What Are Real Estate Investment Trusts Preferred Stock? How To Make Money With Real Estate Investment Trusts Preferred Securities (Real Estate Investment Trusts Preferred Stock)

When investors seek to take advantage of publicly listed real estate opportunities, they often favor traditional REIT common stock to gain exposure. This makes sense — from Oct. 1, 2008 through Sept. 30, 2018, US REIT common stock has provided attractive returns coupled with income generation, potential diversification benefits and a potential hedge against inflation. However, we believe US REIT preferred stock may offer a unique opportunity for investors to access real estate like returns with even higher income (and lower volatility) versus traditional REIT common stock. A real estate investment trust (REIT) is a company that owns (and typically operates) income producing real estate or real estate related assets.

Preferred stock is class of ownership in a corporation that has a higher claim on its assets and earnings than common stock.

Understanding US REIT preferred securities

REIT preferred stock is a type of hybrid security with both equity- and bond-like characteristics. Within the capital structure of REIT companies, preferred stocks have a senior claim to earnings and dividends versus common stock but are generally junior to corporate bonds. The dividends paid on REIT preferred stock are often considerably higher than REIT common stock and shares are generally issued at a par value (often $25). While REIT preferred shareholders have no voting rights, they can often benefit from investing when issues are trading at discounts to par. REIT preferred stock is generally callable after five years from the date of issuance, at which point management reserves the right to redeem the shares at par. This five-year non-call period provides the potential not only for income, but also capital appreciation. The five-year non-call period also gives investors a more certain return opportunity over the time period, which may be an additional benefit.

Why do companies issue REIT preferred stock?

So why do REIT companies issue preferred stock at all given the options of simply issuing common equity or traditional corporate debt? First, when REIT companies issue preferred stock (versus traditional corporate debt) they are often given more favorable treatment by rating agencies. This allows companies to showcase lower leverage levels to prospective investors and analysts. Second, REIT preferred stock provides companies with a unique source of capital. While these shares are generally callable after five years at par, company management reserves the right to keep the shares outstanding in perpetuity. A broad array of REIT companies offer preferred stock, including those that operate in sectors focused on residential, office, retail, industrial, self-storage, data centers, infrastructure, healthcare and lodging. While the universe of US REIT preferred stock is relatively small by number of issuers and total capitalization, the benefits to investors have historically been quite compelling.

A comparison: US REIT preferred stock versus US REIT common stock

Over the last ten years – since the global financial crisis in October 2008 to the present – REIT preferred stock has outperformed REIT common stock with roughly half the volatility. The higher level of income generated by the preferred shares, coupled with the potential for capital appreciation for discounted securities, has allowed this segment of the capital structure to generate excess returns.

Over the past ten years, US REIT preferred stock has outperformed US REIT common stock

Over the last ten years, ZARZAR LAND has also observed that US REIT preferred stock has tended to outperform REIT common stock during periods of rising interest rates. We believe that the higher level of yield spreads versus the 10-year Treasury and other preferred sectors have allowed these securities to insulate themselves more to periods of rising interest rates.

US REIT preferred stock has tended to outperform REIT common stock during periods of rising rates

Given the yields of US REIT preferred stock today (which generally span from 5% to 8%), investors have the right to question the sustainability of these distributions. Unlike financial preferreds, which have experienced certain periods of double-digit levels of payment defaults, since 2000 the US REIT preferred universe has never seen a year with more than a 1% level of missed payments. In the past 18 years, the average annual default rate for US REIT preferred stock has been a modest 0.25%, reflecting the stable and predictable cashflows generated by real estate-related companies over the period. And in the last four calendar years there have been no defaults in the broader US REIT preferred universe at all. We also believe that convertible REIT preferred securities may create even better tracking relative to REIT common stock and may provide more robust protection against rising interest rates than non-REIT preferred stock.

How Billionaire Investors Protect Their Wealth & Fortune

Above: How Billionaire Investors Protect Their Wealth & Fortune.

It can take a lifetime to build a fortune like Warren Buffett or Ray Dalio. But, as all billionaires know, there is always risk present in the stock market, and even though a catastrophic geopolitical or financial event is very unlikely, it is important to be prepared for anything.

The World’s Biggest Real Estate Bubbles In 2019

Courtesy of: Visual Capitalist

Above: The World’s Biggest Real Estate Bubbles In 2019.

The World’s Biggest Real Estate Bubbles In 2019

With the current stock market bull run reaching nearly 10 years in length, it’s understandable that many investors are nervous about the end of the party coming sooner than later. However, as UBS notes in its latest report, there is also growing concern about another prominent bubble that has been in the works since the aftermath of the financial crisis.

Large amounts of easy money have fueled real estate bubbles in the world’s major cities, and the Swiss investment bank UBS now sees the property markets in six global cities as being at risk.

The Biggest Real Estate Bubbles In The World.
The Biggest Real Estate Bubbles In The World.

Hong Kong tops the “Real Estate Bubble” index this year. Any city with a score over 1.5 is considered at “Bubble Risk”, and right now those include two cities from Canada (Vancouver and Toronto), one from Asia (Hong Kong), and three from Europe (Amsterdam, London, and Munich in Germany). It is also very important to note that there are four cities that score just under the 1.5 real estate bubble threshold: Stockholm, Paris, San Francisco in California, and Frankfurt in Germany.

Above: The Most Expensive Real Estate In The United States: San Francisco Or New York?

Whether it is a real estate housing bubble or not, many real estate investors agree that San Francisco’s housing situation is still a crisis. In the San Francisco Bay Area, approximately 60% of all rental units are in rental controlled buildings, and the median single family house price is an incredible $1.7 million United States Dollars.

About ZARZAR LAND

ZARZAR LAND was founded on December 1998 with the simple mission of giving interested investors with limited finances and/or expertise access to quality real estate investment opportunities. ZARZAR LAND is an innovative and prestigious land group that works closely with various government agencies and institutions. Discover more at:

http://www.zarzarland.com

How To Invest In Farmland – Gladstone Land & How To Invest In Farming & Buy Farmland Without Owning A Farm

Gladstone Land (Nasdaq stock symbol: LAND) invests in farms and farmland. The real estate investment trust (REIT) owns approximately 75 farms and 63,000 acres of land across nine states. Its land portfolio is valued at approximately $537 million and is 99.7% leased. The farmland owned by Gladstone Land is primarily used to grow fresh fruits and vegetables, rather than commodity crops like corn, wheat, and soybeans. The advantages of fresh produce farms are higher productivity and rents. Also, there is no tariff risk since production from Gladstone farms is consumed domestically and rarely exported.

The market for farmland is highly fragmented in the United States. In addition, roughly two-thirds of American farmers are nearing retirement age, creating many farm acquisition opportunities for Gladstone Land.

Gladstone had its initial public offering (IPO) in 2013 and pays monthly dividends. Farm portfolio growth and annual rent increases have fueled 11 dividend increases over five years and approximately 48% dividend growth.

Gladstone Land Stock Price.
Gladstone Land Stock Price.

How To Invest In Farming & Buy Farmland Without Owning A Farm

Investing in farming can seem like a good strategic move for real estate and land investors. After all, whether the overall economy is in recession or booming, people still have to eat food. Because of this, many real estate and land investors regard agriculture and farming investments as being recession-proof. Furthermore, as the world’s population increases, farming will play an increasingly important role in sustaining people around the world. That said, buying a farm is not very easy for the average investor because it can require a large capital commitment and the time and cost of operating or leasing farmland is often substantial. Fortunately, real estate and land investors have many other means to gain exposure to the sector without having to actually buy a farm.

Farmland Real Estate Investment Trusts (REIT)

The closest that an investor can get to owning a farm without actually purchasing farmland is by investing in a farming focused real estate investment trust (REIT). Some examples include Farmland Partners Inc. (New York Stock Exchange symbol: FPI) and Gladstone Land Corporation (Nasdaq stock symbol: LAND).

These real estate investment trusts (REIT) typically purchase farmland and then lease it to farmers. Farmland real estate investment trusts (REIT) offer many benefits, such as providing much more farmland diversification than by simply buying a single farm, as they allow an investor to have interests in multiple farms across a wide geographic region.

Farmland real estate investment trusts (REIT) also offer greater liquidity than does owning physical farmland, as shares in most of these real estate investment trusts (REIT) can be quickly bought and sold on stock exchanges for as little as $4.95 in commissions with a stock broker such as Charles Schwab. In addition, farmland real estate investment trusts (REIT) such as Gladstone Land (Nasdaq stock symbol: LAND) also decrease the amount of capital needed to invest in farmland, as the minimum investment is just the price of one real estate investment trust (REIT) share (or less if you use a stock broker that allows fractional shares). In other words, you can become an indirect farmland part owner for less than $100 United States dollars.

How To Invest In Gold | What Are Gold Exchange Traded Funds? The Best Gold Exchange Traded Funds For Individual Investors

Gold exchange traded funds (ETFs) offer investors a great alternative to investing in the gold market. From exchange traded funds continuously tracking the price of gold, to exchange traded funds covering the global gold mining industry, gold exchange traded funds have amassed significant assets and have become extremely popular with gold investors.

Gold continues to offer good returns, and investors who are interested in owning the precious metal may consider buying shares in a gold exchange traded fund (ETF). We have chosen the top five gold ETFs based on net assets. Every one of these picks has turned in positive returns year to date (YTD). None of them pays a dividend. Read the descriptions carefully, because each of these ETFs has different types of expenses. All figures are current as of Oct. 12, 2017.

SPDR Gold Shares (GLD)

This fund buys gold bullion. The only time it sells gold is to pay expenses and honor redemptions​. Because of the ownership of bullion, this fund is extremely sensitive to the price of gold and will follow gold price trends closely. One upside to owning gold bars is that no one can loan or borrow them. Another upside is that each share of this fund represents more gold than shares in other funds that do not buy physical gold. However, the downside is taxes. The Internal Revenue Service (IRS) considers gold a collectible, and taxes on long-term gains are high.

Average Volume: 7,600,275
Net Assets: $35.66 billion
YTD Return: 10.92%
Expense Ratio (net): 0.40%