iREIT Daily

Adversity Is Bitter, But Its Uses May Be Sweet

Brad Thomas

467 postsJune 11, 2021

It’s no surprise that my new book is titled The Intelligent REIT Investor Guide, in honor of the legendary investor Benjamin Graham. In college, I heard about Graham’s famous book, The Intelligent Investor, but did not read it until about ten years ago.

In 2009 and 2010, there was plenty of time for reading, as I was in the midst of a career change of sorts. Having been a real estate developer for twenty years, in 2008, something commonly referred to as “The Great Recession” forced me to pivot.

From 1990 through 2010, wealth was created using tools such as leverage and networking; developing a large rolodex of contacts along the way, with which real estate was acquired with little to no equity.

My first build-to-suit project was for Advance Auto Parts in 1990. That one deal led to over $100 million of real estate development projects over two decades.

The brands we worked with included Blockbuster Video, Payless ShoeSource, Sherwin Williams, Eckerd Drug, Bi-Lo, Wal-Mart, Hibbett Sports, Cato, Sally Beauty, Radio Shack, PetSmart, OfficeMax, Barnes & Noble, Party City, La-Z-Boy, Badcock, Big Lots, Food Lion, CVS, Walgreens, Hollywood Video, Econo Lube, Rent-A-Center, Aaron Rents, Citi Trends, O’Reilly Auto Parts, Lowe’s Food, Family Dollar, Dollar Tree, Dollar General, and others.

With a knack for building stores and leasing them back to restaurants, we worked with McDonald’s, KFC, Applebee’s, IHOP, Waffle House, Outback, Subway, Pizza Hut, Papa John’s, Red Lobster, CiCi’s Pizza, Denny’s, Baskin Robbins, Rock-Ola Café, and others.

As our experience grew in real estate development, we worked with companies like Lemforder, Goodyear Tire, GE Modular, and others.

Along the way, we also arranged large portfolio sale/leasebacks with companies like Buddy’s, Aaron Rents, and Alltel.

Over the course of twenty years, gaining considerable experience in site selection, construction management, capital markets, leasing, and deal making – with a few missteps along the way – my net worth grew to over $25 million before my 45th birthday.

But … there was a valuable lesson that I had not learned … my principal was unprotected and at extreme risk … but that lesson was about to be taught to me.

My Personal Great Recession began in 2005

My business partner, over the prior 15 years, was building a new hotel and getting into serious financial trouble. The next five years were some of the most difficult of my life. Day after day, project after project, problem after problem, setback after setback, loss after loss, it all came apart.

All that previous net worth, and more, was gone. My family moved in with my in-laws for a year in an attempt to gain our financial footing. Personal bankruptcy was close for a long time, and essentially the only thing holding me back from bankruptcy was the $5,000 needed to pay an attorney.

That all sounds like fiction, but it is most certainly fact. Our five kids in 2010 were in kindergarten, elementary school, middle school, and high school.

There were plenty of adjustments to be made. We reset our priorities. What were previously high end vacations, evolved into weekend trips to the beach. Private schools gave way to public schools. We pulled ourselves together. Turns out, those changes were not bad things after all.

Professionally, my goal became taking the results of those very hard lessons and applying them to life; my life and the lives of others. So, in 2010 I began writing for a really great website called Seeking Alpha. After 11 years, the results are pretty outstanding.

Nearly 3000 articles (almost half of which are editors’ picks). Almost 100,000 “followers.” Partnership in 3 marketplace services on Seeking Alpha – Dividend Kings, iREIT on Alpha, and Safe High Yield; serving over 3,000 members. Serving as the editor of the Forbes Real Estate Investor with over 2,500 members. CEO of Wide Moat Research. Not too bad …

Now back to The Intelligent Investor and Ben Graham; in his own words:

“Adversity is bitter, but its uses may be sweet. Our loss was great, but in the end, we could count great compensations.”

Mr. Graham taught me a lot, but my lessons in life were teaching me, too. Graham’s rags-to-riches youth shaped his outlook on money – both earning it and spending it – just as my own 2005-2010 journey was shaping my perspective.

Graham understood that financial success involved playing good offense (i.e., earning money) and defense (i.e., spending as little as possible for good value).

“The years of poverty since Father’s death had touched me only lightly. They had developed in my character a serious concern for money, a willingness to work hard for small sums, and an extreme conservatism in all my spending habits.”
Ben Graham

The difference between investment and speculation lies at the heart of Ben Graham’s investment philosophy, and its primary impetus is the margin of safety principle. As Graham defined it, the margin of safety constitutes a “favorable difference between price on the one hand and indicated or appraised value on the other.”

This so-called “extreme conservatism” gave Graham an enormous (arguably definitive) advantage when picking stocks and bonds. Ultimately, this conservatism became Graham’s quintessential tenet of his investment philosophy: the margin of safety – and that is what drives my recommendations today.

Recognizing the lack of high-quality institutional investment coverage focused on dividend paying stocks, my partners and I recently launched Wide Moat Research. Our goal is to assist investors with selecting high-quality stocks that are trading at a healthy margin of safety.

Remember, it takes only a few large losses to decimate overall investment performance, even if many other investments prove successful. Having experienced severe financial misfortunes in his youth, Ben Graham grasped the danger of risking capital that one already has for the potential of additional capital.

Similarly, after having to start all over again, you can now see why my approach to investing is extremely conservative and does not take excessive risks in the stock market. Using Graham’s proven methods (margin of safety), we can systematically minimize risk by screening out unsafe positions from the outset.

Protect principal at all costs. We can help ….

Happy Investing

Brad Thomas

467 posts

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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.

The Moments You Can’t Prepare For

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

Adversity Is Bitter, But Its Uses May Be Sweet

Brad Thomas

467 postsJune 11, 2021

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Adversity Is Bitter, But Its Uses May Be Sweet

467 postsJune 11, 2021

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