Beware, The Raised Nail Gets Hammered
- Today I am adding two new names to the Intelligent REIT Lab.
- This now means that we now have 12 commercial mREITs in the REIT Lab, providing investors with plenty of choices.
- A bit of caution before I get started: “Beware, The Raised Nail Gets Hammered.”.
Because they both invest in commercial mortgages, they have modest interest rate risk; however, they are unique in their risk profiles. Remembering that the key risk for commercial mREITs is credit risk and this means they should be rated based on the competence of the underwriting team.
Most of my followers understand that I am not a fan of the agency mREIT variety due to the sensitivity to interest rates through prepayments and the impact on hedges and book values.
Alternatively, commercial mortgage REITs are less sensitive to interest rates and an underwriter’s ability to underwrite quality loans can be shown through default and delinquency data. However, one gripe I have with commercial mREITs is the lack of transparency related to the underlying loans.
Currently, I have Buy ratings on BXMT, Ladder Capital (LADR), KKR Real Estate (KREF), TPG Real Estate (TRTX), and Granite Point (GPMT). In addition, I have Strong Buys on the specialty commercial mREITs: Hannon Armstrong (HASI) and Jernigan Capital (JCAP).
Today I am adding two new names to the Intelligent REIT Lab and providing you with my initial research and recommendations. This now means that we now have 12 commercial mREITs in the REIT Lab, providing investors with plenty of choices.
A bit of caution before I get started, and one valuable lesson that a friend of mine once echoed when we were discussing a high-yield stock. He said,
Beware, The Raised Nail Gets Hammered.”