First Industrial Trust Reality (FR, Financial) owns industrial park warehouse type properties. It appears to be discounted significantly to value. Companies need warehouse spaces with local or regional offices in these kinds of office parks on a repetitive basis across the country. This is one of the first expenses that industrial and distribution businesses have to make each month by paying the rent. There is presently slack in the market, and the company may be somewhat under water with payments it owes on loans. It is the kind of basic value added real estate where rents can quickly go up on leases.
It is not the least expensive real estate you can buy. I calculated Weyerhaeuser's (WY, Financial) cost per acre between $2000 and $3000 an acre. It now is also a REIT, and it may not be bad as an asset play, as timber prices will eventually surge again once the economy is rolling. Weyerhaeuser is not nearly as cheap as First Industrial Trust Reality, nor does it have as much value-added property. Weyerhaeuser may end up having vast natural gas resources or a major mineral find no one expects. Then it is possible this value comparison is completely reversed.
I have not done calculations for First Industrial Trust Reality, but I would guess it has more than $40,000 per acre value with basic covered warehouse spaces and parking lots etc. The rents will more than justify those prices. Whatever that figure is, you can now buy the company for about half that cost in market shares (per acre).
I once did calculations figuring out how much money you should have to pay per McDonald's restaurant owned by the company, and the price was significantly less than what you would have paid to open your own McDonald's franchise. It worked out even better at the time for Jack In The Box restaurants. Buying the shares was a lot cheaper than opening your own restaurant, and you got the benefit of all of the service fees to non-company-owned restaurants. McDonald's subsequently outperformed most of the market. That is why I have been zeroing in on First Industrial Trust Reality. I can't go out and buy warehouse space and become a professional real estate manager and do nearly as well as buying it for approximately half off on the stock market though shares of the REIT.
There is some financial difficulty there at the moment, and they are raising capital by selling new shares. That makes it cheap still. And it probably won't be so inexpensive once the regular required REIT dividends resume. I would like to go back and buy a lot more of those unwanted McDonald's shares when they were such an amazing give away. I can't do that now because the value now has been realized in market price.
I suggested to a friend that he buy general growth properties when they were a complete give away at the bottom nearing bankruptcy. I was a very dangerous transaction compared to First Industrial Trust Reality, and it paid off handsomely. Also went after Prologis when it was discounted spectacularly when the bottom fell out. Those were more dangerous extreme risk value situations and no more was invested than could be lost with some degree of toleration.
I don't think First Industrial Trust Reality is as risky. One of the reasons is the dividend was suspended, which is a positive in terms of not having to pay out that money. REITS should have the ability to reinvest dividends and not have to pay them out for the benefit of shareholders and not having to borrow so much and often. Unlike other kinds of real estate, warehouse space does not take huge re-investments in capital, and tenants often have to make those improvements at their own expense. Ever dealt with a triple net lease? The tenants even pay the property taxes right up front so the owner has a very abstract kind of hands-off ownership that can be very regular and lucrative.
Recently after I started dealing with First Industrial Trust Reality, the price has shot up substantially from when I started on a short-term basis, but not compared to the total value that is still submerged. It can if nothing goes wrong be a spectacular money-making opportunity. I would also look at Weyerhaeuser and see if they may be sitting on mineral resources including coal, gas or some other mined commodity, or even fresh water that is not reflected in the value of their shares as a timber land holding company.
The company is going the way of JOE, looking to sell off lots to builders. In the vicinity of cities like Seattle, that is land worth far more than $3,000 an acre. It is harder to figure out Weyerhaeuser than it is Weyerhaeuser. Not all timber owned by Weyerhaeuser has any value because a lot of it is replanted, and it maybe 20-plus years till harvesting, if ever.
It is not the least expensive real estate you can buy. I calculated Weyerhaeuser's (WY, Financial) cost per acre between $2000 and $3000 an acre. It now is also a REIT, and it may not be bad as an asset play, as timber prices will eventually surge again once the economy is rolling. Weyerhaeuser is not nearly as cheap as First Industrial Trust Reality, nor does it have as much value-added property. Weyerhaeuser may end up having vast natural gas resources or a major mineral find no one expects. Then it is possible this value comparison is completely reversed.
I have not done calculations for First Industrial Trust Reality, but I would guess it has more than $40,000 per acre value with basic covered warehouse spaces and parking lots etc. The rents will more than justify those prices. Whatever that figure is, you can now buy the company for about half that cost in market shares (per acre).
I once did calculations figuring out how much money you should have to pay per McDonald's restaurant owned by the company, and the price was significantly less than what you would have paid to open your own McDonald's franchise. It worked out even better at the time for Jack In The Box restaurants. Buying the shares was a lot cheaper than opening your own restaurant, and you got the benefit of all of the service fees to non-company-owned restaurants. McDonald's subsequently outperformed most of the market. That is why I have been zeroing in on First Industrial Trust Reality. I can't go out and buy warehouse space and become a professional real estate manager and do nearly as well as buying it for approximately half off on the stock market though shares of the REIT.
There is some financial difficulty there at the moment, and they are raising capital by selling new shares. That makes it cheap still. And it probably won't be so inexpensive once the regular required REIT dividends resume. I would like to go back and buy a lot more of those unwanted McDonald's shares when they were such an amazing give away. I can't do that now because the value now has been realized in market price.
I suggested to a friend that he buy general growth properties when they were a complete give away at the bottom nearing bankruptcy. I was a very dangerous transaction compared to First Industrial Trust Reality, and it paid off handsomely. Also went after Prologis when it was discounted spectacularly when the bottom fell out. Those were more dangerous extreme risk value situations and no more was invested than could be lost with some degree of toleration.
I don't think First Industrial Trust Reality is as risky. One of the reasons is the dividend was suspended, which is a positive in terms of not having to pay out that money. REITS should have the ability to reinvest dividends and not have to pay them out for the benefit of shareholders and not having to borrow so much and often. Unlike other kinds of real estate, warehouse space does not take huge re-investments in capital, and tenants often have to make those improvements at their own expense. Ever dealt with a triple net lease? The tenants even pay the property taxes right up front so the owner has a very abstract kind of hands-off ownership that can be very regular and lucrative.
Recently after I started dealing with First Industrial Trust Reality, the price has shot up substantially from when I started on a short-term basis, but not compared to the total value that is still submerged. It can if nothing goes wrong be a spectacular money-making opportunity. I would also look at Weyerhaeuser and see if they may be sitting on mineral resources including coal, gas or some other mined commodity, or even fresh water that is not reflected in the value of their shares as a timber land holding company.
The company is going the way of JOE, looking to sell off lots to builders. In the vicinity of cities like Seattle, that is land worth far more than $3,000 an acre. It is harder to figure out Weyerhaeuser than it is Weyerhaeuser. Not all timber owned by Weyerhaeuser has any value because a lot of it is replanted, and it maybe 20-plus years till harvesting, if ever.
