From a small northwestern observatory…

Finance and economics generally focused on real estate

Archive for June 2021

Monday, Monday…

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Washington Prime Group (WPG) filed for Chapter 11 reorganization late last evening, saying that COVID-19, “created significant challenges.” The stock dropped 55% in early trading this morning (although had rebounded somewhat by mid-day), and is down almost 60% on the year.

This apparently came as a bit of a surprise to the market. While equity REITs in general had a down year in 2020 (-5.12%), retail REITS performed the worst of any sector, down 25.18% overall, with regional malls leading the way at negative 37.15%. However, as of the end of the 1st quarter (the most recent data available to us), retail REITs were back on track, having clawed back most of their 2020 losses. (Overall, US Equity REITS had a total return of 8.32% in the first quarter, 2021.) WPG had a lackluster year, and from Dec 31 to May 28 was down 56%. However, it was in a rebound mode in June, having tripled in price by the beginning of last week. No analysts were rating WPG as a “buy”, but two were rating it a “hold” as of two weeks ago. Intriguingly, since the first of the year, numerous class-action suits had been filed against WPG, alleging they concealed the true financial picture from shareholders. Notably, as of their annual report in March, they had disclosed some “potential deleveraging or restructuring transactions” with certain holders of senior notes.

WPG owns about 100 shopping malls throughout the US., but mostly east of the Mississippi. They invest in a variety of retail malls, including both open-air and enclosed malls. Major tenants include Signet Jewelers, Dick’s Sporting Goods, Footlocker, Jared’s, Kay Jewelers, and ales Jewelers. As of their annual report, 59 stores comprising 4% of total rents were on their high credit watch list.

At Greenfield, in our in-house REIT fund “ACCRE”, we have purposely avoided long positions in retail since the beginning of the pandemic. For those of you tracking ACCRE, I might note that as of mid-day today. ACCRE was up 7.5% for the month, compared to less than 1% for the S&P 500.

As always, if you have any questions regarding real estate in general or your real estate investments, please don’t hesitate to reach out.


Written by johnkilpatrick

June 14, 2021 at 11:57 am

Posted in Uncategorized

ACCRE Report, May, 2021

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We have mixed emotions when ACCRE beats the S&P 500. ACCRE is a diversifying adjunct to a well rounded portfolio. Hence, we want to see both ACCRE and the broader index do well each month. After a rocky year, ACCRE put together two great months — April we were up 2.94% followed by a 3.25% return in May. While the broad index had a super April (up 5.62%) it was flat in May, only up 0.55%. The global real estate metric has been positive for four months in a row, most likely emblematic of the continued positive sentiment for real estate as the economy gets back on its feet.

A dollar invested in ACCRE at the inception would be worth $1.61 today. Of course, that same dollar invested in the S&P 500 would be worth $1.78, having enjoyed the great “bull” run that started about 14 months ago. If you had invested that dollar in the S&P Global Real Estate index, you’d have $1.34 today. ACCRE is a carefully curated fund of REITS, with a goal of achieving liquidity, diversification, and superior returns.

Thanks also to the 14-month bull market, the risk-adjusted returns for the S&P continue to dominate, as evidenced by the Sharpe Ratio, as shown below. Again, the Sharpe Ratio measures the average daily returns (daily return minus the T-bill rate) divided by the standard deviation of those returns. In short, it tells you how much return you get for every unit of risk. In long bull markets, with little variation over time, the Sharpe Ratio is expected to be highly positive, as we see below. The correlation between ACCRE and the S&P over time is about 50%. This is our goal — to move in more-or-less the same direction but to offer some portfolio attenuation via diversification.

S&P 500
Average Daily Excess Return0.0494%
Standard Deviation1.2908%
Sharpe Ratio3.8296%
Excess Return0.0389%
Standard Deviation1.1947%
Sharpe Ratio3.2572%
Correlation (life of the fund)51.8333%
Correlation (month of May, 2021)43.0532%
Accre Metrics as of May 28, 2021

As always, if you have any questions about ACCRE, about REIT investing, or real estate investing in general, please drop us a note. We’re always glad to hear from you!

John A. Kilpatrick, Ph.D., MAI —

Written by johnkilpatrick

June 1, 2021 at 10:43 am

Posted in Uncategorized

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