Wednesday, April 29, 2015

Good Advice

Here is a Bloomberg article that quotes Colony Capital's Thomas Barrack, Jr.   Mr. Barrack provides some smart, basic advice, but advice that few people will follow.  This passage is a warning:
“Everybody is outside of their own asset class,” Barrack said in a Bloomberg Television interview Tuesday with Erik Schatzker and Stephanie Ruhle at the Milken Institute Global Conference in Beverly Hills, California. “When amateurs enter the marketplace for all of this, you are going to get an abundance of something and it is usually not good.”

Central banks globally have pushed investors into higher-yielding assets by reducing interest rates and purchasing bonds. The Standard & Poor’s 500 Index reached an all-time high on Friday and sovereign debt in Europe is trading at negative yields.

“Institutional investors that are in this endless search for yield are ignoring the risk peril of all the consequences of those things,” he said.
And here is some more:
To protect themselves from possible future losses, real estate investors should look for “equity-type returns” in the capital stack, Barrack said during the panel discussion.

“Floating debt can choke and kill you quickly,” he said.
The article is about real estate investors, but you can substitute nearly any asset class that throws of yield and uses low cost leverage to boost returns. 


Inland American changed its name to InvenTrust Properties Corp on April 16, 2015.  I would have posted earlier but I am still laughing at this nonsense name.  Inland needs to invent some equity for Inland American investors rather than waste time and money thinking of a made-up name.   The new logo is cool, although I am not sure what it signifies.

InvenTrust's spin-off of Xenia Hotels and Resorts (XHR) has held up well in the market since its listing in February.  It has traded over $22 per share since mid-March.  Inland has had more good news, as its latest non-traded REIT, Inland Real Estate Income Trust, raised over $88 million in March, placing it third out of all non-traded REITs in sales.  Not too shabby.