4 ms·

If someone wanted to take a diversified, low-cost position in office reits, what would one buy?

cm2187 3y ago
I don't know if REIT aggressively remark the value of their property to adverse market conditions. I would watch how much they marked down their assets otherwise you might buy at a very overinflated value.
- infecto 3y ago
  I might be mistaken but I thought it was the inverse. REITs that trade on the public market would have pricing that reflects the market opinion regardless of how the books are marked. The issue in general with RE is that you would be marking your books based on comps and the mark downs will lag the market. Not investment advice but sometime in the past year to now is when you would want to be investing in publicly traded REITs if you thought there was going to be a rebound. Private funds like a Fundrise are the ones where their marks are going to be lagging the market as its purely on book value.
  - cm2187 3y ago
    Surely at one point someone has to invest into the fund, you can't just buy shares on the secondary market otherwise how do they fund assets? For ETFs, market makers are liaising with the issuer to issue and redeem as the demand fluctuates. But that only works for liquid underlying assets.
    - infecto 3y ago
      I think that is conflating the ETF and the underlying REIT. The REIT has a float that is going to be similar to any other publicly listed company. The market is setting the price and underlying value of the REIT. The ETF which has a basket of those REITS, will include authorized participants that are creating and redeeming shares based on the underlying REITS. Are there any REIT ETFs with basket holdings including non-traded assets? I am not sure but I don't know of any. So the ETF is indeed redeeming/creating based on market supply/demand but its of an underlying public traded REIT.
deleted 3y ago
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imakwana 3y ago
Interesting question, probably an ETF like NETL comes close to holding diversified positions in various commercial/office REITs: https://www.morningstar.com/etfs/arcx/netl/portfolio https://www.morningstar.com/etfs/arcx/netl/portfolio
ethagknight 3y ago
Before you get too far down this road, remember that the REIT's slice of the ownership is second or even third to a lender, and said lender may be just about to take that property back from the equity holders, wiping out your investment.
- evanelias 3y ago
  As an alternative to a REIT, any thoughts on TIAA's Real Estate Account [1]? It seemed like a popular retirement investment choice when I worked in higher education. (IIRC it's only available in retirement accounts and only for employees of nonprofits, education sector, etc.) If I understand correctly, they mostly invest directly in commercial real estate, and they keep their LTV ratio quite low (20%). I'm curious about how it might perform during a plummeting market for office space... perhaps it'll drop but not as badly as REITs? [1] https://www.tiaa.org/public/retire/financial-products/annuities/retirement-plan-annuities/tiaa-real-estate-account https://www.tiaa.org/public/retire/financial-products/annuit...

I don't know if REIT aggressively remark the value of their property to adverse market conditions. I would watch how much they marked down their assets otherwise you might buy at a very overinflated value.

infecto 3y ago
I might be mistaken but I thought it was the inverse. REITs that trade on the public market would have pricing that reflects the market opinion regardless of how the books are marked. The issue in general with RE is that you would be marking your books based on comps and the mark downs will lag the market. Not investment advice but sometime in the past year to now is when you would want to be investing in publicly traded REITs if you thought there was going to be a rebound. Private funds like a Fundrise are the ones where their marks are going to be lagging the market as its purely on book value.
- cm2187 3y ago
  Surely at one point someone has to invest into the fund, you can't just buy shares on the secondary market otherwise how do they fund assets? For ETFs, market makers are liaising with the issuer to issue and redeem as the demand fluctuates. But that only works for liquid underlying assets.
  - infecto 3y ago
    I think that is conflating the ETF and the underlying REIT. The REIT has a float that is going to be similar to any other publicly listed company. The market is setting the price and underlying value of the REIT. The ETF which has a basket of those REITS, will include authorized participants that are creating and redeeming shares based on the underlying REITS. Are there any REIT ETFs with basket holdings including non-traded assets? I am not sure but I don't know of any. So the ETF is indeed redeeming/creating based on market supply/demand but its of an underlying public traded REIT.

deleted 3y ago

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imakwana 3y ago

Interesting question, probably an ETF like NETL comes close to holding diversified positions in various commercial/office REITs: https://www.morningstar.com/etfs/arcx/netl/portfolio https://www.morningstar.com/etfs/arcx/netl/portfolio

ethagknight 3y ago

Before you get too far down this road, remember that the REIT's slice of the ownership is second or even third to a lender, and said lender may be just about to take that property back from the equity holders, wiping out your investment.

evanelias 3y ago
As an alternative to a REIT, any thoughts on TIAA's Real Estate Account [1]? It seemed like a popular retirement investment choice when I worked in higher education. (IIRC it's only available in retirement accounts and only for employees of nonprofits, education sector, etc.) If I understand correctly, they mostly invest directly in commercial real estate, and they keep their LTV ratio quite low (20%). I'm curious about how it might perform during a plummeting market for office space... perhaps it'll drop but not as badly as REITs? [1] https://www.tiaa.org/public/retire/financial-products/annuities/retirement-plan-annuities/tiaa-real-estate-account https://www.tiaa.org/public/retire/financial-products/annuit...