Brandywine Realty: A Highly Discounted Office REIT, But Long-Term If you read your homeowners policy, the expensive toys must be insured separately. Since I was unable to comment, on time (due to the FL weather), in the UK Chaos Econ thread, I hope I can use this thread to post a question: With the BofE stepping in to bail out the leveraged pension funds, wont this create a possible circle of QT and money printing? In addition to any long positions listed below, Hoya Capital is long all components in the Hoya Capital Housing 100 Index and in the Hoya Capital High Dividend Yield Index. Commercial real estate advisory Savills today released the first batch of its Q3 quarterly office market reports on the major markets in the US, 12 markets in total. An investor cannot invest directly in an index and index performance does not reflect the deduction of any fees, expenses or taxes. Personally, I am not bullish on BDN and believe it is a better "hold" today. Also, since I was caught in Hurricane Ian (about 30 miles N of Ft. Meyers) I am just now getting access to power and internet so go ahead and recall the Search and Rescue team as Im back in the comments, baby! These other countries need to raise their interest rates ahead of the Fed, and if they did QE (Japan and European countries/Eurozone), they need to do QT. well break time is over and its time to go back to work The shares of the five largest office REITS by market cap have all plunged from their recent highs - and some of them much more from their distant all-time highs. Bisnow's REIT Scorecard: The 5 Biggest Office REITs By Market Cap Sometimes cost savings in the millions. dynamic. These many levels of corporation structure drive me nuts.who OWNS who? Stock Price: $47.48. at all. The only way corporate REIT can fight this is if communities charge extra taxes for headcount that would be in the office. List of public REIT companies by market capitalization - StockMarketCap.org In reality, that figure accounts for an expected . That implies that up to half of the area may eventually become unleashed over the coming decade. Funded by a captured Fed without the sense of a spavin jackass. As you can imagine, the city that paid for all of the expensive infrastructure for this headquarters, is not very happy. Futures up nearly 2%, looks like happy days on Wall Street are here again! Is this a balance transfer offer? Staggering decrease to physical office occupancy in central business districts has led to a massive departure from office REITs. With these factors in mind, I suspect that Brandywine's properties may eventually see their fair-value capitalization rates rise to 9-11% due to the increase in mortgage rates and the sharp increase in risks of large NOI declines. Please consult with your investment, tax, or legal adviser regarding your individual circumstances before investing. 170.14M Minimum May 16 2023. However, my "base case" valuation range for BDN is $890M to $1.62B, which is 13% to 105% above the company's current market capitalization. However, because the Fed owns MBS isnt that conflict of interest? P/E ratio is a lagging indicator and one of the worst measures of relative valuation. A very large percent of workers in the IT/developer departments of this firm are 100% WFH, and out of state or country from any physical office. Investments in real estate companies and/or housing industry companies involve unique risks, as do investments in ETFs. I believe BDN is technically very undervalued based on prevailing market prices in the office property market. But its the problems in the office market since 2020, since the large-scale arrival of working-from-home, and with it the largest office glut ever, with record amounts of office space vacant and on the market for lease, that these REITS have taken the most recent hits. Personal income solidly outpaces inflation. And they should get crushed. >The question is what happens if or when WFH ends? Any market data quoted represents past performance, which is no guarantee of future results. Its self-inflicted wound, and they should stop blaming the Fed. Real Estate Property Services Premium Premium statistics Industry-specific and extensively researched technical data (partially from exclusive partnerships). The Pressure/Benefit of Automation Processes is now The attendance in these companies remain around 25%. With an increasingly tight labor market, employees - not employers - will chart the future of the workplace. That said, investors should also not overestimate Brandywine's recovery potential and should be mindful of other factors that could affect the firm. That may have been a one off thing in CT in the 1980s? This commentary is impersonal and should not be considered a recommendation that any particular security, portfolio of securities, or investment strategy is suitable for any specific individual, nor should it be viewed as a solicitation or offer for any advisory service offered by Hoya Capital. Insolvent no solvency Further, this risk may not fully realize for 5-10+ years, so there is no sense in betting against the company based on this existential risk factor. Instead, one overlooked factor determining how fast - and to what extent - employees returned was employee commute times. First, BOE (sorta) A lot of jobs have been shrunk,duplicated, and eliminated by leaps in software and the cloud. That metric is based on current capitalization rates in higher-quality office spaces in urban areas it is situated in and the company's current NOI. level, but instead of rising vertically, it cluster together, increasing volatility for 7 months slightly under Mar 2020 high, but well below Sept 2008 high. As interest rates rise, capitalization rates on properties will typically keep up; however, it may take one to two years for the full adjustment to occur. Also notable - Orion Office (ONL) - the newest office REIT that was spun out from Realty Income (O) as part of its merger with VEREIT - has been under pressure since reporting its first inaugural earnings results as investors were disappointed by its lower-than-expected quarterly dividend of $0.10/share - representing a yield of 2.6%. Office REITs usually prosper when economic conditions are strong because of competition for office space that drives up rents. Imploded Stocks For commercial, a major change is in software companies where WFH is very much possible. A property without demand has a negative value as it must be demolished. I am not receiving compensation for it (other than from Seeking Alpha). I was wondering about a tie to residential. In Silicon Valley, the availability rate dipped 10 basis points to 20.8%, based on one large deal: TikToks parent Bytedance subleased 658,000 sf from Yahoo. While it is true that BDN is undervalued based on a sensible decline in its property's valuations, its leverage level will become high once that occurs. Inflation & Devaluation The REIT owns, operates, develops and leases over 49 . Its that they hope you screw up (check the fine print, often if you are accidentally late on a payment on that card, or even on another unrelated bill, you get hit with the full 20% or whatever) and they can raise the rates, or that you dont have the $ to pay it off at the end of the year. Good. The company's income has declined from falling sales and rising operating overhead costs. A complete list of holdings is available and updated at www.HoyaCapital.com. That said, the likely considerable rise in total urban office vacancies should immediately negatively impact the fair-value of affected properties. Powell needed to be doing 1% hikes at every meeting since last Winter. They need to be crushed utterly so that capitulation can do its work. What's a REIT? Shares of office landlords plunge. Lower-cost secondary markets in the Sunbelt and the West continued to lead the way in Q4, with many of these markets approaching pre-pandemic levels of leasing volume, while larger coastal "gateway" cities continued to lag. I find working from my HOME OFFICE still is cheapest A "new normal" on several levels, office REITs - which historically traded at persistent premiums to their REIT peers - have become relative "value plays" in the post-pandemic era while dividend yields have swelled. Is this happening to you frequently? But that era is over. Leasing activity fell to 1.0 MSF, the lowest since the lockdowns, and less than half the activity during the last three pre-pandemic Q3s. Im coming round to the idea that, perhaps, the FFR at 4.25 by December is a bit aggressive, given that state of speculative, financiaily vulnerable firms that were spawned by the Feds manipulation of the value of the currency, these past 15 years. Management isnt able to convince employees to come to office and the rewards for coming to office is lower than the rewards from switching jobs! Im a member of Seeking Alpha and I checked their ratings on Boston Properties (BXP) and was shocked, and here is a brief rundown of their ratings, from 1 to 5: Quant Rating 3.0 (Hold) (its a AI like formula of 100+ variables, or so). The pivot has been broadcast. companies: 7,654 . I will send the whole report if you want it. Sublease space rose to 5.7 MSF. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. The question was: Would you lend Italy $1 MM for 50 years at -.25 pct interest. This is particularly true given the ample available supply - a supply overhang that will linger for much of the next decade. Leasing activity in Q3, driven by the 658,000 sft Bytedance deal rose to 1.7 MSF, from 0.9 MSF a year ago. For many employees, there's no going back to the long transit-heavy commutes - at least not to the pre-COVID norms of a traditional 5-day in-person workweek and evidence suggests that it's market forces rather than discrete decisions driving the shift. Highwoods Properties. The job I work now is a ISP that is in growing markets, providing 1-2 gig fiber. With a current market cap of $27 billion, ARE is one of the bigger office REITs in the market, and currently holds a spot in the S&P 500 index. Hoya Capital Research is an affiliate of Hoya Capital Real Estate ("Hoya Capital"), a research-focused Registered Investment Advisor headquartered in Rowayton, Connecticut., Founded with a mission to make real estate more accessible to all investors, Hoya Capital specializes in managing institutional and individual portfolios of publicly traded real estate securities, focused on delivering sustainable income, diversification, and attractive total returns.. Its spring selling season, when prices always rise month-to-month, and they did, but it wasnt enough. This will continue for years as office projects are being completed. The model of a privately owned Federal Reserve has clearly failed and should be replaced with a National Bank agency that is more attuned to the interests of the vast majority of citizens. The Market Hates Real Estate Stocks. It's Time to Buy. Turns out, these office REITs, once among the hottest stock trends, werent such great deals after all and they really dont like working from home and higher interest rates. Office REITs - which lagged over the prior two years from persistent pandemic-related headwinds - have been the best-performing major property sector in early 2022. Is there any insight worth mentioning here? Our theory was that the patterns wouldn't necessarily follow the clear-cut regional dynamic. During the subsequent mega-QE era, it regained much of what it had lost in March 2020. For an in-depth analysis of all real estate sectors, be sure to check out all of our quarterly reports: Apartments, Homebuilders, Manufactured Housing, Student Housing, Single-Family Rentals, Cell Towers, Casinos, Industrial, Data Center, Malls, Healthcare, Net Lease, Shopping Centers, Hotels, Billboards, Office, Farmland, Storage, Timber, Prisons, and Cannabis.
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