Comments on: Picking Up Hard Real Estate The Soft Way http://financialjungle.com/2007/12/28/investing/picking-up-hard-real-estate-the-soft-way/ A Vancouverite's journey to financial freedom. Fri, 05 Sep 2008 21:37:42 +0000 http://wordpress.org/?v=2.1.2 By: moneygardener http://financialjungle.com/2007/12/28/investing/picking-up-hard-real-estate-the-soft-way/#comment-775 moneygardener Fri, 28 Dec 2007 19:06:21 +0000 http://financialjungle.com/2007/12/28/investing/picking-up-hard-real-estate-the-soft-way/#comment-775 This picks up on the theme of my latest post. I agree that you should pay attention to your weighting in as you eloquently term it 'soft' real esate assets. This picks up on the theme of my latest post. I agree that you should pay attention to your weighting in as you eloquently term it ’soft’ real esate assets.

]]> By: ThickenMyWallet http://financialjungle.com/2007/12/28/investing/picking-up-hard-real-estate-the-soft-way/#comment-779 ThickenMyWallet Mon, 31 Dec 2007 17:17:11 +0000 http://financialjungle.com/2007/12/28/investing/picking-up-hard-real-estate-the-soft-way/#comment-779 I am quite under-exposed to RE and I am fine with it. RE is extremely over-valued historically speaking; RE is supposed to be an inflation hedge with a small upside but it has been turned into a stock in many ways in that people are expecting stock like returns on their homes. The correction in the U.S. is really bringing the industry back into historical returns and not a "crash" per se. This is a good thing- it is a remainder to people who pay heed that being house rich isn't necessarily a good thing when the value of a home is reliant on cheap money and shady lending practices. Vancouver real estate is a ticking time-bomb- it shares characteristics with certain U.S. markets- its economy is primarily consumer driven and not business driven and people are putting 0% down on over-valued property. When the credit lines are maxed out, the Lower Mainland doesn't have a fall back (as an observation, the real estate markets that are doing well in the US- NYC, Chicago, Boston- have a economic base not primarily consumer driven). Point being- wait for the fall before you load up on RE. As for specific stocks- Riocan: I am not crazy about declining cash flow from operating activities or the fact it issued more many shares last year. BPO- it is getting really cheap but I wonder if it may become collateral damage to the U.S. economy (which means it may get cheaper). RE is becoming unfashionable- wait longer until it becomes completely unfashionable. You could really score some bargains then. Happy new year! I am quite under-exposed to RE and I am fine with it. RE is extremely over-valued historically speaking; RE is supposed to be an inflation hedge with a small upside but it has been turned into a stock in many ways in that people are expecting stock like returns on their homes. The correction in the U.S. is really bringing the industry back into historical returns and not a “crash” per se. This is a good thing- it is a remainder to people who pay heed that being house rich isn’t necessarily a good thing when the value of a home is reliant on cheap money and shady lending practices.

Vancouver real estate is a ticking time-bomb- it shares characteristics with certain U.S. markets- its economy is primarily consumer driven and not business driven and people are putting 0% down on over-valued property. When the credit lines are maxed out, the Lower Mainland doesn’t have a fall back (as an observation, the real estate markets that are doing well in the US- NYC, Chicago, Boston- have a economic base not primarily consumer driven).

Point being- wait for the fall before you load up on RE.

As for specific stocks- Riocan: I am not crazy about declining cash flow from operating activities or the fact it issued more many shares last year. BPO- it is getting really cheap but I wonder if it may become collateral damage to the U.S. economy (which means it may get cheaper).

RE is becoming unfashionable- wait longer until it becomes completely unfashionable. You could really score some bargains then.

Happy new year!

]]> By: Financial Jungle Guy http://financialjungle.com/2007/12/28/investing/picking-up-hard-real-estate-the-soft-way/#comment-780 Financial Jungle Guy Mon, 31 Dec 2007 17:58:53 +0000 http://financialjungle.com/2007/12/28/investing/picking-up-hard-real-estate-the-soft-way/#comment-780 It seems the Vancouver market will cool off in 2008 based on a projection I read from the Vancouver Sun. Although Home ownership is on my to-do list, I feel at the moment, dividend stocks are cheaper than bonds, and bonds are cheaper than residential housing. However, housing is only one component of real estate. Step outside of housing, you have retail, office, industrial, hotel, storage and commercial residential. REIT is in the business making money and adding value. They don't acquire a new property to satisfy their American dream; they acquire to improve cashflow and well being of the trust. As far as I know, subprime borrowers or teaser rates don't exist in REIT, so no cockroaches there. Having said that, REITs do look expensive from the yield perspective. It was only a couple of years ago when Riocan was trading above the 7% yield. It seems the Vancouver market will cool off in 2008 based on a projection I read from the Vancouver Sun. Although Home ownership is on my to-do list, I feel at the moment, dividend stocks are cheaper than bonds, and bonds are cheaper than residential housing.

However, housing is only one component of real estate. Step outside of housing, you have retail, office, industrial, hotel, storage and commercial residential.

REIT is in the business making money and adding value. They don’t acquire a new property to satisfy their American dream; they acquire to improve cashflow and well being of the trust. As far as I know, subprime borrowers or teaser rates don’t exist in REIT, so no cockroaches there.

Having said that, REITs do look expensive from the yield perspective. It was only a couple of years ago when Riocan was trading above the 7% yield.

]]> By: Warren http://financialjungle.com/2007/12/28/investing/picking-up-hard-real-estate-the-soft-way/#comment-781 Warren Wed, 02 Jan 2008 18:26:37 +0000 http://financialjungle.com/2007/12/28/investing/picking-up-hard-real-estate-the-soft-way/#comment-781 Definitely stay away from Vancouver RE right now. It may be several years before the best buying opportunities come for us out west. RE is a slow moving beast, so when it does start to fall, it will likely take years to slide to the bottom. When it finally starts to change back up, that's the time to jump in. I'm waiting as well, I think it will be a tough wait, but worthwhile. Definitely stay away from Vancouver RE right now. It may be several years before the best buying opportunities come for us out west.

RE is a slow moving beast, so when it does start to fall, it will likely take years to slide to the bottom. When it finally starts to change back up, that’s the time to jump in. I’m waiting as well, I think it will be a tough wait, but worthwhile.

]]> By: Sami http://financialjungle.com/2007/12/28/investing/picking-up-hard-real-estate-the-soft-way/#comment-782 Sami Thu, 03 Jan 2008 14:27:57 +0000 http://financialjungle.com/2007/12/28/investing/picking-up-hard-real-estate-the-soft-way/#comment-782 you got to be careful when valuing calloway and riocan. Although riocan appear more expensive and not growing cash flows vs calloway there is a good reason for that. returns on RE have fallen down significantly over the last few years and RioCan have not done any major development or acquisitions in that period while calloway was on a tear owning new properties for wal-mart. I would not pick calloway, but i would pick riocan if it goes below $20, as most the deals that calloway did was on rich valuation while riocan waits for cheaper properties to buy and that's what you want from a RE company management: buying when prices are down and doing nothing while prices are up. doing deal like callowy's are dilutive to shareholders as the returns on some of the properties that they did are really low. great blog btw. you got to be careful when valuing calloway and riocan. Although riocan appear more expensive and not growing cash flows vs calloway there is a good reason for that. returns on RE have fallen down significantly over the last few years and RioCan have not done any major development or acquisitions in that period while calloway was on a tear owning new properties for wal-mart. I would not pick calloway, but i would pick riocan if it goes below $20, as most the deals that calloway did was on rich valuation while riocan waits for cheaper properties to buy and that’s what you want from a RE company management: buying when prices are down and doing nothing while prices are up. doing deal like callowy’s are dilutive to shareholders as the returns on some of the properties that they did are really low.

great blog btw.

]]> By: Financial Jungle Guy http://financialjungle.com/2007/12/28/investing/picking-up-hard-real-estate-the-soft-way/#comment-783 Financial Jungle Guy Thu, 03 Jan 2008 16:50:04 +0000 http://financialjungle.com/2007/12/28/investing/picking-up-hard-real-estate-the-soft-way/#comment-783 Warren - It's interesting to note that despite having the highest housing price, Vancouver lags Toronto and Calgary in household income and population growth. http://www.canadianbusiness.com/rankings/bestplacestolive/list.jsp Sami - Excellent insights on Riocan and Calloway. I'll have to take a closer look. Warren - It’s interesting to note that despite having the highest housing price, Vancouver lags Toronto and Calgary in household income and population growth.

http://www.canadianbusiness.com/rankings/bestplacestolive/list.jsp

Sami - Excellent insights on Riocan and Calloway. I’ll have to take a closer look.

]]> By: Warren http://financialjungle.com/2007/12/28/investing/picking-up-hard-real-estate-the-soft-way/#comment-784 Warren Thu, 03 Jan 2008 16:53:21 +0000 http://financialjungle.com/2007/12/28/investing/picking-up-hard-real-estate-the-soft-way/#comment-784 Exactly. Rents are directly related to average income. So lower rents and higher prices = poor returns. Stay away from Vancouver RE (for now). Exactly. Rents are directly related to average income. So lower rents and higher prices = poor returns. Stay away from Vancouver RE (for now).

]]> By: Financial Jungle Guy http://financialjungle.com/2007/12/28/investing/picking-up-hard-real-estate-the-soft-way/#comment-788 Financial Jungle Guy Fri, 04 Jan 2008 21:58:44 +0000 http://financialjungle.com/2007/12/28/investing/picking-up-hard-real-estate-the-soft-way/#comment-788 Riocan's valuation is appearing more attractive as their units tumbled over the past few days. Riocan is yielding higher than Calloway now! My wallet is standing by. Riocan’s valuation is appearing more attractive as their units tumbled over the past few days.

Riocan is yielding higher than Calloway now! My wallet is standing by.

]]> By: Financial Jungle Guy http://financialjungle.com/2007/12/28/investing/picking-up-hard-real-estate-the-soft-way/#comment-796 Financial Jungle Guy Tue, 08 Jan 2008 17:11:48 +0000 http://financialjungle.com/2007/12/28/investing/picking-up-hard-real-estate-the-soft-way/#comment-796 Looking very tempting... Riocan's yielding 6.7%; Calloway 7.0%. Brookfield Properties is in the mid $18. Wonder how cheap they'll get this year. Looking very tempting… Riocan’s yielding 6.7%; Calloway 7.0%.

Brookfield Properties is in the mid $18.

Wonder how cheap they’ll get this year.

]]> By: Picking Up Hard Real Estate The Soft Way | Financial Solution News http://financialjungle.com/2007/12/28/investing/picking-up-hard-real-estate-the-soft-way/#comment-802 Picking Up Hard Real Estate The Soft Way | Financial Solution News Wed, 09 Jan 2008 00:39:04 +0000 http://financialjungle.com/2007/12/28/investing/picking-up-hard-real-estate-the-soft-way/#comment-802 [...] post by Financial Jungle Guy Related Posts: The Two Safest Ways to Invest in Real [...] […] post by Financial Jungle Guy Related Posts: The Two Safest Ways to Invest in Real […]

]]> By: Financial Jungle Guy http://financialjungle.com/2007/12/28/investing/picking-up-hard-real-estate-the-soft-way/#comment-809 Financial Jungle Guy Thu, 10 Jan 2008 07:26:26 +0000 http://financialjungle.com/2007/12/28/investing/picking-up-hard-real-estate-the-soft-way/#comment-809 Well, sorry Sami. Sometimes when the market is pleading to take Calloway off their hands, you have to act like a gentleman and offer your courtesy. The 7.4% yield was on the table; I bit. Riocan, at 7+% yield, is an attractive supplement to ease in over the coming months. Well, sorry Sami. Sometimes when the market is pleading to take Calloway off their hands, you have to act like a gentleman and offer your courtesy.

The 7.4% yield was on the table; I bit.

Riocan, at 7+% yield, is an attractive supplement to ease in over the coming months.

]]> By: Financial Jungle Guy http://financialjungle.com/2007/12/28/investing/picking-up-hard-real-estate-the-soft-way/#comment-814 Financial Jungle Guy Fri, 11 Jan 2008 06:14:38 +0000 http://financialjungle.com/2007/12/28/investing/picking-up-hard-real-estate-the-soft-way/#comment-814 http://www.theglobeandmail.com/servlet/story/LAC.20080110.HEINZL10/TPStory/Business <strong>The rout in REITs spells opportunity for investors</strong> by JOHN HEINZL <em>Much of the recent selling appears to have been driven by retail investors who couldn't stomach watching their unit prices plunge. The price drops were exacerbated because buyers were so scarce. Now, some institutions say REIT valuations are starting to look attractive. Paul Gardner, partner and portfolio manager at Avenue Investment Management, said the firm may add to its existing positions in some REITs. "The large-cap REITS are really cheap," he said. Mr. Smith at National Bank agrees REITs are a good buy. "Based on the fundamentals, the underlying real estate fundamentals, the downdraft is overdone," he said. "But in a bear market, fundamentals take a backseat to fear."</em> http://www.theglobeandmail.com/servlet/story/LAC.20080110.HEINZL10/TPStory/Business

The rout in REITs spells opportunity for investors
by JOHN HEINZL

Much of the recent selling appears to have been driven by retail investors who couldn’t stomach watching their unit prices plunge. The price drops were exacerbated because buyers were so scarce. Now, some institutions say REIT valuations are starting to look attractive.

Paul Gardner, partner and portfolio manager at Avenue Investment Management, said the firm may add to its existing positions in some REITs.

“The large-cap REITS are really cheap,” he said.

Mr. Smith at National Bank agrees REITs are a good buy.

“Based on the fundamentals, the underlying real estate fundamentals, the downdraft is overdone,” he said. “But in a bear market, fundamentals take a backseat to fear.”

]]>