.Most of the apartment reits are not buying or turning to development because they can’t find properties below replacement cost.That should be a warning to syndicators or private partnerships or small investors who are buying.

I agree that we need to see job growth again before the market can turn around.Best wishes.Lar

Re: Are the big Reits right? - Posted by Larry

Posted by Larry on September 09, 2003 at 09:29:02:


I went to and punched up Reits and then hit Apartment Reits.That gave me a listing of all listed
Apartment Reits and then i went to their individual sites and and got their 10k and annual reports and read them. Also,i listened to their 2-3rd quarter conference calls which give their quarterly results.

It was a fascinating look into what the big guys are thinking. That doesn’t mean their right,however,if your buying property from them be careful.Many of these companies are net sellers due to the high prices they are gettting and are even turning to development since they cannot acquire properties below replacement cost.There are always good deals out
there but now is a time to be very selective as there are so FEW good deals. Good investing. Lar

Re: Are the big Reits right? - Posted by tony

Posted by tony on September 07, 2003 at 22:44:37:

There’s a time to buy and there’s a time to sell! Each project is different and certainly every city is different too…