We're nearing the three quarters' mark for 2023. Summer's (almost) over, football season has kicked off and pumpkin-flavored beverages are back. Where did the time go? More importantly, where do we want to be invested for the rest of the year?
I want some exposure to commercial real estate.
Like some others, I'm a bit nervous about the state of the economy, which should be good for bonds and bad for risk assets. So I'm looking for risk assets that haven't gotten ahead of themselves. For assets, that even some bad news might not push them down much and there is a potential for a rally.
I own things such as regional banks (SPDR S&P Regional Banking ETF (KRE) ) and have several real estate-linked funds (KKR Real Estate Finance Trust (KREF) , Principal Real Estate Income Fund (PGZ) , and Vanguard Real Estate Index Fund (VNQ) ) and am sitting on 70% gains on a specific company I bought back in April.
Some of the outsized returns might be gone, but I like and am comfortable adding to (BXMT) .
BXMT is Blackstone Mortgage Trust Inc., a real estate investment trust, which primarily originates and purchases senior mortgage loans collateralized by properties located in the U.S. and Europe.
My theory on commercial real estate in general is three-fold:
1. Overall, people have gotten far too pessimistic and too underweight and even short this sector.
2. Working from the office is getting traction as more companies pressure employees to work and as jobs get more difficult to source.
3. Yes, there is risk, loan costs will go up, valuations, in some areas are down, but these things take time to play out and the market seems overly negative (even where negativity is deserved).
I like BXMT's dividend yield of just over 10%. Getting paid to wait.
We are barely above levels we saw during Covid. There was an incredible amount of uncertainty then. Rates were much lower and some serious problems hadn't been exposed (unlike now), but I like where we are for some downside protection.
Can we get back to levels when the Fed first started hiking? Possibly. Above that? I'm not sure, but we are getting paid to wait, in uncertain times.
I don't think we get another 35% return (like we've had since I bought on April 25) but I like this stock a lot and will be buying any dips.
