Reits Time may have Come Again

A market segment in which I have interest now is REITs. I think there is some opportunity here.

Have a look at the Chicago Fed’s report, “why aren’t banks lending more” at http://www.chicagofed.org/digital_assets/publications/chicago_fed_letter/2010/cfldecember2010_281.pdf.

This article researches the roll of Commercial Real Estate and the depth of investment in CRE as it relates to a given bank’s lending. They found a direct correlation between banks with high exposure to CRE and slower rates of loans to other sectors of the economy.

Some REITs have contributed to the problem with delinquent payments. Some have not. Moody’s Delinquency Tracker (DQT) tracks loans issued since 1997, and the numbers of increased delinquencies are staggering. In 2009, there were 1800 delinquent loans with a balance of around 15 B$, but in 2010, there’s over 4000 with a balance in excess of 50B$. By property type, the hotel sector has the highest delinquency rate, and Multifamily came in second. Office space, which used to be the best, has shot up, but is still near the best of breed. For more details, you can see:

http://www.housingwire.com/2010/12/13/cmbs-delinquency-rate-rose-to-8-63-in-november-moodys

The sectors that have the least default percentages are 1) Industrial properties, 2) Office space, and 3) Hospitals. With the up-up-and-away market, and the continued profit gain by industries, I think we might consider investment in these REIT market segments.

In my REIT chart, here are candidates that fall into (mostly) the 3 segments with the least delinquencies:

CLI: Diversified in Office, Industrial, some retail, and a hotel
DLR: Technology (industrial) real estate
GOOD: Industrial and commercial properties
HCP: Healthcare
LRY: Diversified in Office and industrial properties
PSA Self-storage. I don’t know, maybe a kind of industrial property?
PSB: Multi-tenant flex, Industrial and Office space
SNH: Hospitals, senior nursing homes
VNO: Office, Industrial and Retail
VTR: Healthcare-related facilities.

I’m investigating SNH because it’s pulled back a lot and had a big 250Million buy on Dec 10’th. On the 60 minute chart, I will have to wait for a pullback hopefully above 20.43 to establish a start for a position. Right now, it looks like a lower low on the 15th and a lower high on the 17’th, not good points for a position start.