As If On Cue, Goldman Upgrades REITs As It Pumps Commerical Real Estate Offerings

Reggie Middleton's picture

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Anonymous's picture

Accuracy is important, so I commend you for taking some more time to go over the numbers.

If you need help, posting your valuation assumptions would be a good place to start. At the moment, I believe that the discount rate on a portfolio basis for regional malls would be in the 9% range, however, each asset may range from 7% up to 10% for the dogs.

The mall owners are really good at capturing increases in tenant sales through percentage rent clauses. Significant portions of their income is from % rent as sales have continued to grow, up until now. % rent can be up to half of the income from a mall, especially for the older anchor deals that have low base rents.

Some malls are offering rebates back to select tenants to keep them going. We have not seen the volume of transactions that we thought would see this year. 2010 seems to be shaping up as a more active year.

Reggie Middleton's picture

There are two analysts working on it and one of them made a double counting error on a subset of the unconsolidated properties that got past me and the QC person. There was a changing of the guard with my analysts and I'm pissed that it happened but mistakes do happen, no one is perferct, and it was only out for a few hours. I have the reworked set now, and am giving it a once over. The data input error did not cause a material change in the valuation nor the investment thesis - but it was a material error nonetheless. Trust me, my stuff is heads and shoulders over what many institutions actually consume from the sell side, many of which are paying subscribers.

The assumptions are available, but I do not distribute them publicly (you have to pay for something and there are at least two man months each of work that go into building these models). We canvassed brokers, the REITs themselves (who are generally quite uncooperative), and databases that are popularly used. When in doubt, I always err to the conservative side. Rates used are more optimistic than you suggested (in many cases) and we add premiums to the rent figures when in doubt. I always choose to be conservative. Each and every single property is modeled individually.

Anonymous's picture

Geithner and Obama - Blankfien's Bitches

Joanito's picture

fascinating...  Amazing that they didn't put any ammunition manufacturers on their conviction buy lists a few weeks back, especially with the foreknowledge that GS was starting their glocks for investment bankers campaign.  Those ammunition guys are actually earning a windfall.  But I guess that investing based on funamentally positive earnings and not subsidies and underwriting chicanery is dead and buried....   for now

TheGoodDoctor's picture

Cramer just chatised Goldman for doing a similar thing with Dole last night on his show. Basically doing an IPO and then coming out with a Neutral rating on the stock.

E Thomas St.'s picture

After Dubai last week REITs have been on an absolute tear. It's kind of disheartening too because I was hoping that would be an inflection point to go short but nope, not this time.

Gilgamesh's picture

Dear Lord (Blankfein), please let the REITs end red on this here day of thy upgrade.


E Thomas St.'s picture

Haha, I'd send that holiday card.