REITs without malls?

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RobLIC
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REITs without malls?

Post by RobLIC » Fri Aug 24, 2018 3:41 pm

Two separate questions:

What are some respectable REITs — US and ex-US — with minimal or no exposure to malls/companies such as Simon Properties?

And can anyone offer a simple explanation as to why a fund such as VNQ is so popular, even though it has such a significant stake in a business fundamentally damaged by online shopping?

I’m sure there are good threads on this around, but I’m not having luck finding one. Thank you!

Ragnoth
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Re: REITs without malls?

Post by Ragnoth » Fri Aug 24, 2018 3:47 pm

There are plenty of specialized REITS out there that focus on nursing homes, mortgage debt, sever farms, etc. I don’t know if a mutual fund that broadly has exposure to “all REITs ex shopping malls.”

People that hold REITS usually want some diversification (although the level that it is actually uncorrelated with the broader market is a huge debate unto itself), and don’t get too into the minutia of the holdings.

But if you are trying to slice and dice to that level of specificity, you may as well just pick some individual stocks and strap on for a bumpy ride. (Or conversely, buy a broad REIT ETF and buy some puts an individual companies with shopping mall exposure).


Edit: you may want to look at the discussion on VNQ here: viewtopic.php?t=216087

Suffice to say, it’s questionable that the fund as a whole has an undue exposure to malls that hasn’t been priced in.

mrmass
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Re: REITs without malls?

Post by mrmass » Fri Aug 24, 2018 3:53 pm

The industrial space is good. They're impacted by Amazon and the like. Here's a few stocks.
PLD
O
STAG
REXR
www.seekingalpha.com is a good place to look for REITS and other dividend stocks.

Topic Author
RobLIC
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Re: REITs without malls?

Post by RobLIC » Fri Aug 24, 2018 4:03 pm

Thank you. Ah, that’s the link I actually might have been thinking of — where it was observed that retail REITs made up “only” 21% of the fund. Seems like a lot.

Generally, I’m comfortable with the understanding I’ve gained here that the REIT exposure in Total Stock is about 3%, though the sector makes up closer to 13% of the market.

I’ve also learned here that much real estate is private. One of our tenets here is that if you can’t understand or explain why you’d do something ... then don’t do it. So I don’t. I own an apartment in an HCOL, which probably meets my risk tolerance for real estate anyway.

But this helps me learn, regardless. It’s the occasional 5th fund I think about using to diversify after the 4 big stock/bond Index funds.

:beer

randomguy
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Re: REITs without malls?

Post by randomguy » Fri Aug 24, 2018 4:05 pm

RobLIC wrote:
Fri Aug 24, 2018 3:41 pm
Two separate questions:

What are some respectable REITs — US and ex-US — with minimal or no exposure to malls/companies such as Simon Properties?

And can anyone offer a simple explanation as to why a fund such as VNQ is so popular, even though it has such a significant stake in a business fundamentally damaged by online shopping?

I’m sure there are good threads on this around, but I’m not having luck finding one. Thank you!
The fact that retail is fundamentally damaged by online is know. Why do you think it is going to be worse than what the market expects?:) Answering that question is what makes stock picking hard. I know apple is a better than average company. What I don't know is if it is better or worse that what the market expects. There are some reits that focus on specific sectors but I am not aware of total REIT market excluding retail.

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sigmadave_2000
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Re: REITs without malls?

Post by sigmadave_2000 » Fri Aug 24, 2018 4:11 pm

Well that's a good question. I haven't found a ETF, so you may need to buy REITS individually. These are some that I have on my list:

Farmland
FPI Farmland Partners -- Not a REIT, but one of the few ways to get exposure to farmland. It's a LP so you have to deal with a K-1 tax form
LAND - Gladstone Land Company Not a REIT but a corporation. one of the few ways to get access to Farm Land in your portfolio

Trees
WY Weyerhaeuser They have converted from a paper company into a Forest REIT. One of the biggest land owners in the US
CCT CatchMark Owns a lot of forest land, and it's in the Souther United States where the economy is booming and people need lumber for housing.

Trailer Parks
SUI a REIT that invests in properties that people call Trailer Parks. The advantage of this is that the tenants own the property that depreciate, and you get exposure to the land value.

MedicalAs the average age of he US and Europe increase, we will need more of these buildings.
WELL WellTower. They are a landlord for up scale retirement communities
MPW - Medical Properties Trust. They own a lot of hospitals, rehab centers and medical office buildings. A portion of their portfolio is in Europe.

Student Housing
ACC and EDR these REITS own upscale Student Housing. No longer is a double occupancy 10x12 dorm room good enough. These companies offer luxury housing for todays students who thanks to their wealthy parents or the ability to borrow through the Student loans programs can afford this lifestyle.

South of the Boarder
FBASF FIBRA UNO It invests in a lot of Mexican Real Estate. Mexico never became "over malled" like the US, so people say that investing in Mexican shopping malls is not like investing in US retail centers. They also do big city office buildings and industrial properties. Maybe a bit risky, but you get an 8% yield.

Ragnoth
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Re: REITs without malls?

Post by Ragnoth » Fri Aug 24, 2018 4:44 pm

RobLIC wrote:
Fri Aug 24, 2018 4:03 pm
Thank you. Ah, that’s the link I actually might have been thinking of — where it was observed that retail REITs made up “only” 21% of the fund. Seems like a lot.

Generally, I’m comfortable with the understanding I’ve gained here that the REIT exposure in Total Stock is about 3%, though the sector makes up closer to 13% of the market.

I’ve also learned here that much real estate is private. One of our tenets here is that if you can’t understand or explain why you’d do something ... then don’t do it. So I don’t. I own an apartment in an HCOL, which probably meets my risk tolerance for real estate anyway.

But this helps me learn, regardless. It’s the occasional 5th fund I think about using to diversify after the 4 big stock/bond Index funds.

:beer
If you are using VNQ as a diversifier, I wouldn’t let shopping malls keep you up at night.

Let’s say you make VNQ a 20% stake in your portfolio... of that, about 20% is retail REITS. That is a 4% total exposure to retail real estate (ignoring the fact that the risks are priced in and there is always some inherent value in the land). Even a catostropic event for the sub-sector would be a blip on the radar (as it should be in any well diversified portfolio).

Life is too short to worry about minutia like that!

sillysaver
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Re: REITs without malls?

Post by sillysaver » Fri Aug 24, 2018 4:48 pm

RobLIC wrote:
Fri Aug 24, 2018 3:41 pm
Two separate questions:
And can anyone offer a simple explanation as to why a fund such as VNQ is so popular, even though it has such a significant stake in a business fundamentally damaged by online shopping?
Passive indexing is about getting broad exposure to the market, not about making active bets on individual sectors or stocks.

There will be winners and losers, but indexing guarantees that you will capture the aggregate returns offered by the market (in case of VNQ, a broad basket of REIT's), which we expect to be positive over time.

Also, how sure of you that malls will be killed by Amazon? I have heard some malls are doing well, while others are going to have to be closed. I would be reluctant to test my stock-picking skills vs. the handicapper known as "the market." Mall REIT's are probably already trading at huge discounts to NAV.
Last edited by sillysaver on Fri Aug 24, 2018 4:54 pm, edited 1 time in total.

alex_686
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Re: REITs without malls?

Post by alex_686 » Fri Aug 24, 2018 4:54 pm

RobLIC wrote:
Fri Aug 24, 2018 3:41 pm
And can anyone offer a simple explanation as to why a fund such as VNQ is so popular, even though it has such a significant stake in a business fundamentally damaged by online shopping?
Sure. Just look at what Warren Buffet has done with companies in distressed industries. Berkshire Hathaway is a classic example. See also zombie companies and vulture funds.

What we have here is large tracks of desirable land in the middle of a city. Hard to find stuff like this anywhere else. Buy the mall, squeeze out whatever rent there is, skimp on maintenance. Then raze the mall and turn it into condos.

daveydoo
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Re: REITs without malls?

Post by daveydoo » Fri Aug 24, 2018 4:55 pm

sigmadave_2000 wrote:
Fri Aug 24, 2018 4:11 pm

Student Housing
ACC and EDR these REITS own upscale Student Housing. No longer is a double occupancy 10x12 dorm room good enough. These companies offer luxury housing for todays students who thanks to their wealthy parents or the ability to borrow through the Student loans programs can afford this lifestyle.
Ha! One of my kids lived in an EdR-run dorm. You're right -- it was not 10x12. It was a lot smaller. Plus roommate. Two beds lofted over desk/dresser, and almost enough floor space left over for a trash can. Good to know I'm a wealthy parent, though. :happy

Maybe check that prospectus again... :D
"I mean, it's one banana, Michael...what could it cost? Ten dollars?"

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sigmadave_2000
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Re: REITs without malls?

Post by sigmadave_2000 » Fri Aug 24, 2018 9:34 pm

daveydoo wrote:
Fri Aug 24, 2018 4:55 pm

Ha! One of my kids lived in an EdR-run dorm. You're right -- it was not 10x12. It was a lot smaller. Plus roommate. Two beds lofted over desk/dresser, and almost enough floor space left over for a trash can. Good to know I'm a wealthy parent, though. :happy

Maybe check that prospectus again... :D
Well you are correct. They seem to have two businesses (1) They take over existing facilities and optimize revenue by increasing resident capacity. Sounds like your kid is in one of those.

(2) But I was paying a lot in rent in one of their "student housing buildings" because the school dorms were not acceptable for my niece. I couldn't believe it: free tv/internet, pool, basketball, gourmet coffee, Washer/Dryer in the apartment, shuttle buss, planned parties and BBQ's, pets okay... Luxury student housing is their second business, and I have a feeling that the margins are higher on the off-campus building they own. I think in total the kids were paying about $2,000/month for an apartment in a location where regular apartments cost a lot less. Check out the amenities at one of their buildings. http://www.reserveatcolumbia.com/Community

I recall my dorm room being above the dumpster, carpet was worn out, the landlord had apparently gotten a good deal on plastic patio furniture, my kitchen consisted of a a Microwave that I did not use because it made sparks, and the mattress sank down in the middle about six inches. I was fine with it because I was happy to have the opportunity to be in school, but a lot of kids today seem to be going to school because it's a lifestyle thing.

Valuethinker
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Re: REITs without malls?

Post by Valuethinker » Sat Aug 25, 2018 11:38 am

RobLIC wrote:
Fri Aug 24, 2018 3:41 pm
Two separate questions:

What are some respectable REITs — US and ex-US — with minimal or no exposure to malls/companies such as Simon Properties?

And can anyone offer a simple explanation as to why a fund such as VNQ is so popular, even though it has such a significant stake in a business fundamentally damaged by online shopping?

I’m sure there are good threads on this around, but I’m not having luck finding one. Thank you!
The market has already downvalued the US mall reits. Why do you think you can figure out their future better than the market?

TOJ
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Re: REITs without malls?

Post by TOJ » Mon Aug 27, 2018 10:51 pm

Don't underestimate the malls' ability to reinvent themselves. Malls as you know it might be done, but there is plenty of experimentation around creating new service- & experience-based businesses alongside the retail. And changes in retail strategy, too. Best Buy is profitable, no one would have ever foreseen that.

daveydoo
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Re: REITs without malls?

Post by daveydoo » Tue Aug 28, 2018 12:44 am

TOJ wrote:
Mon Aug 27, 2018 10:51 pm
...Best Buy is profitable, no one would have ever foreseen that...
+1. Spouse is angry at Amazon for squeezing warehouse workers' wages. We criticized Walmart for that years ago but now embrace Amazon as a forward-thinking tech giant. Strange. So I'm trying to buy more as online order/in-store pick-up, like at Best Buy and Home Depot. It has worked pretty well so far -- even faster than Prime! :D
"I mean, it's one banana, Michael...what could it cost? Ten dollars?"

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unclescrooge
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Re: REITs without malls?

Post by unclescrooge » Tue Aug 28, 2018 1:26 am

sigmadave_2000 wrote:
Fri Aug 24, 2018 9:34 pm
daveydoo wrote:
Fri Aug 24, 2018 4:55 pm

Ha! One of my kids lived in an EdR-run dorm. You're right -- it was not 10x12. It was a lot smaller. Plus roommate. Two beds lofted over desk/dresser, and almost enough floor space left over for a trash can. Good to know I'm a wealthy parent, though. :happy

Maybe check that prospectus again... :D
Well you are correct. They seem to have two businesses (1) They take over existing facilities and optimize revenue by increasing resident capacity. Sounds like your kid is in one of those.

(2) But I was paying a lot in rent in one of their "student housing buildings" because the school dorms were not acceptable for my niece. I couldn't believe it: free tv/internet, pool, basketball, gourmet coffee, Washer/Dryer in the apartment, shuttle buss, planned parties and BBQ's, pets okay... Luxury student housing is their second business, and I have a feeling that the margins are higher on the off-campus building they own. I think in total the kids were paying about $2,000/month for an apartment in a location where regular apartments cost a lot less. Check out the amenities at one of their buildings. http://www.reserveatcolumbia.com/Community

I recall my dorm room being above the dumpster, carpet was worn out, the landlord had apparently gotten a good deal on plastic patio furniture, my kitchen consisted of a a Microwave that I did not use because it made sparks, and the mattress sank down in the middle about six inches. I was fine with it because I was happy to have the opportunity to be in school, but a lot of kids today seem to be going to school because it's a lifestyle thing.
True, today's dorms are like 5 star hotels.

In undergrad, I lived in 1 bedroom, 1 bath with 3 other guys. I shared half of the living room. The entire apartment couldn't have been more than 700 sq ft. There was an auto mechanic below us, and we lived on an off ramp leasing to an industrial park, so there were large trucks rattling by all night.

I could've spent more, but I couldn't bring myself to.

In grad school I upgraded to a 1 bedroom apt that I shared with only 2 other guys!

DJN
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Re: REITs without malls?

Post by DJN » Tue Aug 28, 2018 2:13 am

Malls are an opportunity and they will shake out eventually with diversification in use to include hotels, apartments etc. Time to buy. Maybe US needs to get rid of some of the more obsolete strip malls outside of real population centres. That will happen in any case.
Yah shure

Valuethinker
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Re: REITs without malls?

Post by Valuethinker » Tue Aug 28, 2018 2:55 am

DJN wrote:
Tue Aug 28, 2018 2:13 am
Malls are an opportunity and they will shake out eventually with diversification in use to include hotels, apartments etc. Time to buy. Maybe US needs to get rid of some of the more obsolete strip malls outside of real population centres. That will happen in any case.
It is bigger than that. The US has something like 60% more mall space per capita than Canada (the next highest). The demographics are adverse -- young families spend a lot of time shopping in malls, older people tend to spend very little on goods. I've seen pieces on exceptions: for example malls that have catered to the expanding Hispanic demographic, who still have larger families, by offering for example Sunday afternoon music.

Probably half of traditional mall space in USA gets shut down. That traditional structure with 1-2 anchor tenant department stores at each end, and then extra rent to the shops in between who get the benefit of the footfall. As the department stores go, the other tenants have the right to pull out or renegotiate, and the downward spiral begins.

You will still have Big Box like WalMart (clusters of big box stores), and you will have the new open air formats etc.

Strip malls have a particular advantage in that they tend to be immigrant run businesses and again catering to the local demographic. Think Sari shops and Indian restaurants. And they are quite low cost for the tenants compared to indoor malls so they are not just dominated by chains.
Last edited by Valuethinker on Tue Aug 28, 2018 2:59 am, edited 1 time in total.

Valuethinker
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Re: REITs without malls?

Post by Valuethinker » Tue Aug 28, 2018 2:58 am

TOJ wrote:
Mon Aug 27, 2018 10:51 pm
Don't underestimate the malls' ability to reinvent themselves. Malls as you know it might be done, but there is plenty of experimentation around creating new service- & experience-based businesses alongside the retail. And changes in retail strategy, too. Best Buy is profitable, no one would have ever foreseen that.
How much of Best Buy's profits is extended warranties?

In the UK this is investigated repeatedly by the competition authorities. It's clear that the white and brown goods retailers make almost all their profit by selling warranties.

The likes of Amazon are invading this space with Alexa, music streaming etc. Basic phone handsets are getting cheaper. Apple has gone direct to customer via Apple retail (always the busiest store in any mall; I figure too busy to actually sell anything). And in the UK one online retailer (AO - Appliances Online) is something like 25% of appliance sales).

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peterinjapan
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Re: REITs without malls?

Post by peterinjapan » Tue Aug 28, 2018 3:36 am

At UTC in San Diego, one of the nicest malls, they've been doing a lot of design work to improve things. This included reworking the carcass of the Sears to include lots of small shops, which will presumably be a big improvement going forward. It was interesting to see them work, tearing out the old and putting in hip new stores. (Which I didn't go in, but they were nice.)

So I am a little hopefully about (some) malls going forward.

Valuethinker
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Re: REITs without malls?

Post by Valuethinker » Tue Aug 28, 2018 3:52 am

peterinjapan wrote:
Tue Aug 28, 2018 3:36 am
At UTC in San Diego, one of the nicest malls, they've been doing a lot of design work to improve things. This included reworking the carcass of the Sears to include lots of small shops, which will presumably be a big improvement going forward. It was interesting to see them work, tearing out the old and putting in hip new stores. (Which I didn't go in, but they were nice.)

So I am a little hopefully about (some) malls going forward.
That's the sort of creative thinking - need to get the small 1-3 store operators. Malls became all the same thus there is no incentive to use them.

I've seen pictures of malls that have turned into co-working spaces for startups. Entertainment complexes. Even giant indoor gardens.

The space is there, but the shopping needs that drove the expansion are now a declining force in American economy: young demographics, lots of new homes to furnish and fill, etc. And online has hit - Amazon is taking its turnover out of conventional outlets.

I can't think of a mass market retailer that is not cutting outlets (of course that's Representativeness Bias, because I will remember the ones that, like the Gap, that *are* cutting outlets).

DJN
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Re: REITs without malls?

Post by DJN » Tue Aug 28, 2018 4:16 am

Brookfield Property Partners reached a deal to buy mall operator General Growth Properties for $9.25 billion in cash (March 2018). I think these guys know something interesting about shopping and its potential for change and adaption. It isn't dead notwithstanding the internet.
Yah shure

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