REITS

Weingarten Reality Investors:

-Weingarten, which started as a Grocery chain in Houston, developed solely into a REIT by the 1980’s.

-The company current has 33 officers that collectively own less than a fourth of the firm.

– Roughly a third of the properties are located in Texas, many of which can be found in the Houston area where the company started. The leading states after that are Florida and California.

-A majority of the properties are supermarket anchors, followed by power centers and JR centered anchors

-Weingarten’s target markets are high growth areas with large upper-middle classes populations.

-The current dividend yield is 4.17%

American Campus Communities:

-Nation’s largest developer, owner and manager of high quality student housing.

-Student housing is one of the few real estate fields that hasn’t had a large drop in prices or demand over the last several years.

-Develop both off and on campus housing throughout much of the United States and Canada

-More than half of their on campus housing (34 of 64) came from additional projects award to after a previous successfully completed community.

-American Campus Communities only build near universities with over 8000 student body population, and their projects must be worth at least $10 million with 300-500 beds.

-Primary investors are financial institutions and mutual funds.

-Owns 148 properties through direct ownership, joint venture and third-party ownerships.

-Operating margins are over 25%

-Current dividend yield is 3.03%

Public Storage:

-Started in 1972 and now currently owns over 2000 locations across the United States and Europe.

-Has the highest occupancy rates among its competitors

-Expenses are expected to outgrow revenue in the next several years

-Stock prices are perceived as inflated and overvalued.

-Dividend yield is 2.9%

Taubman:

-Founded in 1950 and incorporated in Bloomfield Hills, Michigan in 1973

-Employees over 600 individuals

-Owns 28 retail properties in 19 states and 3 countries

– Occupancy rates were around 90% last year.

-Operating Margin in 2011 was 44%

HCP Inc.:

-Largest Healthcare REIT in the United States with over $18 billion worth of assets

-Headquartered in Long Beach, California and made its IPO in 1985

-HCP likes to acquire, develop, lease, sell and manage healthcare real estate and are a capitla partner to leading healthcare providers

-Contains 5 distinct sectors: senior housing, post-acute/skilled nursing, life science, medical office and hospitals

-Leading categories of assets include post-acute/skilled nursing followed by senior housing

-Leading locations of assets are California, Texas, Florida and Ohio

-Operating Margin last year was 36.68%

-HCP believes in growth through portfolio acquistions and they particpate in both debt and equity positions.

-Dividend yield is 4.4%

SL Green Reality Group:

-Focus is to acquire improving the operating margins of office properties in Manhattan

-Founded in 1997 and has now become New York’s largest office landlord with properties all across the greater New York area.

-Occupancy rates of currently owned properties is 91%

-Largest tenants by industry are in the financial industry with over 36% of their managed portfolio

-SL Green recieves over 60% of its financing from insurance companies and pension funds

-Operating Margin is currently 35.38%

-Average Cap Rate is 6.6%

-Dividend yield is currently 1.4%

TOPIC #4: Public Restrictions on Ownership

When you own any property within a governing body, there are restrictions that apply depending on where you choose to purchase real estate.

A common public restriction that applies to any property within the United States is power of eminent domain. This is used on any level on government that sees fit to acquire any portion of private property for a purpose that considered for the greater good of the public. This can be anything from a road to a power-line. If the local, state, or federal government believes it must take certain private real estate for this overall benefit, it will compensate the previous owner by the value of its property taxation, not necessarily the market value of the real estate.

Here is an example of property bought by the government by the power of eminent domain:

http://bangordailynews.com/2012/08/19/opinion/editorials/would-the-government-take-private-property-to-build-an-east-west-highway/

Another example of a very common public restriction on ownership is the concept of ad valorem tax. This is the taxation of private real estate based upon the government’s valuation of that particular property. The valuation is adjusted often, but does not always coincide with the value that is determined by the current markets. Ad valorem can be contested, but the government will always have the final say to which it will value the property that is being taxed.

Here is an example of how College Station, TX values it’s property tax:

http://www.cstx.gov/index.aspx?page=3471

A third and controversial example of public restrictions on ownership is the power of escheat. This is when the government can acquire private real estate of a decested individual that either has no heirs, or no valid will. Power of escheat is controversial because many individuals do not choose to create a legal will out of choice or were not prepared because of an unexpected death. Without heirs with a legal will, the government can take the real estate for its own benefit as it sees fit.

Here is an example of the power of escheat:

http://www.4vf.net/the-supreme-court-espousing-easier-escheat/

TOPIC #3: Private Restrictions on Ownership

A private restriction on the ownership of property is always a privately arranged agreement made between two or more parties often covered in contract that is overseen by an expert in real estate law, and can be enforced by the government once that agreement has been made by all involved parties. There are many examples and legal terms that have been created for various situations, but we will cover the basics that are often made in a contract or agreement involving real estate.

The first and often most common are deed restrictions. These agreements are made by residential owners who must obey rules made by neighborhood associations to keep order and uniformity among all the properties of that particular neighborhood. There are no particular boundaries or trends that are addressed in such agreements, they are simply tailored to the needs and wants of that neighborhood and its residents.

Here is an example of Deed Restrictions in The Woodlands, TX:

http://www.thewoodlandstownship-tx.gov/DocumentCenter/Home/View/891

Another example of a private ownership restriction is a lien. A lien is a private agreement between the current owner of the property and the other parties that share a financial interest in the property. The other parties are often mortgage lenders who can claim a portion or the whole property in the case of missed payments by the property owner. A lien in the contract gives the parties with any financial interest a certain backing or guarntee that their investment will be returned to them through other means such as a foreclosure, if the property owner cannot make their payments.

Here is an example of a sample lien:

http://www.luxuryhomesandproperties.com/_public/_files/forms/lien.htm

A third example of a private restriction on the ownership of a property would be an easement. This is agreement between two or more different parties that states one party may use the property for a specific economic purpose without the permission of the current landowner that has possession of the property. Easements are often common in the contracts of property owners who do not have mineral rights of the land that they currently own. When an exploration firm discovers oil or natural gas underneath these types of properties, the owner is not entitled to royalties from those firms who use the resources that are beneath the property.

An example of an easement involving mineral rights can be found in the link below:

http://www.ballascreative.com/wsmt-beta/assets/downloads/pdf/CHAINED-GATES-AND-NO-TRESPASSING-SIGNS.pdf

 

TOPIC #2: Supply & Demand in a Real Estate Context and Basics of Urban Development, Market Research

Supply & Demand:

Supply and demand will often follow the basic economic principles that dictate how a limited good is priced in the market, but it has some characteristics that run counter to how other demanded goods fluctuate, from local to global platforms. First, the supply of real estate is often much more steady and its movement is much more gradual than other goods. Due to the cost and risk of creating new supply, the durability of existing supply, and the boundaries that keep and or slow the growth of supply from goverment permits to economic trends, all factor into a much more stable and predictable rate of supply in real estate. Demand is much different, it can rapidly change because of quick changes in geographic markets such as cities and nations, or the decline and growth of specific industries that demand real estate.  Those who create such a volitate demand are often either investors who own the property, or tenants who temporarily use property. Both contribute to how the property will be valued based upon how much an investor is will to pay for the property, and how much a tenant is willing to spend to lease the property.

Market Efficiency and its Impact in Real Estate:

Market efficiency is defined as the availability, rate, and cost of obtaining information that pertains to how investor will react to a market. Many markets such as Treasury bills, commodities and company equity have become much or efficient over the years due to the increased rate of obtaining critical information and the lower cost in gaining such information. Real estate markets have lagged in such advancement due to the nature of real estate’s timing, diversity and cost in obtaining relevant information for potential investors. The implication of such inefficiencies can create huge margins in both gains and losses because an investor may or may not have the correct or complete amount of information to go forward with the investment. This is why accurate market research is so important when firms or individuals wish to buy or sell real estate. This lag has created windows of opportunities for those who wish to simply gather information for others who need that information. Many websites have been made for real estate market research, see below for such examples:

http://www.loopnet.com/?sourcecode=2ggtkt041h85092&gclid=CJnqlNmiwLMCFcaiPAodNFcAfQ

http://www.costar.com/?src=ppcg_Costar2_CoStarKeywords_Brand&mkwid=stW8fKfcw_pcrid_3994856950

http://www.realtor.org/research-and-statistics

TOPIC #1: Real Estate as an Investment

There are several ways to approach  investing in real estate that can resemble or deviate from how you typically would invest in other sources such as securities and commodities. The similarities between real estate investments and other potential sources can be seen from futures trading to equity investment in REITs that pay regular dividend payments. These hands off investors that are involved in security style investing are often referred to as passive investors. Their positions are often liquid and short term compared to other real estate investors.

Here are some examples of REITs that a passive investor can look into:

http://www.dctindustrial.com/

http://www.bostonproperties.com/site/

http://www.hcreit.com/

What differentiates real estate from other sources of investment lies within the later type of investor that has more at stake in the property is referred to as an active investor. These investors either lend their own capital to others who buy the real estate in mind, and the lender will gain a healthy yield from that repaid loan, or an active investor can directly buy or gain a portion of an equity position within the property and received a steady cash-flow from either rent or other economic uses of the property. After the active investor sees fit to sell the property, he or she would like to make a gain on the sell that at the minimum covers all expenses of the property and beats the inflation during the duration of holding that property or set of properties.

About Myself

Hi,

My name is Stuart Sharp, I am currently a senior Finance major attending Texas A&M University and taking Dr. Peterson’s Real Estate Investment Analysis class. I am also involved in in student organizations such as Delta Sigma Pi Business Fraternity, and Alpha Tau Omega, a recently colonized Fraternity on Texas A&M’s campus. I am a native Texan, and in fact I am a 5th generation Houstonian. I keeping up with football, baseball and political current events. My hobbies include running, reading and watching movies in my free time.