Thursday, May 23, 2013


OMG!  Net lease REIT stocks were hit hard yesterday, with declines ranging from 2% to nearly 5%.  American Realty Capital Properties (ARCP) was off 4.83%, WP Carey (WPC) off 2.28%, Realty Income (O) down 4.76%, and Spirit Realty declined 2.64%.  The sell-off is continuing this morning.  Yikes.  Am I to believe that REITs that own properties subject to long-term net leases are sensitive to possible changes in interest rates?  Why wasn't I told?

Oh, the horror of market movements.  Why can't markets always move up?   Why did the ARC REITs and WP Carey REITs list in the first place?  And why are so many other non-traded REITs planning on listing their shares?  I don't care that before yesterday, an ARCT III* investor who still owned his or her shares had a 69% price appreciation since the stock listed in early March.  The sudden price drop is too much for my fragile nerves.   Can't we go back to the good old days (like twelve months ago) where non-traded REITs planned to raise money over extended periods fueled by artificial distribution rates, then cut the unsustainable distributions after completing the equity raise, and ignore stated liquidation dates?  At least back then the share price didn't decline - it was fixed - so investors didn't see that awful drop in value on their computer screens.  Why can't non-traded REIT sponsors take the "non-traded" moniker seriously? 

*  American Realty Capital Trust III was acquired by ARCP in March at a price of one share of ARCT III for .95 shares of ARCP.  So a $10.00 per share initial purchase was worth the equivalent of $16.92 per share ($17.81 * .95) at the market close on Tuesday, May 21, 2013.  So, $16.91-$10.00 divided by $10.00, gives a 69% return.


Anonymous said...

you have a warped sense of humor!

Rational Realist said...

Yes I do.

Anonymous said...

Thank you Brad,

Insightful comments as always!

Rational Realist said...

Anon 2,

Brad? That's a good one. No Brad here.

Anonymous said...

Anonymous-2 is thinking your Brad Thomas from Seeking Alpha with your negative comments on net lease.

Rational Realist said...

Anon 3,
I figured Anon 2 was referencing Brad Thomas. I didn't say anything negative on net lease. It's a long-term finance investment, susceptible to interest rate moves. The point of the article was poke fun at people who think non-traded REITs should never list. Probably worth a longer post.