Thursday, March 27, 2008

Too Smart
Dividend Capital's Total Realty Trust is expected to release its 10-K on Monday, March 31, 2008. This non-traded REIT began its offering period in early 2006 at the height of low cap rate real estate. To off-set the low yields on real estate, the REIT purchased high yielding debt securities. These include CDOs and CMBSs, but no subprime securities. These are the type of securities that are giving the large banks trouble, due to their uncertain valuation. I want to know how the REIT is valuing these hard-to-value securities. Dividend Capital has a leveraged closed-end mutual fund , Dividend Capital Realty Income Allocation (DCA), which owns similar-type debt securities. This fund has lost half its value since last summer. DCA has all its assets invested in debt and income producing securities and is leveraged. The REIT has about 20% of its assets in securities, and I don't think it borrowed to acquire them, so the impact is much smaller, and the securities are performing. But it is an item that needs analysis.


Anonymous said...

Started reading new 10K from Wells Timberland. Not much data on timber operations yet. They point out that pulpwood prices are higher but neglect to mention that cutting/shipping costs are higher too. It costs just as much to haul pulp as sawlogs. Owners of preferred shares look well protected.

Rational Realist said...

I printed out my version last night. I am sure the preferred shares are well protected. I am curious to read the supplemental information section.