Received today a notification in the mail about the financial stability of one of my investments. Specifically it is a REIT, a Real Estate Investment Trust. A company that owns a part of something (land, buildings, etc.) that makes money off of it either through mortgages, selling, renting, or leasing it out. All the profit they make is taxed...unless they pay out a certain amount as dividends to their shareholders.
My REIT dividend dropped by $1.45 per share to $0.05 per share in a 3 month span, or one financial quarter. What happened? Well, they sold some investments in Maryland and made a huge profit after making very little for a while. This meant they had to pay out big dividends on their profits. The next dividend is a now a nickle per share because there's no more profit from the sell.
The problem? They sold rental property, in Maryland. You don't sell rental property if you are a REIT, it is steady income and thus ensures the financial health of your company. Even in hard times, you hold on for future hope. Unless, of course, there's no income in the foreseeable future, ever. REIT's often plan for this, they call it Uncollectible Debt, and they have a reserve to deal with it. This one Uncollectible Debt became such that it drained my REIT's cash reserves and they sold it just to get rid of it, not to recoup their losses.
Wonder what the fuck happened in Maryland.
Interesting. It smells like management shenanigans?
Have kids doing very well in Silver Springs Md, they tell me everything is open and people are out and about, housing prices are quite high and the neighborhood is full up with other people just like them - it sounds booming.
Why would the REIT sell stable rentals in a good market like that?
Anybody who has been alive more than 25 years has lost money on something, it happens. The stories I could tell ...
They weren't making any money and it drained the coffers to the point they bundled it with other properties and sold them. I wonder why. They have properties in South New York, Northern New Jersey, and Maryland. Woke policies, perhaps?
On r/wallstreetbets, they're speculating that REITs are going to suffer a blood bath next year as properties flood the market due to increased mortgage rates and rental prices. There's already been a severe reduction in buying by both funds and private owners.
Why don't you ask them?
blackrock