Apr 10, 2010 0
Winthrop Realty Trust (FUR) 2009 Letter
The folks at Winthrop Realty Trust (NYSE:) are respected by much of the value investor community for their opportunistic approach to investing. Here is an excerpt from their 2009 letter:
Notwithstanding the price tightening of CMBS securities, by February 2010, loans in special servicing increased to $75 billion or 10.7% of the entire CMBS universe with a current loss severity exceeding 44% on defaulted fixed-rate loans. Fitch Ratings now predicts that 20% of all CMBS loans will be in special servicing by 2012. Job growth, the single greatest driver of occupancy rates, continues to remain elusive. These statistics belie any theory that the real estate markets are improving.
Where sentiment/momentum clashes with real time economic data, how should we invest our Company’s capital in 2010? While we acknowledge we may miss some of the momentum related opportunity, we believe that capitalization rates will ultimately revert back to historic levels and real estate pricing will trend downward more accurately reflecting its current and near term operating fundamentals. We expect that excessive leverage, reduced liquidity and a reappraisal of value by institutional lenders will create ongoing investment opportunity not presented by the current “pretend and extend” lender policies. Consequently, we intend to continue to invest patiently, with deliberation and dispassionately avoiding market mania.
During 2009 we identified and capitalized on investment opportunities in real estate debt and equity securities as well as secured real estate debt, investing in excess of $90 million in these assets. While we do not presently see equivalent opportunities in REIT debt and equity securities, we maintain an interest in secured real estate debt as well as new investment opportunities in preferred equity and distressed debt. These latter opportunities have only begun to emerge in the last quarter of 2009 but we expect an increase in their volume through 2010.
HT:
As always, be sure to read the entire letter.
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