The following are research reports written by Magnolia Realty Advisors’ CIO Mitchell Bollinger:
SLG: This is what Free Money Looks Like : Addresses the large disconnect between the implied cap rate of SLG’s stock and the cap rate SLG has been selling its buildings for.
Blackstone’s Real Estate Choices : Blackstone has raised a private equity real estate fund and this paper makes a case that the buyout of an existing publicly traded REIT that owns properties in New York City should be a prime target.
How do Office REITs Perform During Market Volatility? : This paper compares the growth rate of property level NOI of several REITs to growth rate of earnings of S&P 500 companies during the Great Recession and shows that property level NOI was significantly less affected during the Great Recession than the earnings of S&P 500 companies.
Interpreting REIT stats : The paper draws attention to the metrics that Magnolia Realty Advisors believes are the most important for valuing a REIT including the same store cash NOI growth and the amount of capital a REIT spends on building capital, tenant improvements and leasing commissions.
Mr Market Needs to Check his Math : This paper draws attention to the fact that the leverage employed by REITs was not a significant factor in determining the equity drawdown during the concentrated period of negative returns during the second half of August, 2015. This strongly suggests that the REIT market does a poor job of pricing REITs as leverage should have been a significant factor.
NYC REIT Value : Addresses the pricing disparity between recent New York City office sale comps and publicly traded REITs that own a large percentage of their properties in New York City.
REIT Market Insanity! : This article addresses the recent acquisitions by Highwoods and how if these properties grow their cash NOI and use capital at Highsooes’ historical trend, the properties are unlikely to make a total return above their cost of debt. Conversely Paramount Group acquired a partial ownership interest in a building at a capitalization rate that is much higher than recent comps in New York City. The market appeared to prefer the Parkway acquisitions to the acquisition of Paramount Group.
The REIT Emperor has no clothes : This article addresses Parkway’s recent acquisition spree and how if the NOI growth and capital utilization on these newly acquired buildings continues at Parkway’s historical trend, then these newly acquired properties will be unlikely to generate a total return above their cost of debt.
You must be Highwoods : This paper addresses the recent acquisitions by Highwoods and observes that if the buildings grow their cash NOI and utilize capital at Highwoods’ historical trend, these newly acquired properties will be unlikely to generate a total return above their cost of debt.
Does employment growth matter? : This paper explores the connection between employment growth in markets and the total return for office investments.
Beware the 15 Percent Targeted Return : This paper addresses the disconnect between what real estate investors target for a return and the actual returns they achieve.