Sell Alert: 2 REITs Getting Risky

seekingalpha05-23

I invest 50% of my portfolio in REITs.I know from past experiences that you need to be very selective.Here are 2 REITs that I would avoid today. JuSunI am very bullish on REITs (VNQ). So much so ...

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So much so ...</p>\n\n<a href=\"https://seekingalpha.com/article/4694494-sell-alert-2-reits-getting-risky\">Source Link</a>\n\n</div>\n","source":"seekingalpha","html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>Sell Alert: 2 REITs Getting Risky</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nSell Alert: 2 REITs Getting Risky\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-05-23 19:30 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4694494-sell-alert-2-reits-getting-risky><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>I invest 50% of my portfolio in REITs.I know from past experiences that you need to be very selective.Here are 2 REITs that I would avoid today.   JuSunI am very bullish on REITs (VNQ). So much so ...</p>\n\n<a href=\"https://seekingalpha.com/article/4694494-sell-alert-2-reits-getting-risky\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"CFA","symbol_name":"VictoryShares US 500 Volatility Wtd ETF","start_time":0,"source_url":"https://seekingalpha.com/article/4694494-sell-alert-2-reits-getting-risky","article_id":"2437758850","we_media_id":null,"thumbnails":["https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1212617916/image_1212617916.jpg"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2437758850","pubTimestamp":1716463800,"sourceInfo":{"source_id":"seekingalpha","name":"Seeking Alpha"},"weMediaInfo":null,"summary":"This means that property owners will compete with one another for tenants, offering large concessions, tenant improvements, and rent reductions to avoid vacancies. This is well reflected in SLG's latest results as the company's occupancy rate dipped into the 80s for the first time in a very long time, and its rents dropped by 5.5% on new leases. And unfortunately for SLG, I expect this cycle of oversupply to last for many years to come. A lot of companies have already moved to a hybrid work setting and this requires less office space, but a lot of these tenants are still today under long-term leases that will only expire in the coming years. Moreover, many of the lower quality Class B office buildings will likely change hands in the coming years, with new owners coming in and heavily reinves","collect":0,"end_time":0,"defaultTopTitle":"seekingalpha.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"CFA":"VictoryShares US 500 Volatility Wtd ETF","CFA.SI":"NikkoAM-STC Asia REIT","IE00B894F039.SGD":"Legg Mason ClearBridge - US Aggressive Growth A Acc SGD-H","BK4528":"SaaS概念","BK4223":"办公室房地产信托","LU1861559042.SGD":"日兴方舟颠覆性创新基金B SGD","BK4023":"应用软件","BK4554":"元宇宙及AR概念","BK4532":"文艺复兴科技持仓","ZM":"Zoom","BK4194":"办公房地产投资信托","BK4585":"ETF&股票定投概念","BK4218":"酒店及度假村房地产信托","BK4525":"远程办公概念","BK4566":"资本集团","SLG":"SL Green Realty Corp","IE00B19Z9P08.USD":"LEGG MASON CLEARBRIDGE US AGGRESSIVE GROWTH \"A\" (USD) INC","BK4535":"淡马锡持仓","BK4548":"巴美列捷福持仓","IE00B19Z9Z06.USD":"Legg Mason ClearBridge - US Aggressive Growth A Acc USD","BK4588":"碎股","BK4181":"酒店及度假村房地产投资信托","HST":"美国豪斯特酒店","BK4551":"寇图资本持仓","BK4561":"索罗斯持仓","LU1861558580.USD":"日兴方舟颠覆性创新基金B","BK4505":"高瓴资本持仓","ABNB":"爱彼迎","BK4142":"酒店、度假村与豪华游轮","VNQ":"不动产信托指数ETF-Vanguard"},"translate_title":"卖出预警：2只房地产投资信托基金面临风险","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"ZM":1,"VNQ":1,"SLG":1,"HST":1,"CFA.SI":1,"CFA":1,"ABNB":1},"content_text":"I invest 50% of my portfolio in REITs.I know from past experiences that you need to be very selective.Here are 2 REITs that I would avoid today.   JuSunI am very bullish on REITs (VNQ). So much so that I invest over 50% of my net worth in this one sector at the moment. They are priced at their lowest valuations in over a decade and historically, such low valuations have usually resulted in very strong total returns in the following years:   Janus & Henderson So I think that REITs are offering a once-in-a-decade opportunity to win big, and I am positioning my portfolio to maximize these gains in the coming years. But that does not mean that all REITs are worth buying. This is a vast and versatile sector, with over 200 companies in the US alone and 1,000 worldwide across 30+ countries. So just because I am bullish on REITs does not mean that I am buying just any of them. Here are two examples of REITs that I would consider selling if I owned them today: SL Green (SLG) SLG is one of the most popular REITs amongst individual investors because its valuation is historically low, it pays a near 6% dividend yield, and it owns mostly trophy office skyscrapers in Manhattan:   SL Green The investment thesis for bulls is that the market overreacted to the threat of remote work. Class A office buildings are here to stay, particularly those that are in exceptional locations. Therefore, many investors see this as a temporary crisis, which will soon set into place an epic recovery, leading to a significant upside, and you earn a high dividend yield while you wait.   SL Green It is a pretty good investment thesis in my opinion. But it has a few flaws. Firstly, it has already risen a ton, so a lot of this upside has already been realized. From its lowest point, SLG has already appreciated by 150%, even as most other REITs have stagnated, and as a result, it is less desirable now relatively speaking. Secondly, while I agree that Class A office buildings will do fine over the long run, I still think that they will face substantial pain in the near term as the office market is very severely oversupplied. The average occupancy rate is today just ~80% - the lowest in over a decade! This means that property owners will compete with one another for tenants, offering large concessions, tenant improvements, and rent reductions to avoid vacancies. This is well reflected in SLG's latest results as the company's occupancy rate dipped into the 80s for the first time in a very long time, and its rents dropped by 5.5% on new leases. And unfortunately for SLG, I expect this cycle of oversupply to last for many years to come. A lot of companies have already moved to a hybrid work setting and this requires less office space, but a lot of these tenants are still today under long-term leases that will only expire in the coming years. Moreover, many of the lower quality Class B office buildings will likely change hands in the coming years, with new owners coming in and heavily reinvesting in their properties to compete with the Class A properties. This in turn will again force the landlords of Class A properties to keep giving large concessions and to reinvest in their properties. Once you take that into account, the actual cash flow of SLG is likely to be a lot lower than it may today seem. A final point about SLG is that it is 100% focused on New York City, which will likely suffer even more than many other office markets. NYC is very expensive, taxes are high, regulations aren't particularly business-friendly, and so if you are going to reconfigure your office space, you may as well move down south or go fully remote in some cases. However, there is a massive amount of supply in NYC and therefore, I fear that the supply/demand imbalance could last for a long time to come.   SL GreenPriced at 9x forward cash flow, the stock is not particularly cheap relative to many other safer alternatives in the REIT sector and therefore, I have no interest in owning the stock of the company. Host Hotels & Resorts (HST) HST is the biggest hotel REIT in the world and it owns some amazing properties. I think that the REIT will do fairly well over the long run given that it is priced at a reasonable valuation, has a good balance sheet, and it is well-positioned to take advantage of potential buying opportunities in the sector if and when things get tougher. However, this is a sector that I want to avoid because historically, it has been the worst of all property sectors and I don't expect this to change:   Host Hotels & Resorts I don't expect this to change because:  It is very cyclical, and we are likely closer to the end of this cycle than its beginning. It is highly competitive. It requires a huge amount of capex. Profits are increasingly getting eaten by booking websites. Flags are losing value as a result of these websites. Airbnb (ABNB) and others continue to grow rapidly. Zoom (ZM) is reducing business traveling. Some offices will be converted into more hotels in premium locations.    Host Hotels & Resorts All of this bodes poorly for the hotel sector. I still expect some players like HST to fare relatively well, but why invest in it at 9x FFO, when you could buy far stronger and safer REITs at comparable valuations? Closing Note REITs can be great investments, but you need to be very selective when investing in them.  There are some amazing opportunities in today's market, but there are also equally many landmines that you could turn into value traps.","kind":null,"is_publish_news":true,"is_publish_highlight":false,"is_publish_live":null,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"","news_tag":"","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.24.0","shortVersion":"4.24.0","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2437758850"}