Author Topic: High Quality Multi-family REITs - EQR, CPT, ESS, AVB  (Read 17511 times)

thepupil

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Re: High Quality Multi-family REITs - EQR, CPT, ESS, AVB
« Reply #30 on: April 08, 2020, 07:20:01 AM »
Initial look shows big drop in those paying rent

Only 69% tenants paid any of their rent in April's first five days, according to the National Multifamily Housing Council. That compares to 81% in March's first week, and 82% in April's first week one year ago.
The actual situation for most (tenants and landlords) may be somewhat worse as the data is from a survey of 13.4M investment-grade rental apartments, i.e. likely to be occupied by higher-income tenants.
While this doesn't necessarily mean a wave of evictions (new laws around the country kind of prevent this), the delinquent rent is likely to move up the chain as landlords then struggle with mortgage payments, possibly setting off a wave of losses in CMBS-land.

I may be weighting this data point too much, but I sized down my exposure by 1/4 at 5-15% profits. Given this is a starter basket approach as I don't think they're quite "cheap" enough, I think it is appropriate to be a little more risk averse. I will await further changes to price / fundamental data to make any more moves. Given the low leverage a 15% move in stock price is basically an equivalent move in the asset.


matts

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Re: High Quality Multi-family REITs - EQR, CPT, ESS, AVB
« Reply #31 on: April 08, 2020, 02:17:59 PM »
Equity Residential (NYSE: EQR) today announced that through April 7, the Company collected approximately 93% of its monthly residential cash receipts for April 2020 and the Company is working with the remainder of its residents on payment options.

http://investors.equityapartments.com/file/Index?KeyFile=403555723

I guess they have better tenants than average

thepupil

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Re: High Quality Multi-family REITs - EQR, CPT, ESS, AVB
« Reply #32 on: April 08, 2020, 04:15:35 PM »
Equity Residential (NYSE: EQR) today announced that through April 7, the Company collected approximately 93% of its monthly residential cash receipts for April 2020 and the Company is working with the remainder of its residents on payment options.

http://investors.equityapartments.com/file/Index?KeyFile=403555723

I guess they have better tenants than average

Ha completely missed that, dumbass move on my part, remaining EQR lots are up 27%, AVB up 20%, CPT just a little, Essex up 15%.

Im not going to chase these up, but perhaps more inclined to average down with that datapoint in line with my gut feel/ read of the asset/tenant quality...maybe the hard relief rally is just getting to me


matts

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Re: High Quality Multi-family REITs - EQR, CPT, ESS, AVB
« Reply #33 on: April 09, 2020, 02:33:14 AM »
Agreed. By May 1, everyone will know whether their job is steady, or they will have some cash from the feds in their accounts. I'm still a bit worried many will not pay even if they could. You see that already in CRE. This is from a Prologis investor update a few days ago:

Look, a substantial amount of that 24% are Fortune 100 companies. And somebody in their legal department probably said, "Send a letter to all your landlords and ask for rent deferral. Why not?" We're not going to give those people. I mean I think people should not use this market condition opportunistically. I think that's really a bad thing to do. I think people should do the right thing. We should be here helping the people that really need help as opposed to trying to extract an economic advantage. We're just not going to stand for that. They're valued customers, but they need to behave themselves.
 We're not going to take money out of our shareholders' pockets and put in other major companies' shareholder pockets just because they ask for it.

Now landlords have leverage over commercial tenants because "normal" rules still apply. But what about residential where new rules say you can't get evicted if you don't pay? I still worry about that.

Kaegi2011

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Re: High Quality Multi-family REITs - EQR, CPT, ESS, AVB
« Reply #34 on: April 09, 2020, 07:46:12 AM »

Now landlords have leverage over commercial tenants because "normal" rules still apply. But what about residential where new rules say you can't get evicted if you don't pay? I still worry about that.

You have a valid point, but if it really gets to that level is there really nothing that can be done as a land lord?  Especially in this high rise buildings, are there no options (cutting internet, for example) to at least force a conversation around ability to pay?  It's one thing to not be able to pay, it's another thing to choose to not pay.  So if one wants electricity or cable or internet, assuming they could be cut off unit by unit, why is a landlord obligated to provide that if the renter isn't paying rent? 

matts

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Re: High Quality Multi-family REITs - EQR, CPT, ESS, AVB
« Reply #35 on: April 09, 2020, 07:53:26 AM »

Now landlords have leverage over commercial tenants because "normal" rules still apply. But what about residential where new rules say you can't get evicted if you don't pay? I still worry about that.

You have a valid point, but if it really gets to that level is there really nothing that can be done as a land lord?  Especially in this high rise buildings, are there no options (cutting internet, for example) to at least force a conversation around ability to pay?  It's one thing to not be able to pay, it's another thing to choose to not pay.  So if one wants electricity or cable or internet, assuming they could be cut off unit by unit, why is a landlord obligated to provide that if the renter isn't paying rent?

I'm almost sure turning off electricity would open up massive legal liabilities that landlords would lose in court. I know it is illegal in canada to turn off electricity or the heating source to delinquent renters. I imagine it is the same in the US, nevermind during this crisis.

As for cable/internet...not sure how it works in US, but again in Canada, most renters even in apartment buildings have individual agreements with their telcos. yes, technically the buildings allow the telcos to run their hardware through common areas, but the rent is separate. landlords would have no legal right to turn off a third party service. Is it generally different in the US? Is the internet explicitly bundled with rent?


Kaegi2011

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Re: High Quality Multi-family REITs - EQR, CPT, ESS, AVB
« Reply #36 on: April 09, 2020, 10:42:10 AM »

Now landlords have leverage over commercial tenants because "normal" rules still apply. But what about residential where new rules say you can't get evicted if you don't pay? I still worry about that.

You have a valid point, but if it really gets to that level is there really nothing that can be done as a land lord?  Especially in this high rise buildings, are there no options (cutting internet, for example) to at least force a conversation around ability to pay?  It's one thing to not be able to pay, it's another thing to choose to not pay.  So if one wants electricity or cable or internet, assuming they could be cut off unit by unit, why is a landlord obligated to provide that if the renter isn't paying rent?

I'm almost sure turning off electricity would open up massive legal liabilities that landlords would lose in court. I know it is illegal in canada to turn off electricity or the heating source to delinquent renters. I imagine it is the same in the US, nevermind during this crisis.

As for cable/internet...not sure how it works in US, but again in Canada, most renters even in apartment buildings have individual agreements with their telcos. yes, technically the buildings allow the telcos to run their hardware through common areas, but the rent is separate. landlords would have no legal right to turn off a third party service. Is it generally different in the US? Is the internet explicitly bundled with rent?

Obviously case by case basis here and we're generalizing, so it's prob not great to extrapolate.  However, if the reason why renters aren't paying is b/c they think the courts will be stuck with too many cases, then it goes for landlords too.  ANd in terms of liabilities - outside of physical harm (so heat being one of the "Essential" items), what could be claimed?  No legal expert here but can someone really claim that they are entitled to free rent?  Again, I'm not suggesting that this is just a legal issue.  If I were a landlord and I have tenants who I know are employed, able to pay, and won't even have a conversation about rent and is telling me to go pound sand to take advantage of a pandemic, then I have no problem letting him or her know that electricity is not a "right."

In terms of internet / cable - depends on the building.  Many large buildings include it as a part of the rent / HOA.  It's just easier to negotiate on behalf of 100 units and get economies of scale and service. 

KJP

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Re: High Quality Multi-family REITs - EQR, CPT, ESS, AVB
« Reply #37 on: April 09, 2020, 11:02:13 AM »

Now landlords have leverage over commercial tenants because "normal" rules still apply. But what about residential where new rules say you can't get evicted if you don't pay? I still worry about that.

I believe it will make a big difference who the tenants are.  Many people in the US are effectively judgment proof, because they have no assets.  So, it's ordinarily a waste of time to sue them, and that is why debt buyers generally can buy debts for pennies on the dollar.  But there are others who do have plenty of assets and very good credit ratings.  This is the group that, for example, can't simply give the keys of a house back to the bank if its underwater (at least in states that have recourse mortgages).

My understanding of the thesis articulated in the original post was something like EQR likely has many fewer judgment proof tenants than something like NEN and so should be priced accordingly.
« Last Edit: April 09, 2020, 11:03:57 AM by KJP »

BG2008

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Re: High Quality Multi-family REITs - EQR, CPT, ESS, AVB
« Reply #38 on: April 09, 2020, 11:06:16 AM »

Now landlords have leverage over commercial tenants because "normal" rules still apply. But what about residential where new rules say you can't get evicted if you don't pay? I still worry about that.

You have a valid point, but if it really gets to that level is there really nothing that can be done as a land lord?  Especially in this high rise buildings, are there no options (cutting internet, for example) to at least force a conversation around ability to pay?  It's one thing to not be able to pay, it's another thing to choose to not pay.  So if one wants electricity or cable or internet, assuming they could be cut off unit by unit, why is a landlord obligated to provide that if the renter isn't paying rent?

Dude, what state and city do you live in?  You will be skinned and boiled alive for even thinking about cutting off utilities etc as a landlord in NYC.

lnofeisone

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Re: High Quality Multi-family REITs - EQR, CPT, ESS, AVB
« Reply #39 on: April 09, 2020, 11:06:24 AM »

Now landlords have leverage over commercial tenants because "normal" rules still apply. But what about residential where new rules say you can't get evicted if you don't pay? I still worry about that.

You have a valid point, but if it really gets to that level is there really nothing that can be done as a land lord?  Especially in this high rise buildings, are there no options (cutting internet, for example) to at least force a conversation around ability to pay?  It's one thing to not be able to pay, it's another thing to choose to not pay.  So if one wants electricity or cable or internet, assuming they could be cut off unit by unit, why is a landlord obligated to provide that if the renter isn't paying rent?

I'm almost sure turning off electricity would open up massive legal liabilities that landlords would lose in court. I know it is illegal in canada to turn off electricity or the heating source to delinquent renters. I imagine it is the same in the US, nevermind during this crisis.

As for cable/internet...not sure how it works in US, but again in Canada, most renters even in apartment buildings have individual agreements with their telcos. yes, technically the buildings allow the telcos to run their hardware through common areas, but the rent is separate. landlords would have no legal right to turn off a third party service. Is it generally different in the US? Is the internet explicitly bundled with rent?

Making unit uninhabitable by landlord is called constructive eviction and opens up landlord to civil lawsuit/liabilities. Depending on the state these could very stiff.