iREIT Daily

Sam Zell Tells Me His 3 Keys to Success

Brad Thomas

467 postsOctober 21, 2021

The markets are back down a bit. Again. As China’s Evergrande takes the spotlight. Again.

I’ll fill you in about that after I share details from my meeting with Sam Zell. (I’m still pretty excited about that, to say the least.)

It was great getting to speak face to face with such a real estate and real estate investment trust (REIT) legend. You’d better believe I made sure to ask him how he got to where he is – worth $6 billion at Forbes’ last count – especially after nearly going bankrupt once upon a time.

I remember reading that his secret to success was a three-part recipe that involved buying:

Distressed assets, hence his “Grave Dancer” nickname
Quality assets, whether for his real estate empire or elsewhere
Tax efficient assets.

All of which he confirmed.

He refuses to overpay – and then some. He doesn’t buy anything unless he knows it’s worth resurrecting. And, knowing full well the toll “secondary” forces like taxes take on one’s wealth, he refuses to get involved in something he can’t make the most out of both in the moment and after it’s passed.

It’s that kind of action and advice that made me sign the copy of Intelligent REIT Investor Guide I gave him this way: “To Sam Zell, the quintessential value investor.”

At the risk of overstressing the point, never forget that successful value investing requires an understanding of proper pricing. Which requires following fundamentals.

This is why China Beige Book CEO Leland Miller told Mornings With Maria yesterday that, “I’m not ready to say that China is uninvestable period, because I don’t think it is. But I think it completely depends on your risk profile.”

I can admire that kind of informed candor.

The China Real Estate Conundrum Continues

Miller also said:

What a lot of multinational corporations have done, lots of financial firms have done for years and years and years [is to simply say], “China’s big, lots of consumers, lots of opportunities. We got to go in there, and we’ll figure it out.” And I think the idea that you’re just going to be able to go in there and divine what political risk is and risk what could be serious falls in company assets or stock prices, sales, etc.? Now that’s a very dangerous thing to do.

As for Evergrande in particular, its stock just ended a 17-day suspension, allowing investors to jump ship. Which they did, taking shares down 14%.

Perhaps that fall wouldn’t have been so bad if it hadn’t announced that its deal with fellow real estate firm Hopson Development – which was supposed to take over 51% of its property services unit – failed.

Making things even worse is Fox Business’ accurate insight this morning that, “The figures on the books sometimes don’t tell the full story.”

Since Beijing started clamping down on corporate debt in 2017, many real estate developers have turned to off-balance-sheet vehicles to borrow money and skirt regulatory scrutiny, analysts and lawyers say.
Joint ventures are a popular choice because, unless a company holds a controlling interest in one, it can keep details of it and the debt it acquires off its balance sheet.
“Nearly every developer has borrowings in disguise. The sector’s debt problem is worse than what you can see,” said He Siwei, attorney at Hui Ye Law Firm.

Whether we’re investing in China or elsewhere, we can all take that kind of caution to heart. It’s unknown risks that necessitate us paying attention to position size and asset allocation.

The World According to REITs

There’s plenty more to talk about today, such as:

The John Deere strike of more than 10,000 United Auto Workers over contract negotiations
Used car prices soaring another 8.3% October 1-15
How oil prices fell from their seven-year highs… while inventories still decline.

Oh yeah… and Exxon (XOM) is considering cutting more than one major oil and gas project for cost- and climate-saving purposes.

In the midst of all this, we’ve got a real round of REIT earnings to report – including Crown Castle International (CCI), as promised. That data center company says its Q3 adjusted funds from operations (AFFO) was $1.77 per share. That’s several cents better than expected and 13% higher year-over-year.

Net revenue was $1.62 billion, up 8.9%, and CCI raised its dividend 11% on all the good news.

The three other REITs to report are as follows:

First Industrial Realty Trust (FR) beat consensus estimates and last year’s Q3 FFO of $0.49 per share by $0.02. Revenue was $121.08 million, up from $116.19 million year-over-year. And occupancy increased to 97.1%. As such, it increased its 2021 FFO guidance by $0.02 at the midpoint to $1.95.
Rexford industrial Realty (REXR) raised its per-share 2021 FFO guidance from $1.48-$1.51 to $1.60-$1.61 on strong Q3 results. Same-property portfolio net operating income grew 9.7%, and cash NOI rose 13.3% year-over-year. Occupancy was at 98.6%, and it ended the quarter with $1.1 billion in liquidity all told.
SL Green Realty (SLG) raised its full-year FFO expectations from $6.30-$6.70 per share to $6.45-$6.65. Same-store office occupancy (including leases signed but not started) hit 93.1% by the end of the quarter. And same-store cash NOI rose 5.7%.

Want more where that came from? Make sure to sign up for the completely free Intelligent REIT Daily e-letter as earnings seasons picks up…

Every bit of which will be included in upcoming Daily REIT Beats featured on iREIT on Alpha.

Get involved before Q3 passes you by!

(Source: The Daily REITBeat)

Happy Investing

Brad Thomas

467 posts

View all my Posts

Brad Thomas is Senior Research Analyst at iREIT and CEO of Wide Moat Research LLC. With over 30 years of real estate experience, he is also long-time Editor of Forbes Real Estate Investor, a monthly subscription-based newsletter that dives deep into the vast world of profitable properties, and since 2021, he has served as an adjunct professor at New York University.

Thomas has also been featured on or in Forbes magazine, Kiplinger's, U.S. News and World Report, Money, NPR, Institutional Investor, GlobeStreet, CNN, Newsmax, and Fox. And he was the #1 contributing analyst on Seeking Alpha in 2014, 2015, 2016, 2017, 2018, 2019, 2020 and 2021 based on both page views and number of followers.

Thomas is the recently-published author of The Intelligent REIT Investor Guide (2021), co-author of The Intelligent REIT Investor (2016), and he wrote The Trump Factor: Unlocking The Secrets Behind The Trump Empire (2016) - all available on Amazon.

Thomas received a bachelor of science in business/economics from Presbyterian College and is married with five wonderful kids.

Evergrande, Bitcoin, and Conference Confirmations

REIT Mutual Fund	Symbol
Alpine Realty Income and Growth Fund	AIGYX, AIAGX
American Century Real Estate Fund	REAIX, REACX, AREEX, AREWX, ARYCX, AREDX
Real Estate Securities Fund	MRESX
AR Capital Real Estate Income Fund	ARIAX, ARICX, ARIPX
AssetMark Real Estate Securities Fund	AFREX
Aston/Harrison Street Real Estate Fund	AARIX, ARFCX
Baron Real Estate Fund	BREIX, BREFX
BlackRock Real Estate Securities	BIREX, BAREX, BCREX
Brookfield U.S. Listed Real Estate Fund	BRUAX, BRUCX, BRUIX, BRUYX
CGM Realty Fund	CGMRX
West Loop Realty Fund	REIIX, REIAX, REICX
Cohen & Steers Institutional Realty Shares	CSRIX
Cohen & Steers Realty Income Fund	CSEIX, CSDIX, CSBIX, CSCIX
Cohen & Steers Realty Shares	CSRSX
Columbia Real Estate Equity Fund	CREAX, CREIX, CRRVX, CRERX, CREEX, CRRFX, CREWX, CRECX, CREBX
Compass EMP REC Enhanced Volatility Weighted Fund	CWRAX, CWRIX, CWRTX, CWRCX
Davis Real Estate Fund	RPFRX, DREYX, DRECX, DREBX
Delaware Real Estate Investment Trust Portfolio II	DPRTX, DPRBX
Delaware Real Estate Investment Trust Portfolio	DPREX, DPRSX, DPRRX, DPRCX
DFA Real Estate Securities Portfolio	DFREX
Dunham Real Estate Stock Fund	DAREX, DNREX, DCREX
DWS RREEF Real Estate Securities Fund	RRRRX, RRREX, RRRAX, RRRSX, RRRBX, RRRCX
DWS RREEF Real Estate Securities Income Fund	REFAX, REFCX, REFIX, REFSX
Eaton Vance Real Estate Fund	EAREX, EIREX
EII Realty Securities Fund	EIIRX
Fidelity Advisor Real Estate Fund	FHEIX, FHEAX, FHETX, FHECX, FHEBX
Fidelity Advisor Real Estate Income Fund	FRIRX, FRIQX, FRINX, FRIOX
Fidelity Real Estate Income Fund	FRIFX
Fidelity Real Estate Investment Portfolio	FRESX
Fidelity Spartan Real Estate Index Fund	FSRNX, FRXIX, FSRVX
Fidelity Series Real Estate Equity Fund	FREDX, FREFX
Fidelity Series Real Estate Income Fund	FSREX, FSRWX
Forward Real Estate Long/Short Fund	KSRYX, FRLSX, FFSRX, KSRAX, KSRCX, KSRBX
Forward Real Estate Fund	FPREX, FFREX, KREAX, KRECX
Forward Select Income Fund	KIFYX, FSIMX, FFSLX, KIFAX, KIFBX, KIFCX
Franklin Real Estate Securities Fund	FREEX, FRLAX, FRRSX, FSERX
GMO Real Estate Fund	GMORX
Goldman Sachs Real Estate Securities Fund	GREIX, GRETX, GREAX, GRESX, GRERX, GREBX, GRECX
Great-West Real Estate Fund	MXREX
Heitman REIT Fund	OARTX, OBRTX
ING Real Estate Fund	CRARX, IREWX, IDROX, CLARX, CRWRX, CRCRX, CRBCX
INVESCO Real Estate Fund	REINX, IARFX, IARIX, IARYX, IARAX, IARRX, IARCX, AARBX
Ivy Real Estate Securities Fund	IRSAX, IREIX, IRSYX, IRSRX, IREEX, IRSCX, IRSBX
John Hancock Real Estate Securities Fund	JIREX
Johnson Realty Fund	JRLTX
J.P.Morgan Realty Income Fund	URTLX, JRIRX, URTAX, URTBX, URTCX
J.P. Morgan Security Capital U.S. Core Real Estate Securities Fund	CEEAX, CEERX, CEEFX, CEESX, CEECX
J.P. Morgan U.S. Real Estate Fund	SUSIX
Lazard U.S. Realty Equity Portfolio	LREIX, LREOX
Lazard U.S. Realty Income Portfolio	LRIIX, LRIOX
Manning & Napier Real Estate Series	MNRIX, MNREX
Morgan Stanley Institutional U.S. Real Estate Portfolio	MSUSX, MUSDX, MSULX, MURSX
Natixis AEW Real Estate Fund	NRFAX, NRFYX, NRFBX, NRFCX, NRFNX
Neuberger Berman Real Estate Fund	NBRIX, NBRFX, NREAX, NRERX, NRECX, NRREX
Nuveen Real Estate Securities Fund	FREAX, FARCX, FRSSX, FREBX, FRLCX, FREGX
Oppenheimer Real Estate Fund	OREAX, OREIX, OREYX, ORENX, OREBX, ORECX
PHOCAS Real Estate Fund	PHREX
PIMCO RealEstateRealReturn Strategy Fund	PRRSX, PETPX, PETAX, PETDX, PETCX, PETBX
Pioneer Real Estate Shares	PWREX, PYREX, PCREX, PBREX
Principal Real Estate Securities Fund	PIREX, PIRPX, PREPX, PRETX, PREJX, PRRAX, PRERX, PRENX, PRAEX, PRCEX, PRLEX
ProFunds Real Estate UltraSector ProFund	REPIX
Prudential Select Real Estate Fund	SREAX
Prudential U.S. Real Estate Fund	PJEAX, PJEZX, PJECX, PJEBX
REMS Real Estate Income 50/50 Portfolio	RREIX
REMS Real Estate Value-Opportunity Fund	HLRRX, HLPPX
Rydex Real Estate Fund	RYREX, RYHRX, RYCRX
SA Real Estate Securities Fund	SAREX
SEI Institutional Mgd Real Estate Fund	SETAX, SEIRX
Spirit of America Real Estate Income & Growth Fund	SOAAX
SSgA Clarion Real Estate Fund	SSREX
Stratton Real Estate Fund	STMDX
T.Rowe Price Real Estate Fund	TRREX, PAREX
TIAA-CREF Real Estate Securities Fund	TIREX, TRRPX, TRRSX, TCREX
Vanguard REIT Index Fund	VGSNX, VGRSX, VGSLX, VGSIX
Virtus Real Estate Securities Fund	PHRAX, PHRIX, PHRCX, PHRBX

REIT ETF	Symbol
Flex Shares	ASET
Wisdom Tree Global Ex-US	DRW
S&P 500 Equal Weight	EWRE
iShares FTSE Industrial/Office	FNIO
MSCI Real Estate Index	FREL
S&P REIT Index	FRI
First Trust S&P REIT	FRI
iShares Real Estate 50	FTY
Flexshares Global	GQRE
iShares Cohen & Streers	ICF
iShares International Developed RE	IFGL
iShares US RE	IYR
Premium Yield Equity REIT	KBWY
ETRACS Monthly Pay 2x Leverage	MORL
Market Vector Mortgage	MORT
iShares Global REIT	REET
iShares FTSE Mortgage	REM
iShares Residential	REZ
IQ US Real Estate Small Cap	ROOF
iShares FTSE NAREIT Retail	RTL
DOW Jones Global RE	RWO
SPDR Dow Jones	RWR
Schwab US REIT	SCHH
Super Dividend REIT	SRET
ProShares Ultra RE	URE
Vanguard REIT	VNQ
Vanguard Global ex-US	VNQI
iShares International Developed	WPS
Wilshire US REIT	WREI
Pacer Benchmark Data & Infrastructure RE	SRVR
Pacer Benchmark Industrial RE	INDS
Pacer Benchmark Retail RE	RTL
Hoya Capital Housing	HOMZ
NetLease Corporate RE	NETL

REIT Name	Ticker	Annual Increases/yr
Federal Realty	FRT	51
Universal Health Realty	UHT	33
National Retail Properties	NNN	29
Realty Income	O	27
Tanger Outlets	SKT	26
Urstadt Biddle	UBA	25
Essex Property Trust	ESS	25
W.P.Carey	WPC	22
National Health Investors	NHI	17
Equity Lifestyle	ELS	15
Digital Realty	DLR	15

Sam Zell Tells Me His 3 Keys to Success

Brad Thomas

467 postsOctober 21, 2021

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Sam Zell Tells Me His 3 Keys to Success

467 postsOctober 21, 2021

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