Bill Chen 谈 REITs 当前格局
- Bill Chen 对“cap rate 套利永远不会收敛”质疑的反驳，是一套完整的总回报算法：以6% cap rate 买入，扣除40–50个基点的G&A和每套约1,000美元的维护性资本开支，得到约5.1–5.2%的真实无杠杆自由现金流，再加上2–3%的租金增长，并叠加保守的20% LTV 债务。 在他把债务简化为按cap rate借入的假设下，永久持有的数学结果约为10%的总回报；鉴于许多多户住宅REITs目前交易在6%中段附近，他认为回报率接近10–11%，无需被收购退出。
- 这一算法为NAREIT带来的两年总回报只有7.3%，原因符合经典的资本周期理论，而Bill认为周期如今正在转向。 2021年的免费资金让除办公楼外的所有资产类别都“把铲子插进了地里”（"a shovel in the ground"），供应在2024–25年集中交付，租金增长极其有限；但供应浪潮如今正在被市场吸收，新开工量在各资产类别均低于20年均值。AI数据中心和基础设施相关项目是主要例外。由于cap rate压缩“极其有限”，Bill表示自己现在比两年前参加播客时更兴奋。
- Andrew认为，REITs“可能更接近债券，而不是股票”：他两年前对多户住宅NOI的预测误差在2–3%以内，而对化学品公司 EBITDA 的判断误差则在正负30%以内。 Andrew将其概括为“资本周期入门课”，Bill的点睛之笔是：大约40年来最多的一轮多户住宅交付，整个周期下来NOI只下降了约3%。
- 围绕公司治理和回购的争论，核心是管理层与董事会持股很少；Camden的10-Q显示，前9个月经营现金流为6.3亿美元，回购仅5,000万美元，开发投入3.1亿美元，收购投入3.34亿美元。 Bill以Camden出售资产并回购股票、以及AvalonBay约1.5亿美元的回购为蓝筹REITs辩护；Andrew则认为增量资金应当用于回购。Bill还援引了不让资产组合老化的受托责任，Andrew对此提出质疑。
- Bill讲述Griffin的反回购案例：CEO通过1031交换出售Hartford土地、买入Lehigh Valley仓库，取得约7%的无杠杆回报，租金后来翻倍，公司并扩张至Charlotte。 价值投资者当时要求公司回购股票，但Gordon DuGan出任董事长后，股价单日上涨20%，CEO的战略也获得认可。Griffin后来被Senue和新加坡政府以Bill成本基础两倍的价格私有化，公司面积从不足200万平方英尺扩大到约1,500万平方英尺。Bill的结论是：“股价被低估时，解决方案并不总是某种形式的股票回购。”Andrew的反驳是，这一结果依赖于一位极其出色的经营者。
- 收购浪潮确实存在，而Bill认为PE买入上市REITs的门槛已经低到地板：公众股东获得25–40%的溢价，PE仍然可以轻松赚钱。 他列举了Inco、Elme Communities、ROIC和Alexander & Baldwin，以及Dream Residential和一家酒店度假村公司；前4家公司被描述为正在清算或已被收购，其中ROIC和A&B由Blackstone买下。Andrew曾考虑对A&B发起激进投资，但最终转移了资金，因为“目标太多，机会太丰富”。
- 当前错位最严重的领域包括生命科学地产和冷链仓储（Lineage、Americold、按隐含cap rate计算估值很高的Alexandria）、所有40–50% LTV的资产，以及自助仓储——“我们现在非常喜欢自助仓储敞口”。 从风险调整后的角度看，事件驱动型清算的错位程度最高。
- 目前有5宗房地产清算同时进行，Bill想不起此前有过类似先例；他首次将总敞口做到110–130%，因为资产出售和账上现金可以在1–5个月内返还一半资本。 他的承销底线是约20%的上行空间，因此低端估值从20下调至19.50，会让MOIC从约1.22倍降至约1.15–1.17倍。双方都指出，在净租赁办公楼清算中，容易承销的长租约资产以及适合改造成多户住宅的资产已经先行出售，剩下的是被挑剩的尾部资产。
1. 永久持有的数学：为什么6% cap rate无需出售也能复合出10%回报
- Andrew开场提出了一个他认为每场REIT推介都绕不开的问题：如果REIT按5% cap rate交易、底层物业按4% cap rate交易，就意味着25%的无杠杆上行空间，股权回报可能达到80–100%；但“如果明天卖不出去……你就只是买下来，永远拿着5%的回报”，还要扣除G&A拖累，而管理层可能把现金重新投向4% cap rate的物业。
- Bill认为，这种框架“是一个常见误解”，因为它忽略了租金增长。按他所说目前可获得的6–7% cap rate重新计算：6% cap rate扣除40–50个基点的上市公司SG&A（“大规模买入后，它们的运营效率相当高”），再扣除每套1,000美元的维护性资本开支——这是他多年与私募多户住宅GP交流后总结出的经验值——最终得到约5.1–5.2%的真实无杠杆自由现金流。再加上每年2–3%的租金增长，不加杠杆的回报就是7–8%。
- Andrew追问从8%到10%的杠杆增益：债务难道没有成本吗？Bill的计算机制是作出一个简化假设，即债务实际按cap rate借入，因此债务费用对杠杆本身保持中性，而加杠杆部分的租金增长全部归属于股权。上市REITs的LTV约为20%，并且“发行的是7–10年期、利率低于5%的固定利率债务”，Bill认为这低于其真实的杠杆后自由现金流。若采用私募市场常见的50–70% LTV，永久持有回报会“显著上升”。
2. 两年复盘：供应浪潮来去
- 账面表现并不好看，Bill也没有回避：NAREIT两年总回报为7.3%，价格层面持平至小幅下跌；相对于股市大涨、利率趋稳的环境，Andrew称之为“相当惨淡”。Bill的判断是，2021年“基本免费的资金”加上惊人的 headline 租金增长，让“每一个房地产GP都把铲子插进了地里”（"real estate GPs, every single one of them, put a shovel in the ground"），多户住宅、自助仓储和仓库全都开工，只有办公楼除外；项目在2024–25年集中交付，租金增长因此极其有限。
- 可交易的转折已经出现：多户住宅、自助仓储和仓库领域的管理层都表示，供应浪潮正在被吸收；几乎所有资产类别的新开工量都低于20年均值。Bill认为仍在持续建设的只有AI数据中心和基础设施相关项目，“因为它们来自另一套资金来源”。
- Bill之所以比两年前更看多，是因为“cap rate收缩或倍数扩张极其有限”（"there's been very very minimal cap-rate contraction or multiple expansion"）：回报基本来自股息，价格与两年前接近，因此投资者获得的起始估值大致相同，而供应压力正在缓解。Andrew认可这种方法，喜欢把资本周期变化与一线行业数据结合起来，解释这套算法为何奏效或为何失效。
3. “资本周期入门课”——房地产是可预测的资产类别
- Bill拿两人共同关注的非REIT标的作比较：如果要预测一家化学品公司两年后的EBITDA，“我希望有一次能把误差控制在正负30%以内”；而Andrew表示，他两年前对多户住宅NOI的预测，实际误差在2–3%以内。Andrew的结论是，多户住宅和房地产“可能更接近债券，而不是股票”。
- Andrew的概括值得保留：这是一堂“资本周期入门课”（"capital cycles for beginners"），像一条几乎不摆动的牛鞭。一个稳定运营的公寓楼，两年后可能上涨10%，也可能下跌2%；“不可能跌30%，也不可能涨50%”。Bill最后给出的数据是：大约40年来最大的一轮多户住宅交付，整个周期下来NOI只下滑了约3%——“我觉得这已经不错了”。
4. 回购之争：Camden的10-Q对上受托责任
- Andrew从公司治理角度施压：如果董事会和管理层持股很少、薪酬丰厚、又不去兑现公开市场折价，投资者是否就该要求治理折价？他引用Camden的10-Q：前9个月经营现金流6.3亿美元，回购5,000万美元，开发投入3.1亿美元，收购投入3.34亿美元——“在我看来，增量资金显然仍然流向了增长”。
- Bill为这些蓝筹REITs辩护：Camden正在出售最差的老旧楼龄资产，用于支持回购；AvalonBay也进行了约1.5亿美元的回购；而按6% cap rate进行新开发“其实是很好的资金用途，因为你得到了一栋全新的楼”。他还援引了不让资产组合老化的受托责任，Andrew则直接反问：“为什么这是受托责任？”
- Andrew通过制药行业提出归谬：如果一家公司的股价只值1美元，那么除基础维护性资本开支之外的每一美元都应该用于回购；就像一家药企筹集了5亿美元研发治癌药物，最终失败、公司市值只剩2.5亿美元时所说的：“你想让我们怎么办？削减科研去回购股票？遗憾的是，答案就是这样……市场在喊，经济规律也在喊，你需要清算这家公司。”
5. Griffin故事：反回购寓言
- Bill的反例发生在大约2019年、COVID之前。Mario Gabelli当时公开要求Griffin回购股票；这是一宗复杂的分部加总土地故事，Bill本人也很感兴趣。如果管理层听从了建议，“他们最终会更加集中于康涅狄格州Hartford的土地，以及Hartford的办公楼……整个资产组合都不会发展成后来那个样子”。
- 相反，CEO出售Hartford土地，通过1031交换将资金转移至Lehigh Valley，并以约7%的无杠杆回报建立了现代仓库组合；租金后来翻倍，公司又扩张至Charlotte和其他市场。价值投资者反驳Bill，理由包括CEO与董事会的家族关系、700万美元SG&A以及股票流动性。Gordon DuGan出任董事长后，股价单日上涨20%，尽管在DuGan加入之前，CEO的能力并没有变差。
- 最终，公司在3或4年后被Senue和新加坡政府以Bill成本基础两倍的价格私有化；公司面积从不足200万平方英尺扩大至约1,500万平方英尺，企业价值也从约2.5亿美元增长到Bill估算的10–15亿美元。“股价被低估时，解决方案并不总是某种形式的股票回购。”Andrew的反驳是，这一结果依赖于一位极其出色的经营者。
6. 收购浪潮：PE的门槛已经低到地板
- Bill列举了几家已被收购或正在清算的公司，其中多家来自他自己的组合：Inco正在清算，Elme Communities正在清算，ROIC和Alexander & Baldwin被Blackstone收购，此外还有Dream Residential，以及一家由共同朋友持有的酒店度假村公司。Andrew补充了Hyatt/Playa：Hyatt收购后出售了房地产，而保留的管理费现金流和运营公司的隐含价值意味着“他们拿到了相当不错的价格”。
- Andrew指出其中的结构性机会：在公众股东可获得25–40%收购溢价的环境下，“如今PE买入上市REITs赚钱的门槛低到地板，实在太容易了”。就A&B而言，Andrew说自己曾考虑在交易完成、组合单日上涨5%后发起激进投资，但最终放弃，因为市场上的目标太多，不值得锁定资金。Bill提醒称，针对一宗经过充分竞价且确实存在溢价的交易发起激进投资，可能把已经到手的交易搅黄；这是手里的一只鸟与灌木丛里的两只鸟之间的选择。
- 错位最明显的领域包括生命科学地产和冷链仓储：在不调整杠杆的情况下，Lineage、Americold和Alexandria的隐含cap rate较高、EV/EBITDA倍数较低，估值最便宜；40–50% LTV的资产通常也表现出更明显的错位，部分原因就是杠杆。自助仓储板块在Q3业绩后整体遭到抛售，随后投资者预期供需改善，板块重新获得买盘。Andrew怀疑，集中持股意味着“真正关心的人大概只有10个”，因此当一家无关的REIT出现问题时，市场上没有足够的自然买家。
7. 5宗同步清算：仓位、滑点，以及究竟谁被起诉
- Bill调整了组合配置：在职业管理的投资组合中，他第一次把总敞口做到100%以上，“就算是110–130%之间吧”，因为事件驱动型清算可以依靠资产出售和账上现金，在1–5个月内返还一半资本。他表示，敞口可以很快从130%降到120%、115%和110%，期间还会持续收到股息。
- Andrew援引巴菲特合伙企业作为使用杠杆押注事件驱动型清算的先例，并指出如今这些标的规模太小、流动性太差，大型基金无法参与；这与多年前拥挤的New York REIT清算不同。Andrew的另一个担忧是：当一只20美元的股票宣布派发15美元股息时，“这是10%的仓位，还是2.5%的仓位？”Bill的回答是，实际上是2.5%的仓位，但这件事仍然让他夜不能寐。
- 对于低端估值下修，过去的规则是，经过律师团队论证的低端估值“无论天塌下来都必须兑现”。Bill的纪律是至少按20%的上行空间承销。估值从20下调至19.50，会让MOIC从约1.22倍降至约1.15–1.17倍；由于派发15美元股息后只剩5美元残余股权，这50美分的落差对剩余股权影响很大。Bill不记得有谁在低于清算估值后仍真正完成派现，但幅度很重要：20降至19.50，与20降至17不是一回事。
- Bill同意Andrew对净租赁办公楼清算的结构性判断有一定道理：长租约、容易承销的资产，以及适合改造成多户住宅的资产最先售出，“到了最后，你会被剩下一点难处理的东西”。
- Andrew担心激励错配，举了一个假设性的净租赁办公楼案例：管理层持股很少，只从W. P. Carey获得一笔很小的管理费，可能会以约8,000万美元出售一项还剩8年租期、账面上约有8,000万美元剩余租金的物业，相当于不给终值；而持有15%股权的所有者可能会坚持等待更高价格。Bill的反例是New York REIT：公司把One Worldwide Plaza留作与SL Green合作的增值开发项目，并放进一个不上市交易的残余持股载体；随后COVID袭来，Bill认为股权被彻底清零。他还与最终中标者交流过：那些“看起来有点便宜”的价格，往往意味着物业存在石棉，或租约中藏有允许租户在还剩5年租期时退出部分租约的条款。
- 收尾时，Andrew说自己曾在圣诞前夜交易“AMCO”，当一宗交易完成时感叹：“我已经很久没有在REIT领域的事件驱动机会中如此活跃了。”原定讨论Alexandria的环节没有进行，双方同意另行跟进。
完整逐字稿
Bill, how’s it going?
Good, good.
Go ahead.
No, go ahead.
No, I’m super excited to talk to you today. I’ve had some questions I was sending to you, so I’ve been thinking about REITs specifically and the market generally. You’re the perfect person to bounce these ideas off of, plus an interesting new investing idea.
So, Bill, let’s kick it off here. I’ve been thinking about REITs a lot. I know you’ve talked about how it’s been a really tough couple of years for REITs, and we can talk about all that. But do you mind if I start with my hypothetical? I know you know where I’m about to go.
Sure. Go ahead.
Yeah. I’ve been thinking about REITs, and I know you, my good friend Hawkins, and several other people who look at real estate a lot. A lot of the pitches will sound like this: “Hey, this company trades for—and I’m going to use a really easy number—a 5% cap rate.”
They’re an industrial REIT, and all their properties, if you look at what they’re trading for, trade at 4% cap rates, right? So if they just sold today, you’d get 25% above where they’re trading on an unlevered basis. Going from a 5% to a 4% cap rate is going from a 20× multiple to a 25× multiple, so you get 25% upside there.
Plus, all these have leverage. That’s on an enterprise basis; on a market-value basis, you might be talking about an 80% pop, 100% pop, whatever. I love that thesis.
But the issue I always come to is, that’s true, but if you don’t get that sale tomorrow, then you just buy them and get a 5% cap rate. So you get a 5% return forever, less SG&A drag. Generally, when people quote cap rates, they’re before SG&A. And if that management doesn’t sell, guess what? They’re probably going to go buy, so they’re going to buy a lot of 4% cap properties.
So I’ve had that thought in my mind. To be fair, when somebody says, “Hey, I want to go buy this company at a 10× price-to-earnings ratio, and all the peers are trading at 20×,” guess what? It’s the exact same thing if you don’t get an instant rerating. But something about the lower cap rates hits me. I threw a lot out at you there. We can talk about all of it—we can spend the next 50 minutes talking if you want. What do you think about that?
So, I think you’re missing a few things, and I think this is a common misconception about investing in real estate and REITs in general. I’m going to make one tiny adjustment: let’s just bring the cap rate up to 6%, because generally, even in large caps, we’re finding a lot of 6% to 7% cap rates.
Completely okay. I only used 5% and 4% because it made the math really easy as I was laying it out.
Yes. Let’s walk through that. If you buy the multifamily—and let’s just use the mid-6s, but let’s call it 6%—and you look at the SG&A burden of being a publicly traded company, it’s 40 to 50 basis points. When you buy them at a large enough scale, they run fairly efficiently. So let’s say you bring it down to 5.5%, and then let’s say you assume $1,000 a door for maintenance capex, which, based on tons of conversations I’ve had over the years with private GPs who manage multifamily, is a pretty good rule of thumb. That generally brings you down to about a 5.1% to 5.2% kind of true free cash flow without the use of any leverage.
I think what you’re missing is a rent-growth component. The whole reason why people own real estate and REITs in general is this adage that, over a long time period, it at least keeps up with inflation or beats inflation.
If you model a 3% annual rent increase for an asset class like warehouse, self-storage, or multifamily—or, if you want to be ultra-conservative, use 2% and insert a CPI number—you take a 5.1% and tack on another 2% to 3%. This is before any use of leverage.
The leverage of public REITs is generally about 20% loan-to-value. They’re very conservatively levered. There are other REITs out there that are 40% or 50% loan-to-value. If you model that out—I’ve done a ton of this math—even with 20% loan-to-value, a 3% rent increase gets you to an 8%. That 20% leverage will kind of get you over 10%. If you hold these assets in perpetuity, you get about a 10% total return. That’s generally what I think will happen.
A lot of multifamily REITs today are actually mid-sixes. So if you start at mid-6%, knock off 80 or 90 basis points, and add on 3% rent growth, if you hold it to perpetuity, you actually start approaching that mid-10% to 11% total return.
Can I go ahead?
Go ahead, please.
No, no, no, finish.
No, I think that—and this is, you know, if you were to buy low-leverage public REITs, if you were to put the kind of 50% to 70% loan-to-value that a private real estate investor will put on it, then your total return on a kind of permanent hold actually goes up significantly.
Let me just ask one question to start there. The math you did was kind of, “Hey, let’s just start with a flat 6%, 90 basis points off for management.” And I even forgot, when I was saying the cap rate doesn’t include your maintenance capex to maintain these properties. That brings you down to just over 5%.
Then add 2% to 3% for rent growth. That takes you to 7% to 8%. The leverage component—can you just walk me through the bridge? Because if I’ve got 8% on the whole EV stack and then I throw a 20% LTV on it, it seems kind of aggressive to take it from 8% to 10% there.
If you divide it by 0.8, it kind of gets you to that right ballpark.
But debt has an expense, right? It’s not like you’re going to—
Well, that’s the beauty of it, right? Because you’re buying it at a 6% cap. Your cash flow is leverage-neutral, right? So the debt expense is leverage-neutral, but your rent growth over time—
Okay. So you’re assuming that’s what I drive to.
So you’re assuming, basically, you’re borrowing at your cap rate effectively, and then all the rent growth on that 20% goes—okay, perfect.
Yeah, I mean, I could look at Interactive Brokers.
No, it’s all Excel right now. That’s fine.
No, not Excel. But I do want to just see—I think at Interactive Brokers, you borrow at low- to mid-4% right now, because it’s just a tiny spread over SOFR.
Oh, well, you’re talking about margin lending, which I’m just going to refer everybody to—all the investing disclosures, legal disclaimers, and all that type of stuff. But there is a difference, as many of us have learned painfully over the years in our PAs.
So let’s go back to company financing. Companies are issuing 7- to 10-year fixed-rate debt at below 5%. This is when the 10-year is around a similar interest rate as it is today. So they are borrowing at below their true free cash flow on a levered basis.
Okay, there’s a lot to talk about there. Let me start with the first one. I want to come back to this 8% to 10% all-in number that we just discussed, but let me ask a different question. If I rewind the past 2 to 3 years for REITs, as you talked about, it’s been a tough time for REITs, right? They’re annualizing way below that number we talked about. They’re annualizing below the cap rate. I mean, they’re basically annualizing at cash rates.
If I said, “Hey, the REIT indices over the past 2 to 3 years have been flat,” I’d be a little conservative, but I wouldn’t be too far off. Stock markets have been booming, the economy is doing pretty well, interest rates are stabilizing, and inflation is coming down. It seems to me like this should have been a pretty good time for REITs. Why has that algorithm not worked over the past 2 to 3 years?
I think it’s important to give the exact number. NAREIT—we just calculated this—the total return for NAREIT in the past 2 years was 7.3%, which means that, if you adjust for the dividend yield, it’s either flat or slightly negative from a price perspective.
But that’s a big adjustment, right? The dividend is a real thing.
No, when you buy REITs, dividends are absolutely a real thing. But 7.3% over 2 years is fairly brutal. If that’s your exposure, that’s a fairly brutal benchmark.
I think it’s important because you can look at it and a lot of people say, “REITs are never going to work. Why bother with them?” Another way to look at it is that this makes for an even more exciting opportunity. If you go back to 2 years ago, when I first did the podcast, I said I think what happened was that, because of ultra-low interest rates—essentially free money in 2021—and the incredible headline rent-growth figures in all real estate asset classes, every real estate GP put a shovel in the ground. This happened across almost every single real estate asset class: multifamily, self-storage—not office—but warehouses, every single one of them.
This is classic capital-cycle theory. They put all that capacity in the ground, and the deliveries hit in 2024 and 2025. We’re now really starting to get to the back end of that. You could see that because demand is a little bit harder to forecast, but there’s a lot of really good industry data on supply. You can see the supply.
What you had in 2024 and 2025 was very muted rent growth. Let’s go back to the algorithm we just walked through: How do you actually generate returns from real estate and REITs in general? You have the yield, and then you have rent growth. Most real estate asset classes have exhibited very little rent growth. This is true for self-storage, and it’s true for multifamily.
With multifamily, the coastal markets were hit worse by COVID. Coastal markets have had better rent recovery, while a lot of Sun Belt markets had a lot of rent growth, and then there’s a ton of supply. In all of this, there’s also a very interesting capital-cycle theory.
When we first did the podcast 2 years ago, I was excited. I would say I’m more excited today because there’s been very minimal cap-rate contraction or multiple expansion. There’s been very little of it. All the returns have essentially been through dividends, and the REIT stock price has been similar to what it was 2 years ago.
But now you have the supply wave that was being delivered. If you go listen to a lot of the earnings calls—whether it’s multifamily, self-storage, or warehouses—what you’re hearing from the management teams is that the supply wave is getting absorbed, and now they’re all trending below 20-year averages in essentially every single asset class. The only real estate asset class getting capital injections and new-start activity today is data centers.
I was about to say, AI data centers feel like a lot of money is going in.
The only things getting built today are AI data centers and anything infrastructure-related, because that’s coming from a different funding source.
Can I pause you on the capital-cycle theory? I think you read some of the stuff I put out and some of my podcast material. What I like about the capital-cycle framework, and what you just explained, is that I asked why this 8% to 10% algorithm didn’t work. You said that, at the start, 2 or 3 years ago, the starting point looked good on a cap-rate basis, but here’s why it didn’t work: There was a capital cycle dynamic—something outside of what you could see just by reading the financial statements. You could read industry sources, think it through, and look at the supply.
There’s a counterargument that maybe demand just kept increasing and massively exceeded supply. But I like how you did the on-the-ground research and incorporated the capital-cycle dynamics. I like anytime you can combine capital-cycle dynamics with why something did or didn’t work.
I also like what you’re saying about how you still get the same starting valuation. Honestly, if every miss I had was slightly positive after tax for 2 years, I’d tell you I’ve had a lot of misses that were a lot worse than that. I like the combination: You still get all of that, and now the supply has dried up. So please continue.
Yeah. I think Andrew, you and I both invest in companies outside of real estate—tech, chemicals, and so on. Think about when you invest in a chemical company and say, “I think 1 year out or 2 years out, EBITDA is going to be X.” How many times are we within plus or minus 3% of that projection 1 to 2 years out? I’d like to be plus or minus 30% one of these times.
Yeah. In multifamily, when I go back and look at it—particularly multifamily—basically all the NOI numbers we forecast 2 years ago were within 2% or 3% of the range in either direction. That’s why, particularly with multifamily and real estate, it’s probably a little bit closer to a bond than it is to an equity.
I was thinking in my head: It’s capital cycles for beginners. As you said, in chemicals, the capital cycle can make next year’s EBITDA literally minus 200% or plus 1,000%, whereas with REITs—
Third-tier office in third-tier cities is pretty tough right now. But outside of that, with a stabilized apartment building, it’s pretty good. Yes, it might be plus 10% 2 years from now; it might be plus 2%; it might be minus 2%. It’s not going to be negative 30%, and it’s not going to be plus 50%.
You get that capital-cycle bullwhip for beginners. My 2-year-old is doing the bullwhip, so it’s barely moving up and down, but it is moving.
Yeah.
And keep in mind that, in multifamily, this is the most delivery we’ve had in something like 40 years. If you have the most new capacity addition in an asset class, and the net result is NOI down—I don’t know—3% over a 2-year cycle, when you get the most delivery in history, I think you’re doing okay.
I also think there’s a corporate-governance angle. Anyone who’s looked at REITs knows REITs are really hard to do activism in. Corporate governance is really tough—not impossible, and we’ve seen some. But I think the other thing people might push back on would be to say, “Hey, if this company is trading for a 6 cap, and there are lots of properties at 5 caps, right? Lots of—” That is an argument for, “Hey, we should just go right now and hit the bid on everything.”
And I understand that companies can't buy or sell every day based on the stock price, but there is something where, for 2 years, a lot of these companies have traded at public-market discounts. You and I have talked about several. We've seen that when they sell themselves, they go for 50% premiums, right?
So I think the other thing people would push on is, hey, shouldn't these be getting corporate-governance discounts? As you and I have discussed on previous pods and offline, management teams often don't own a lot of stock. They get paid pretty well, and the boards definitely don't own a lot of stock. So, yes, you and I can say, "Hey, all these trade at 6% cap rates, and they should trade at 5% cap rates." But the board and management are never going to realize that. Actually, they're going to take a lot of your money and invest it into the 5% cap rates. So shouldn't we get some type of corporate-governance discount?
Well, I mean, REIT discounts and REIT premiums are kind of—
Yeah, we've certainly talked about that.
Yeah, we certainly talk about that. But I want to reiterate: if you're a scaled REIT—meaning you're above $5 billion—it takes a long time to grow to that size. It takes a long time to do a lot of development—a lot. Give me a publicly traded REIT with an ATM program, and I might surprise you with how quickly I could grow it to $5 billion, Bill.
Well, no, I think it's worth saying that it's a disservice to the investment community if every time a REIT trades cheaply—a $5 billion or $10 billion REIT—management just instantaneously liquidates itself or gets sold to private equity. Candidly, we could disagree.
No, no, I don't disagree. If the stock trades from $20 to $18, it would be kind of silly if the management team instantly said, "Strategic alternatives—we need to sell." That seems a little silly. But I do see a lot of them where the stock trades at $15, several people say, "Hey, NAV is $22 or $24," and management doesn't care.
But they do. But, Andrew, they do care. If you look at Camden, Camden is selling its worst, older-vintage, lower-quality assets to buy back shares. The way they're financing it is that they bought back $50 million in a quarter. For AvalonBay, I'm waiting for Q4. In Q3, they sold some older assets and bought back $50 million. For AvalonBay, I believe the number is $150 million.
A lot of these larger REITs—the larger blue-chip REITs—are doing the right thing from a capital-allocation perspective. At the margin, that incremental dollar is going toward either a brand-new development at a 6% cap rate, which I think is actually a pretty good use because you get a brand-new building, or toward buying back shares. So I'm okay with a lot of these larger REITs not selling themselves but, at the margin, buying back shares.
Well, you know Camden much better than I do. As you said that, I just pulled up the 10-Q, but I'll push back. If I look at net cash from operating activities, it's $630 million in the first 9 months of 2025. They do $50 million of buybacks, $310 million of development and capital improvements, and $334 million of acquisitions of operating properties, which is about half offset by net proceeds from sales of operating properties.
I'm not saying they're not buying any shares back. They bought $50 million, but this is an $11.5 billion company. Fine, they'll do $65 million for the whole year if they keep that pace. It's not nothing, but the incremental dollar is clearly still going to development. I don't know what the acquisition was, but it's still clearly going to growth. If you're saying they're trading at a 6% cap rate and deserve a 5% cap rate, it seems to me that the incremental dollar should be going to share repurchases.
Well, I think this is where we could talk all day about this. I think—
We've got an hour-long podcast. That's what we're doing, baby.
Well, I think it's important that there is a fiduciary duty for these management teams to keep the average age of these properties low, or not let it grow too much over time. You manage a portfolio; you don't want it to constantly get older every year.
Why is that a fiduciary duty?
What's that? Why is that a fiduciary duty?
I think if you do nothing and just sit on your butt and don't recycle capital, every single year the assets get older.
True. But let me take it to the extreme. If the stock traded for $1—forget the per-share price; if the company traded for $1—clearly the incremental dollars shouldn't go there. Shouldn't the company always be looking—I'm not saying let the buildings fall apart—at maintaining a baseline level of maintenance capex? That's not making the buildings younger; it's just a baseline level of maintenance capex. We can't be slumlords and let these buildings fall apart, but after that, shouldn't every dollar be directed toward buybacks?
Why does having buildings that are 8 years old versus 10 years old matter? If our stock is cheap enough, shouldn't we say, "Let's let our buildings age by a year this year, and we'll buy back even more shares"? These buildings can trade below replacement value. Yes, they're depreciable assets and they will run out, but if the stock trades low enough, shouldn't you say, "We can't go replace these buildings. We just need to buy them on the stock market"?
It's the same way I've argued with a lot of pharmaceutical companies. They're like, "What do you want us to do, cut the science to buy back shares?" Unfortunately, the answer is yes. All of your key drugs failed. You raised $500 million to find the cure for cancer, and your stock trades for $250 million. You can't go buy drugs and run this business. The market and the economics are screaming that you need to liquidate this. I'm not saying all of them need to liquidate, but isn't there an incremental argument there?
I understand the buyback argument, and I agree that the buyback can be a higher and better use of capital. But I've also invested in enough REITs where there's been very minimal buying back. I'll tell you a hilarious story about share buybacks.
All of them will be hilarious if it was Liberty Investor Day.
This was like 2019, before COVID. I ran into Mario Gabelli. Mario had a stake in a company called Griffin.
Which was a real sum-of-the-parts land story.
Mario had publicly written a letter pressing them to buy back shares. I had just gotten out of FRP for the first time after Blackstone bought it, and I thought, "Here's another warehouse company trading at a huge discount." It had a complex sum-of-the-parts story. It had this land bank up in Connecticut, and they were doing a really good job selling land in Hartford and using 1031 exchanges to buy land in the Lehigh Valley and develop it.
The CEO was excellent. His name is Michael Ganza, and we still talk today. Griffin was taken private, right? I ran into Mario, and I asked him what he thought. Mario just wanted them to buy back more shares.
If they had bought back more shares when Mario was pushing them to, they would have wound up more heavily weighted in land in Hartford, Connecticut, and office in Hartford, Connecticut, and that entire portfolio would never have evolved. Instead, Michael Gibson sold the land, used 1031 exchanges to move into the Lehigh Valley, and built an incredible modern portfolio. He was getting about a 7% unlevered return, and then rents doubled over time. He picked great markets and built great assets. Then he expanded to Charlotte and other markets.
The point I'm making is that, within a few years, nobody cared. Nobody cared. I was telling people Michael was a great operator and was doing the right thing by recycling capital, while Mario was publicly pushing him to buy back shares. Fast-forward to today: they got bought out by Senue and the government of Singapore for double my cost basis, 3 or 4 years later. In the private market, they've also probably doubled their portfolio.
What was a $250 million enterprise-value company is now probably a $1 billion to $1.5 billion company. All I know is that they had 15 million square feet when they had maybe under 2 million square feet. What I'm saying is that not every solution to an undervalued stock is some form of share buyback. I do hear you, but—
Isn't the thing that jumps out to me that it was the CEO, this brilliant CEO, who made this great move? He was so good that he could sell the assets and, instead of buying undervalued stock, go do this great thing. That's awesome, but—
Andrew, I'm going to stop you there.
I'm going to stop you there. I'll tell you what: there are messages on the investment forums where, instead of saying, “Oh, this is a brilliant CEO. He's doing this,” every value investor was pushing back on me at the time, saying, “Well, the guy's father-in-law is on the board.” SG&A is $7 million because they're doing a lot of development. They're doing a lot of heavy lifting with this transformation.
Every value investor was basically saying, “Why are they not buying back shares?” There were trading-liquidity concerns. There was the sense that they had an opportunity to do really well, but all the really good stuff they were doing in terms of recycling capital was only apparent when they got a new chairman by the name of Gordon DuGan.
Then the stock popped 20% in 1 day, and all of a sudden Michael Gamzon is a really good CEO. Michael Gamon wasn't any less of a CEO before Gordon DuGan joined the board, right?
So what I'm saying is that I think the share buyback makes a ton of sense, and the fact that they're not doing it doesn't mean that you're not going to generate a good return on these equities. I think the tides will turn the other way one day, and people will want to own these assets. When they want to own them, how many times—if you look at silver, or whatever it may be—it's flat, flat, flat. I mean, how—
No, it's funny you're saying it, because I was thinking the other day: for as long as I've been doing this podcast, everyone's been saying, “Gold, whatever.” Yes, if you have a pandemic or pandemonium, it does well, but that's it. And the people who've just been hardcore bulls for years, everything's got to say—
Let me go to a completely different one because I want to get to Alexandria, but I want to get 1 more question here.
Yeah, but before you go on, I just want to say that we've been so hyperfocused on the large cap, right? Let's go through the list. We're not just in large caps, right? We're in a lot of these small caps. Let me just walk through a list of names that have been taken out, both in our portfolio and also that I'm aware of.
You've got Inco that's liquidating; you've got Elme Communities that's liquidating; you've got ROIC, bought by Blackstone, that's in our portfolio; you've got Alexander & Baldwin, bought by Blackstone, that's in our portfolio; Dream Residential, which was a portfolio name of ours; hotel and resort, which our friend Travis also owned, as mentioned. So there's—
Did you see what Hyatt did with Playa?
I know that they bought it, and then they sold the real estate. If you look at the implied value of what they created—the management-fee stream, the OpCo, because if you have a hotel, there's the hotel, which is the real estate, and then there's the OpCo, which is actually operating the hotel—if you look at the implied value of what they created in the OpCo, they got quite the price on Playa.
Yeah. No, I mean, I think any private equity that buys or takes a REIT private—one of the observations I made is that we're in an environment where the public-equity investors could get a 40% bump on a takeout. Say, I don't know, a 25% to 40% bump on a takeout. I think the bar for PE to make money buying public REITs today is so low; it's a really easy game for them.
That was my argument, right? The bar is so low; all should be hitting the bid.
Yeah. I mean, there was a part of me, when I was really happy to hear the news of Alexander & Baldwin getting taken private. That was a 5% portfolio day for us, right? But when I looked at the valuation, there was a part of me that immediately thought, “I may want to go activist on this,” right?
But because I know what Blackstone is going to do on that acquisition, they're going to do really well on it. The only reason I didn't try to make more noise about it is that there are so many other things I could just buy right now and rotate that capital. It's such a target-rich environment that I just keep recycling my capital today.
The history of going activist on deals at nice premiums, unless the deal is crazy conflicted—I would say the history of going activist on well-negotiated deals, even if you can disagree and say, “Hey, I thought this was worth $20 and it was worth $18,” but if it was shopped well and thought through, the go-shop does clear some of it, though there can be issues with it. But the issue with going activist is you really don't want to break a deal. The bird in the hand versus 2 in the bush.
Okay, last question, then we're going to Alexandria.
Lots of different sectors within REITs: industrials, hotels, apartments, office buildings, New York City office buildings. Where are you seeing the most dislocation right now?
Blindly, without adjusting for leverage, I would say probably life science and cold storage are the 2 areas where there's the most amount of dislocation, because you've got Lineage, Americold, and Alexandria—large, large blue-chip REITs—trading at fairly high implied cap rates and fairly low EV-to-EBITDA multiples, right? So I think that's an area where, regardless of the inherent leverage in the company, there's a lot of dislocation.
Outside of that, I would say the way to think about it is that anything that's got 40% to 50% loan-to-value, you're generally going to find a little bit more dislocation. But I think that's a factor of leverage.
I would also say that self-storage is very, very dislocated right now. After Q3 earnings last year, for whatever reason, they all sold off in groups. Then early this year, they kind of found a little bit of a bid. People think that the supply-and-demand dynamic is inflecting, and we love our self-storage exposure right now.
I think a lot of liquidations and a lot of event-driven situations—not on an absolute basis, but on a risk-adjusted basis—are very, very dislocated right now.
Let's call them hiccups recently.
And I have noticed all of them have traded off on the hiccups of one and then another. I've been wondering if it's like, “Hey, there are 10 guys who care,” and the 10 guys all have the same position. When 1 of them has an issue, 1 of the guys says, “I'm just out of all of them.” There's just no natural buyers.
I'm always kind of interested when, like biotech—real estate is another—in general, the issues at 1 company should not bleed over to the issues at another company. They can be related, but if 1 company's Miami real estate and another company's San Francisco self-storage, those are very different things. But you do see, “Hey, the Miami real estate thing disappointed, so the San Francisco self-storage thing is trading down too.” I've definitely seen that. You can tell me if I'm wrong or tell me otherwise, but it's pretty interesting right now.
I think that generally, what we've done—what we've made adjustments to in our portfolio—and this is not investment advice, but in a professionally managed portfolio, I've personally historically run under 100% gross exposure. This is the first time that we ran over 100% gross exposure, call it between 110% and 130%.
Here's the reason why: I can run the gross exposure from 100% to 130% on a lot of these event-driven liquidations. They're literally like, you buy something for $10, and based on the asset sale and the cash on the balance sheet, you're getting half of that back within 1 to 5 months.
I can run that. I'm not afraid to run that because I know that 130% gross exposure could very quickly drop to 120%, 115%, and then 110%. I also have recurring dividends coming in.
No, I'll refer everyone to the legal disclaimer for everything about the gross, but I do hear you. It's one of the tough things, right? A lot of these liquidations declare, “Hey, the stock's at $20,” and they say, “Hey, we're giving $15 back.” They declare the dividend, so now they're legally obligated to pay the dividend. They're paying it in 2 months.
You're like, “Hey, how do I think about this position? If I think ultimately this is going for $25, how do I think about this position? And how do I think about my sizing in relation?” Because if you were running under 100%, then cool, you can just keep it. But if you were 100% invested, it's like, “Hey, if it's at $20, is this a 10% position? Or if the $15 is coming back, should I think about it as a 2.5% position?” If I'm doing that, I'm way under it. It keeps me up at night, though.
I think the answer is that's actually a 2.5% position, but it keeps me up at night.
You and I are thinking about something very similar. I think that’s because we’ve got one or two and a half.
I just go back to when Buffett was running his partnership successfully. What he was targeting was a lot of these event-driven liquidations. John S was a third, but he was also running over 100% gross, and he was using a little bit of leverage.
The wrong way to do these liquidations is to do the New York REIT liquidation from years ago. Every hedge fund was in those trades, and today there are maybe a dozen people like you and me tracking these. They’re not that large and liquid. It’s not like a $10 billion liquidation where all the big funds are there. There’s a certain amount of illiquidity to some of these names.
This is a net-lease office property, right? I’ll disclose that Bill is basically talking about my portfolio right now.
Well, since we’ve talked about a few—and we don’t have to talk about specific ones—there are 5 liquidations out there in real estate, and you’ve hit 2 of them. As I said, a lot of these have had disappointing numbers, right?
And look, price is everything. You can adjust the price. But when I look at these, a lot of them have had disappointing numbers, and for some of them, I think and hope that has presented an opportunity for me. When you look at these and see the disappointing numbers, a famous thing with liquidations was, “Hey, a company comes out and says, ‘We’d like to liquidate. We think we can give our shareholders $20 to $21 back per share.’”
The famous thing with liquidations was, “Hey, that $20 low end is so heavily lawyered up. It’s so contingent. Come hell or high water, they’re probably going to hit the $20 per share, right?” Now we’ve seen a few liquidations where they’ve said, “Hey, we’re going to do $20,” and then they come out and say, “Actually, when we started putting the properties on the market and getting some bids, it seems like we’re going to do $19.50 on the low end.”
So, are you reading anything into that? I think the only thing I would read into it, Andrew, is that it’s really important for us to have a clear benchmark. If we get in, we need to see a MOIC—at least an equity multiple reflecting 20% upside. We’ll generally try to underwrite to 20% upside. If we put up that capital and don’t see at least 20% upside, our general thinking is that if we underwrite to 20% upside and get some disappointment, exactly what you said—$20 becomes $19.50—that 2.5% or 3% disappointment cuts that back down from 1.22 to 1.15 or 1.17. That’s how we’re trying to control it.
From a market perspective, particularly if we’re talking about net-lease office properties, I think there is some truth to that. The assets with longer lease terms and assets that are easier to underwrite were sold early on. What you have left are office assets with very short-term lease terms and likely lower quality. The stuff that’s good for redevelopment as multifamily has been picked over. So I think there is some truth that, in a liquidation, the easier-to-value, better assets get picked over, and toward the end you get stuck with a little bit.
And again, I’ll disclose that I’ve got a position in one where I also wonder if you run into the issues with liquidations where it happens a lot. The management team, I don’t think they had much incentive, and I don’t think they cared that much about value maximization, because I look at some of the prices of the properties they sold and I think everything you’re saying is correct: this is a low-quality property.
But they’ve sold a few properties where I look at them and think, “Hey, it had 8 years left on the lease, and you sold it.” I’m just going to pull out a number: $10 million per year, so $80 million of rent remaining. Obviously, there are some expenses and some time discounting, but you sold that property for $80 million. So you basically said there was no terminal value left after the lease.
I wonder if it’s a case where, if you and I had been in there, had a 15% position in the equity, and were in charge of the sale, we would have said, “Absolutely not. If you want to pay us $80 million, we’re going to hold this thing, manage it, and sell it for scraps at the end. But you’ve got to pay us $85 million or $90 million, something on top.” I wonder if you have a management team that doesn’t own anything and is getting a very small management fee in W. P. Carey. I wonder if they were just like, “Forget it. The first bid that seems reasonable—take it. Don’t negotiate.” I do wonder if part of that has happened there.
I mean, Andrew was smiling a little bit, right? Because there’s the counterexample of the New York REIT liquidation. They decided to hold on to One Worldwide Plaza, and, lo and behold, they said, “We’ll do the value-add.” They partnered with SL Green, and, lo and behold, they put that into a non-traded stub, and it doesn’t trade.
Guess what? They waited a few years, COVID happened, and they were going to spruce up the lobby. They were going to do some value-adds to try to extract more value from it. I think the equity was totally wiped out on that, right?
I think there is some truth to what you said, and it makes a lot of sense. But shareholders also criticize management teams for moving too slowly, and they made a decision: they’re going to move fast and sell these assets.
Yeah, I think there is some under-monetization of assets. I do think so. We talked to some bidders—some bidders who won some of these auctions. When you look at a lot of these assets, you’re like, “Oh, that price looks low, right?” But if you actually talk to people, you’re like, “Oh, that had asbestos in it,” or, “It’s hard to…”
I know one that sold for $1 million less than I thought because there was an asbestos liability. Absolutely.
We’re like, “Oh, there’s one asset that sold, right? That price kind of seems low.” There’s a weird quirk in there where the tenant could back out of the lease, even though there are 5 years left on it. The tenant could have this really weird clause where they could potentially back out of a portion of it. If you’re a buyer, you really have to have a strong conviction that they’re not going to. I think it eliminates a certain number of bidders.
So, out of all that, answering the question: not that.
No, that was great. Let me ask you another one that I’ve been thinking about a little bit. There are 2 names I’m thinking about in particular; if you say them, I’ll give disclosures. As I said at the beginning, the rule of thumb in liquidations has been that they come out with the low end, right? The low end is like, “An asteroid hits the Earth. It turns out our chief legal officer stole $50,000 from us.” All this sort of stuff—that’s the low end. Every contingency is baked in there.
We’ve seen a few that have come in low, and I’ve wondered about this. When some of these have had to adjust down, I’ve seen a lot of people say, “This is why you want to be crazy conservative in the liquidation, because you’re going to get hit with shareholder lawsuits if you come in low.”
My 2 questions are: Do you think these companies actually weren’t being conservative when they gave these numbers, or do you think they just came out into worse environments? The second question, which I have some thoughts on, is that everybody says, “You go conservative because there’s no incentive to go aggressive. You get sued if you go aggressive.” Has anybody actually ever been sued for saying, “Hey, we think we’re going to do $20 in liquidation,” and then they come in at $19.70? Anyone can file, but has anyone ever actually had to pay out on that?
I don’t remember anyone having to pay out on that. Also, keep in mind, Andrew, I think there’s a big difference between saying your low end is $20 and winding up revising it down to $19.50. If you come out and say the low end is $20 and now you’re revising it down to $17, I think you’re a lot more likely to get sued. The magnitude of the revision matters a lot.
You’re right, though. If you come out and say, “We’re liquidating, we have $20, and we’re declaring a $15-per-share dividend right now. The stub is $5,” and you take that from $20 to $19.50 on the stub, you actually did a big—
So, just one more thing, but I do completely agree with you.
Yeah. No, I think it’s really interesting because, Andrew, you and I have been investing for a decade. When was the last time you could recall this many liquidations within 1 sector?
No. Well, come on over to the [laughter] biotech world, Bill.
No, I’m saying over there.
Yeah. Obviously, biotech has a ton of liquidation, right? But I don’t remember having 5 REITs simultaneously be in liquidation.
And look, I think it’s an interesting counterexample to you and I at the start. My pushback on the 6-to-5—one of them was, I kept saying, “Corporate governance, corporate governance, corporate governance.” And I do think this is interesting: You’ve had multiple ones liquidate now. Were some of them under pressure from activists? Probably, in hindsight. Do I think these liquidations are probably inefficient versus the “Bill, just sell the whole portfolio to Blackstone” route?
Also, probably. But I do think it’s interesting. You’ve had 5, and a lot of what you said earlier was, hey, these $5 billion-plus-scale market-cap REITs—and those aren’t actually the ones I really have issues with. It is these: Hey, we’re a $700 million market-cap REIT with a billion of EV. Well, cool. You’re spending $20 million bucks a year to be public. How are you going to outrun that drag and create value? I think the answer is no. And if they’re all liquidating, I think it’s just very interesting to me.
Yeah. No, this is—I mean, I keep saying that this is the most interesting REIT environment, and this was a great example of that, right? 5 liquidations simultaneously, and I will trade them. So, we’ve been very, very tactical. We’ve been in and out. I was up on Christmas Eve, trading AMCO because they closed a deal, right? That was midday; the news came out. It’s a very interesting space, and I haven’t been this active in event-driven situations within the REIT space in a really long time.
Man, Bill, I’ve got so much to talk to you about, but I actually have a hard stop here. So we’re going to have to wrap it up. Here are the 2 issues. A, I have a natural next question, and we’re just going to have to stop for the hard stop. And B, I’ve got 14 questions I have written on Alexandria’s Group that we’re never going to be able to hit. So, maybe we’ll schedule a quick follow-up appointment, and we’ll both wear Yet Another Value Podcast.
Well, and I do—do you want to do this? I mean, if we’ve got, like, 3 more minutes before the hard stop, right?
It’s a right-now hard stop. It’s like a 30-second hard stop. But I love having you on. This was a really fun conversation. We can keep this going in the very near future, either offline or on the podcast. So, Bill Chen, it’s been awesome. You might be on the Mount Rushmore if we had another Yet Another Value Podcast guest. But I really have to hop. We’ll talk to you later, buddy.
Talk to you soon. Yep.