Someone maybe help me parse this stuff? SEVN

Crash

Seven Hills REIT out of Newton, a Boston suburb.
https://sevnreit.com/investment-strategy/default.aspx#mandate

If I'm understanding the lingo, it just sounds different from the PSTL REIT I own. (I do not yet own SEVN.)
There is phrasing on the website about their investments/loans being "secured" by some particular other properties. The yield on this puppy is OVER 12%. That's nuts, eh? There are 2 Analyst ratings. Just two, and both rate the stock as a BUY.

Where does this sort of outfit fall on the risk spectrum?
Incidentally, I bumped into an article mentioning PSTL as a possible takeover target. Hmmmmm...

yogibearbull

SEVN is a mREIT that has been around for a while (2006- ). It may be showing up on screens for high YTD, but much of that came in early-January. It does have high distributions, as is typical of mREITs (highly leveraged bags of MBS). Otherwise, it has been a disaster as much of the distribution is from capital (eroding NAV). Potential swings are from rate speculations. It's VERY RISKY.

PSTL is an office REIT focusing on postal properties. It has genuine rental income and potential property appreciation. So, it is quite different from SEVN.

I searched the web for rumors on SEVN and PSTL, but I found only the OP article on that, nothing else. Are you starting those rumors? (-:)

rforno

Agree w/yogi's assessment.

If you were hell-bent on playing it for some reason, at least consider an options collar if done at-cost or for a credit so you hopefully can shift your risk on the position to someone else.

... but there are many other opportunities that are safer and more SWAN-ny tha tI wouldn't feel any need to touch this thing....

Crash

@yogibearbull. @rforno.

I'm much obliged for your responses! Ya, SEVN does not need any of my money.
PSTL: (Seeking Alpha, from last May:)
"...At Portfolio Income Solutions we maintain an archive of historical Tax Treatment of REIT Dividends for more than 130 REITs. A look at Postal Realty’s page describes that ~35% of the dividend has been characterized as a Return of Capital (ROC) since its IPO. ROC is not currently taxable as income, so the current year’s tax liability is lower than that of an ordinary dividend. No tax on the ROC is due until the shares are sold. A retiree living on dividend income enjoys a sense of higher current cash flow....

The mention of PSTL as a possible takeover taget was from a Seeking Alpha article I read over this long week-end. Of course, I can't find it, now.

msf

Some more background info:

Intro piece on mREITS, including basic mechanics and risks:
https://money.usnews.com/investing/real-estate-investments/articles/how-to-invest-in-mortgate-reits

[Head of income equities at TCW, Iman] Brivanlou says: "Dividend yields are a direct function of the riskiness of the underlying collateral as well as the amount of leverage employed by the mREIT, so we would urge caution and increased scrutiny if an mREIT is offering an unusually high yield." ...

"Most mREITs employ leverage to produce their returns," Brivanlou says. "Without leverage these entities could not operate profitably, which makes them dependent on a stable source of funding."

The two main parts of the real estate market in which SEVN invest are middle market and transitional. Each is a section of the real estate market where one hopes to get above average returns with all that implies for risk. Background sources below are from companies working in these markets (thus interested in promoting them).

Middle market: https://www.primealpha.com/middle-market-real-estate-2018-06
Transitional: https://lev.co/blog/financing/transitional-real-estate/

For a sense of rates associated with middle market, see p. 9 on Morgan Stanley's 3Q2023 report on floating rate loans. It shows that average coupons on middle market loans are higher than BBB, BB, and B rated leveraged floating rate leveraged loans, and only slightly higher than coupons on CCC rated loans. CCC's 19.4% YTW is way above market average; middle market at 13.6% is next highest, still well above market average.
https://www.morganstanley.com/im/publication/insights/articles/article_floatingrateloanmarketmonitor_q32023.pdf

To refine yogi's comment about most of the YTD return coming from January, SEVN gave back 3/4 of that gain between March and May, and then gained a similar amount from May to July.
https://stockcharts.com/h-perf/ui?s=SEVN&compare=&id=p67735641417

Over the past five years, its total return has been almost exactly zero. I'd call that "flat", except that its volatility is off the scale. See this comparison with JNK:
https://stockcharts.com/h-perf/ui?s=SEVN&compare=JNK&id=p02208364318

Crash

+1. I love to learn. Thank you!

BaluBalu

My recent superior experience dealing with USPS vs FedEx & UPS caused me to read posts about PSTL. Customer service comments about UPS are horrifying; I read to see if my experience is an outlier. UPS stock is doing alright relative to its service. PSTL total return is flat for the year. Tempted to take a flyer. Any current owners of PSTL?

Crash

BaluBalu said:

My recent superior experience dealing with USPS vs FedEx & UPS caused me to read posts about PSTL. Customer service comments about UPS are horrifying; I read to see if my experience is an outlier. UPS stock is doing alright relative to its service. PSTL total return is flat for the year. Tempted to take a flyer. Any current owners of PSTL?

Yes, I'm still in PSTL. It certainly is a niche item. I see positive evaluation numbers. (RSI, P/B, Price to Cash Flow, etc...) I'm thinking that when rates come down, it will help the stock, along with the rest of the RE industry. In the meantime, there is a remarkable dividend: 6.6%.
https://www.stockrover.com/world/insight/summary/Quotes/PSTL
https://www.morningstar.com/stocks/XNYS/PSTL/quote
https://postalrealtytrust.com/
https://www.barrons.com/market-data/stocks/pstl/research-ratings?mod=quotes#subnav
https://www.tipranks.com/stocks/pstl/forecast

larryB

@Crash. We all know you are into your PSTL but according to Portfolio Visualizer it has a CAGR of 1.65 % 1/20 thru 12/23. It also has a higher standard dev than the S&P 500 as well as a higher Max Drawdown. What’s the attraction?

Derf

The price of stamps keep rising !!

Crash

larryB said:

@Crash. We all know you are into your PSTL but according to Portfolio Visualizer it has a CAGR of 1.65 % 1/20 thru 12/23. It also has a higher standard dev than the S&P 500 as well as a higher Max Drawdown. What’s the attraction?

I confess that I never have used a portfolio visualizer. As for the CAGR: that is definitely food for thought. It shows a stinky poopy RoR, true. I must chew and digest your remark. But we are close enough to the next dividend so that I don't want to bail on it right away. You do indeed leave me doubting whether I should remain invested in PSTL. And yet, I look at the numbers and the stars on Stock Rover, and it looks like a great prospect. The P/E is not the best metric to look at when it comes to Real Estate. Thank you.

I chose it just to have some R.E. in the portfolio.

larryB

I got curious about the bigger issue of post office real estate and it’s clear that the US Post Office is consolidating and closing lots of offices. Is this good for PSTL? I don’t know. Portfolio Visualizer is a wonderful tool you might want to become familiar with.

Crash

+1.