Homebuyers who buy a unit within a housing cooperative, or co-op for short, are purchasing shares in a corporation. When a buyer becomes a shareholder in a co-op, they are also granted a proprietary lease that gives them the legal right to occupy their particular unit within the co-op community.
What is a proprietary lease?
Also referred to as an occupancy agreement, a proprietary lease is what gives a co-op shareholder the right to occupy their home.
When you buy a co-op, you’re not purchasing what’s referred to as “real property.” The corporation owns the property — typically an apartment building or other residential development — and you own a stake in that corporation. In place of a deed, co-op owners are granted a set number of shares in the corporation, and a proprietary lease to occupy their unit.
The proprietary lease governs all aspects of the relationship between the co-op and each shareholder. It spells out the rights and privileges associated with ownership of the unit, including:
- Who may occupy the unit
- Total monthly maintenance charges (similar to HOA dues)
- Rules governing the sale of the shares in the co-op
- A shareholder’s right to mortgage
- What constitutes a default by a shareholder
- Who is responsible for the maintenance and repair of a unit
- The co-op’s right to terminate the lease
Proprietary lease example
One of the things a proprietary lease governs is who is responsible for fixing problems within a co-op building. For example, if you own a co-op and a pipe bursts inside your bathroom wall, it is generally the co-op’s responsibility to open the wall and fix the pipe. This is different from owning a single-family home, in which you as the owner would be responsible for repairs.
However, the co-op will not necessarily repair or replace anything outside the wall once the pipe is fixed. It will only return the wall to a paintable surface. If you have expensive wallpaper, for example, you will likely have to pay to replace it.
How do proprietary leases work?
A proprietary lease is considered to be a form of residential lease like any other. As a result, the relationship between the co-op and its shareholders is governed by the laws applicable to residential leases: landlord-tenant law.
Of course, before you sign a proprietary lease you’ll need to have your financing in place. Co-op mortgages are slightly different from conventional mortgages, in which the property serves as collateral for the loan. With a cooperative mortgage, the shares in the co-op corporation and the proprietary lease are the collateral. They are typically not as valuable to the lender, because they can’t be sold as easily as actual property.
This is due to the way co-ops are purchased: It’s not as simple as just ponying up the asking price. Co-ops tend to be tight-knit communities, and before being allowed to buy into one, prospective buyers must be vetted by the co-op’s board of directors. They will review a buyer’s finances — and sometimes much more — as well as interview them before deciding whether to permit them to become a shareholder. Because the board needs to keep the corporation solvent, a certain financial threshold, usually including a minimum gross income, is required for prospective buyers. A co-op’s board members are typically volunteer shareholders who are voted on by their fellow shareholders to run the corporation, which places them in the unique legal position of being, in a sense, both landlords and tenants.
Proprietary leases vs. bylaws
Proprietary leases and bylaws both dictate the rules of the co-op. Bylaws focus on rules of the property, like what you can and can’t leave in common areas. Proprietary leases focus on the agreement between the shareholder/tenant and the co-op; they grant rights to use and occupy the property.
Co-ops vs. other types of real estate
Co-ops have several important differences from other types of real estate. The co-op board governs all, and can impose significant restrictions in their bylaws. For example, they can dictate whether or not you can sublet your unit, and who you can sell your property to.
A co-op and a condo may have very similar physical structures. Co-ops usually are cheaper to buy, but they aren’t eligible for low down payment mortgages. They may also have higher monthly fees, which usually include utilities.
The benefits of co-op living include a sense of community in which you know your neighbors (at least by sight) and know that the building is well-managed and everyone is following an agreed-upon set of rules. There won’t be an Airbnb next-door with strangers in and out all the time, for example, or an all-night dance party, or a marching band practicing upstairs. Co-op apartment buildings can feel safer than condo buildings for these reasons, especially in densely populated urban areas — like New York City, where co-ops are extremely common.
Bottom line
A proprietary lease is a special type of lease used for co-ops. Because co-op owners own shares in the overall corporation, rather than owning their units outright as property, the proprietary lease is what gives them the legal right to live in their unit.
The Ministry of Defence has been forced to apologise after army families were left enduring the “unacceptable” standards of housing contractors who were given management deals worth £650m six months ago.
The contracts had been lauded by the defence minister Leo Docherty in April but a letter was sent to families last week admitting to multiple failures amid claims of squalid and even dangerous accommodation.
Complaints posted on public forums such as Facebook included holes in the exterior walls of the bedrooms of children, front doors without locks and unattended water leaks and cases of mould.
The contracts covering 49,000 homes were supposed to bring an end to decades of sub-standard living conditions said to be driving people out of the service.
David Bowden, the director of accommodation of the MoD’s defence infrastructure organisation (DIO), wrote to families on Wednesday admitting they were being failed despite government promises.
“I want to apologise to you for the unacceptable levels of service you have received under the new accommodation contracts and for the disruption and inconvenience these failures have caused you,” Bowden wrote. “These contracts were designed firmly with families in mind and will deliver significant benefits for families. However, it is clear that the service you have received so far is well below what you have a right to expect.”
Bowden suggested in his letter that soldiers and their families were arriving in homes that were not ready for them and that response times for maintenance appointments were being missed. Complaints were not being dealt with quickly and repair jobs were being drawn out.
The development highlights the discrepancy between praise for the armed services during the Queen’s funeral and the low standards of care army families are often forced to endure.
The state of the accommodation for the armed services has long been an issue of concern, exacerbated by a decision by the Conservative defence secretary Michael Portillo 26 years ago that has left the government paying for the upkeep of MoD properties but unable to exploit the increase in their value.
In 1996, the MoD sold 57,400 properties used by soldiers to Annington Homes, a company now owned by funds owned by Terra Firma, the private equity company of which billionaire Guy Hands is a major investor, for £1.7bn and then leased them back at a discount over a 200-year lease.
In 2018, the National Audit Office said the deal had cost the taxpayer up to £4.6bn due to the huge increase in the value of the property sold. The UK government is looking to take back ownership.
The main £144m national management contract for housing allocations, repairs and maintenance was awarded to Pinnacle Group last year. It is responsible for providing a single point of contact for families.
The company’s chief executive is Peregrine Lloyd, a former City fund manager who moved into the outsourcing sector in the 1990s. The company’s accounts record Pinnacle’s highest paid director, who is not named, as earning £320,000 in 2021, up from £291,000 the previous year.
The year ending March 2022 was said in the company’s accounts to be a “landmark”, with budget targets exceeded and agreement on the government contract reached in what was described as a “significant step forward” for the firm.
Regional maintenance contracts worth £506m were also handed to Amey Community and Vivo Defence under Pinnacle. The defence arm of Amey was previously run by Amanda Fisher, who boasted on becoming chief executive of the parent company in 2021 of making it profitable. The highest paid director at Amey earned £732,000 in 2000 before Fisher took the top job.
Vivo Defence, a 50/50 partnership between contractor Serco and the facilities management company Equans, is yet to file accounts.
Collette Musgrave, the chief executive of the Army Families Federation, which represents the interests of those in the armed forces, said: “We recognise that the poor level of service is incredibly disappointing and frustrating for army families. We have been raising their concerns at the highest levels to push for rapid and significant improvements.
“DIO may now have officially recognised the issues we have been flagging to them, but what families want to see is real and immediate improvements that deliver the service they were promised, and give them confidence that their homes are safe and secure. We hope that this acknowledgement is a first step in that direction.”
In a joint statement, Pinnacle, Amey and Vivo Defence apologised for the levels of service. They said: “The new FDIS contracts are large and complex with service delivery spread among three Defence Infrastructure Organisation supplier partners.
“Over the last six months we have been working hard with DIO to mobilise the contracts. Core to this is putting armed forces families first and ensuring a reliable service for personnel.
“We know that the transition period is taking longer than anticipated and that some families have not received the experience they deserve. We are sorry about this, and we are working hard to deliver the service standards to which we all aspire.”
Amazon’s Prime Early Access Sale — which takes place from Oct. 11-12 — is about a week away, and it will give Prime members a chance to shop discounts on everything from tech and kitchen appliances to pet supplies and more. Experts told us that October’s event — the first time Amazon has hosted a second Prime Day-esque event — is positioned to kickstart the holiday shopping season — in recent years, retailers have started offering deals earlier in the fall to give people more time to buy gifts. And this year especially, shoppers are changing their holiday shopping habits due to inflation and relying on sales to buy presents for loved ones: According to a survey conducted by RetailMeNot, 52% of shoppers say they’ll shop pre-Black Friday sales in October with finding the best deals in mind as inflation impacts their holiday shopping budgets.
SKIP AHEAD What to buy during Prime Day | What not to buy during Prime Day
To help you prepare to take advantage of savings during the Prime Early Access Sale, Select talked to experts about what’s worth buying and what to skip. We also rounded up a handful of tips for shopping the Prime Day-esque sale, many of which can be applied to competitor sales happening around the same time (like Target’s Deal Days event).
What to shop for on Amazon Prime Day
Similar to Amazon Prime Day, experts said there should be a mix of items across all categories on sale during the Prime Early Access Sale. But because Amazon’s October mega sale essentially kicks off the holiday shopping season, expect to see a significant portion of deals centered around gifts, said Vipin Porwal, founder and consumer savings expert at browser cashback extension Smarty. Typical holiday gifts include the newest toys, speakers, headphones and TVs, said Kristin McGrath, shopping expert at RetailMeNot. And while deals on these types of products could be deeper during Black Friday and Cyber Monday, “if there is a must-have item on your list, buy it during this sale and don’t risk it running out of stock,” McGrath advised. She said this is especially important when it comes to apparel and accessories — sizes and colors will sell out earlier in the season, and they may not be restocked. Experts said we may see holiday decor like artificial christmas trees and stocking stuffers on sale, too.
Some of the deepest discounts will likely be on Amazon brands and products like Fire TVs, Kindles and Echo Dots, experts said, which is similar to Amazon’s previous mega sales. McGrath suggested keeping your eye on gift card promotions as well. “Even if a gift card you buy during this pre-Black Friday sale ends up being discounted even deeper during Black Friday (which isn’t likely), you still got free money from your purchase of the $30 gift card for $20, for example,” she said.
And while shopping this time of year is very gift-giving focused, you may want to keep an eye out for things you need around the house: Brands typically discount household essentials during Prime Day, like cleaning products, laundry detergent, paper towels and toilet paper, in addition to non-perishable food like granola bars, bottled water and more. In fact, “one of the bigger stories coming out of the last Prime Day in July was shoppers buying a lot of necessities over wishlist items,” said Jessica Young, director of research at Digital Commerce 360. “I’d anticipate this trend to continue mid-inflation.” If you’re looking to stock up on pantry staples while browsing for holiday gifts, the Prime Early Access Sale affords you the opportunity to do both.
Lightning Deals
When shopping any of Amazon’s big sales, some of the best savings opportunities are Lightning Deals, which are limited-time offers that give shoppers a short window to purchase and check out. While you can’t really prepare for Lightning Deals, be aware that you’ll see them popping up during the event. You may want to browse through them in case there’s an item you’re interested in.
What not to buy during Prime Day
If you don’t need a product immediately, there are some things that experts recommend waiting to purchase until later in the year or early next year.
McGrath said shoppers can expect a wider range of tech deals during Black Friday, Cyber Monday and leading up to the big game in February. She noted that gaming is not the best Prime Day category — it may be wise to buy console bundles and video games, as well as laptops and computers, on Black Friday and Cyber Monday. However, since so many people are looking to gift tech products during the holidays, there’s a very high demand for these items and newer models tend to go out of stock quickly. If you’re looking for a specific tech product and it’s on sale during Prime Day, it may be in your best interest to purchase it — the product could sell out while you’re waiting for a better deal, preventing you from getting your hands on it before the holidays or at all.
How to save during Amazon’s Prime Early Access Sale
The key to saving during Prime Day is planning, which can help keep you focused on what you’re looking for and ensure you’re taking advantage of the best deals possible. Below are a few ways you can ensure you’re successful during the sale event.
Be aware of exclusive promotions before and during the sale
Before and during the Prime Early Access Sale, Amazon is offering members a handful of exclusive promotions:
- Prime members who haven’t yet tried Amazon Music Unlimited can get four months free (non-Prime members are eligible for three months free). Prime members can also get an Echo Dot (3rd Gen) for 99 cents with a one-month subscription to Amazon Music Unlimited. Both offers are available through Oct. 12.
- Prime members can rent or buy select movies, series and sports screenings on Prime Video for up to 50% off through Oct. 7.
Be on the lookout for other promotions as the sale gets closer. Amazon may release more promotions, coupons and more you can use to save on purchases.
Sign up to receive notifications about sales and deals
If you don’t have time to scroll through Amazon’s website or app to browse deals, you can sign up to get notifications about deals on products you’re specifically interested in throughout the sale. It can help you save on a product you’ve had your eye on, especially if the deal is only offered for a limited time. You can also opt to get deal notifications based on your Amazon searches and recently viewed items. To create deal alerts, visit the Amazon Early Access Sale page online or in the Amazon app.
Amazon Alexa can also notify you up to 24 hours in advance of a deal becoming available for an item on your wishlist, in your shopping cart or “saved for later.” You can also ask Alexa to remind you when the deal goes live and give Alexa permission to order the item on your behalf using your account’s default payment and delivery address. According to Amazon, this feature is particularly useful during Prime Day when there are constantly new deals.
Additionally, if you download the Amazon app and add items you’re interested in to your wishlist, you can turn on notifications for your “watched and waitlisted deals.” This alerts you when lightning deals happen for products on your wishlist during Prime Day and otherwise.
Make a shopping list
Beyond keeping you organized, a shopping list helps you focus on products you need to buy or have budgeted for and reduces the temptation to spend on non-essential purchases. This may be something people are thinking more about as they’re looking to cut back on spending. After the first day of the sale, you can look at your original shopping list, cross off what you bought and make a new list of what you’re still looking for on day two.
You can bookmark links to products or write a shopping list, though it may be easier to add items to different wishlists through your Amazon account. For example, you can make wishlists for different people you need to purchase gifts for or wishlists by product category like tech or home. While you’re shopping, you can go through your wishlists, see what’s on sale and decide if you want to make a purchase.
Consider shopping with a credit card
If you’re interested in using a credit card to shop during Prime Day, you may be able to earn points or take advantage of exclusive rewards. Certain cards allow you to earn cash back on Amazon purchases during Prime Day and Prime Day-esque sales, and some also offer welcome bonuses or points. The best credit cards for Amazon Prime Day shopping include the Amazon Rewards Visa Signature Card and Amazon Prime Store Card — they offer 5% cash back at Amazon, reports Select personal finance reporter Brett Holzhauer.
McGrath said she expects other retailers to follow Amazon’s lead and offer their own savings events around the time of the Prime Day Early Access Sale. Target, for example, is hosting Deal Days from Oct. 6-8, Overstock is hosting Overstock Days from Oct. 2-3 and Groupon is hosting Groupon Day on Oct. 14. And while Walmart hasn’t announced a fall sale event, the retailer recently said it will “offer thousands more Rollbacks this holiday” and announced expanded return options during the holidays.
Because retailers tend to host sales in conjunction with Prime Day, it’s worth comparing prices across sites to make sure you’re getting the best deal possible. Tools like Amazon Assistant, Keepa, CamelCamelCamel and Honey monitor and let you compare prices. Some retailers also price-match, meaning a retailer will drop its price to that of a competitor’s.
Catch up on Select’s in-depth coverage of personal finance, tech and tools, wellness and more, and follow us on Facebook, Instagram and Twitter to stay up to date.
MILAN, Oct 3 (Reuters) – New restructuring commitments agreed by Italy and the European Union over state-owned bank Monte dei Paschi di Siena (MPS) (BMPS.MI) include disposals worth up to 400 million euros ($391 million), a document showed on Monday.
The text of the EU Commission’s decision that extended an end-2021 deadline for Rome to sell its stake in the Tuscan bank also showed Italy had committed to keeping the management of its holdings in various state-owned banks separate.
After failing to clinch a sale of MPS to UniCredit last year, Italy has secured a new deadline to re-privatise the bank it rescued in 2017 from the EU agreeing to new restructuring goals.
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MPS needs to carry out property disposals worth 100 million euros and sell non-core equity holdings, including stakes in ATM-machine operator Bancomat and credit card firm Visa (V.N), which had a value of 250-300 million euros at the end of last year, the document said.
The bank has also failed to meet an existing commitment to reduce its leasing portfolio, which stood at 3.3 billion euros at the end of last year, or 700 million euros above target, the EU said in its decision.
“The bank shall carry on a deleveraging of its leasing portfolio, also by means of sale of assets,” it added.
MPS aims to offload leasing contracts by the end of the year by joining forces with other Italian banks on a bad loan securitisation transaction worth in aggregate 1 billion euros, a source close to the matter told Reuters.
The securitisation deal would make use of a state guarantee scheme which is in the process of being renewed.
To meet cost-reduction targets Italy agreed with the EU, which set a cost-to-income ratio of 60% in 2024, MPS aims to launch an up to 2.5 billion euro new share issue later this month.
($1 = 1.0228 euros)
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Reporting by Valentina Za and Giuseppe Fonte; editing by Agnieszka Flak and David Evans
Our Standards: The Thomson Reuters Trust Principles.
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Bless the changing of the seasons and all the incredible fashion trend options they provide (ICYMI, the color pink, cowboy boots, and corset tops are *very* in right now). They also offer so many fun layering options: Give me my knee-high boots, my leather (or vegan leather) jacket options, and something warm and soothing in my cup as I stare longingly at the leaves drifting down outside my window. You can tell I live in the Northeast, NBD.
During the transitional weather especially, a dress is your perfect base: It’s comfy (who wants to be struggling to get dressed in the morning?). It’s deeply, distinctly easy as a fall layer. It’s a way for you to be prepared for the occasional heat wave and simultaneously the frigid temps, all while looking effortlessly cute. Btw, I’m using all different versions of “cute,” from “I want to grab a basket, put my hair in braids, and look like Goldilocks” all the way to “give me the silkiest black sweater dress so I can pair it with boots and a blowout.” You’ll look cute no matter what your vibe is, bb.
Our top picks for the best cute fall dresses in 2022:
There are some pretty fab splurges on here—better to buy that one dress you’re gonna wear every weekend instead of a million dresses you’ll wear once, right? But fear not: We’ve got some ~modestly priced~ and very cute options if you wanna channel your best apple-picking outfit but wanna spare your bank account the angst (and some Amazon-only fall clothing options if that’s your thing).
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Buyer’s advocate Zaki Ameer has noticed an oversupply of units in suburbs such as Homebush and Homebush West in the Strathfield LGA, as well as further west in Sydney.
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“Anything within a five kilometre radius of the Sydney CBD, there’s still strong demand for units, it’s more the outer areas (that are losing value),” the Dream Design Property founder said.
“There was quite a bit sold off the plan that is settling this year and there are valuation shortfalls on those units now compared to what people would have paid at the peak, because banks are pulling back on valuations.”
He tells buyers to negotiate on price as the market falls. Separate figures from CoreLogic on Monday show overall Sydney home values are down 9 per cent since peaking, while Melbourne has fallen 5.6 per cent, Brisbane is down 4.3 per cent and Perth has fallen 0.6 per cent.
Belle Property Strathfield’s Norman So said the unit market in his area had dropped during 2020 and 2021 but prices had started to rise again.
“Buyers are prepared to pay, not the peak of the market, but a hybrid figure,” he said.
Some property owners in the Strathfield area are not reselling for a profit.Credit:Ben Rushton
Demand is stronger for older-style red brick apartments and brand new completed buildings than for blocks that are about five years old, So said.
“The ones in the middle that are relatively new, they’re the ones they are very picky on because of the news coverage,” he said, citing the Opal Tower cracks. He has advised potential buyers to check strata reports.
Melbourne’s CBD has recorded loss-making resales for years after a wave of new investor-grade supply was completed and sold to international investors, but the picture can be different for older-style blocks.
Harcourts Melbourne City director Dionne Wilson said: “Our local audience doesn’t particularly have an appetite for these big, high-rise new builds”, such as buildings from the past 20 years hit by higher international stamp duty charges pre-pandemic.
Melbourne CBD investor-grade apartment resales have been challenged for some time.Credit:Wayne Taylor
“Our biggest buying audience is pied-a-terre, second-residence buyers.”
These buyers were more likely to demand heritage pads that were rarer and came with character, charm, high ceilings and larger proportions, she said.
Wakelin Property Advisory director Jarrod McCabe said there was a lack of demand for high-rise apartments built in the past 20 to 25 years due to the rise of working from home and even the crackdown on investor lending during the 2018 financial services royal commission.
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“There probably hasn’t been that same confidence in the market, more because of the concern of getting locked down again,” he said. “Who wants to be stuck in a high-rise apartment?”
He looks for capital growth drivers: a strong underlying land component, scarcity value, and demand from a range of potential future buyers.
Quantify Strategic Insights principal Angie Zigomanis said a period of net negative overseas migration through the pandemic had put downward pressure on rents in areas where international students tended to live and that not all markets had since recovered.
Units in inner-city and middle-ring areas that lost international students were now starting to be filled with locals who wanted to move out of their share house or their parents’ home after lockdown and immigration had started to pick up this year.
Once rental growth started to accelerate, investors would look at buying apartments in these neighbourhoods again, he said.
“You need that continued strong population growth to keep occupying those apartments,” he said.
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REITs have taken a severe beating in recent weeks, and while some mortgage REITs offer high yields that look tempting, this is not the time to be cute and take on outsized risk. To use a baseball analogy, wealth is generated by hitting singles and doubles rather than trying to hit it out of the park every time.
This brings me to Agree Realty (NYSE:NYSE:ADC), which I was cool on the last time that I visited it, when the share price was much higher. Somewhat predictably, ADC, like other net lease REITs, has fallen precipitously in conjunction with rising rates. This article highlights why now is a great time to land this great dividend payer for sound long-term returns, so let’s get started.
Why ADC?
Agree Realty is a net lease REIT that’s been around for over 50 years. Today, along with well recognized retail focused peers Realty Income Corp. (O) and National Retail Properties (NNN), ADC has become one of the premier net lease REITs, with a portfolio of 1,607 properties, located in 48 states covering 33.8 million in gross leasable area.
What sets ADC apart from peers is its very high exposure to investment grade rated tenants, which represent 68% of its portfolio annual base rent. Also, perhaps unbeknownst to some investors, 13% of ADC’s ABR comes from ground leases, which are safer than traditional building leases.
Moreover, while ADC is heavily retail focused, its tenants are rather e-commerce resistant, with focus on tire and auto service, grocery stores, home improvement, convenience stores, off-price retail, and discount stores. These segments combine to make up nearly half (48%) of ADC’s total ABR. As shown below, ADC boasts many familiar names among its top tenant roster.
ADC Top Tenants (Investor Presentation)
ADC is also showing no signs of slowing downs as management recently raised acquisition for 2022 by 7% from $1.5 billion to $1.7 billion. Funding for current year acquisitions appears to be largely settled, as ADC raised a total $991 million from equity sales during the second quarter at much more favorable valuation, and issued an additional $300 million of senior unsecured notes due in 2032 at a very attractive interest rate of 3.76%.
Headwinds to ADC include higher interest rates, which raises ADC’s cost of debt. However, I view ADC as being better positioned than most peers in both the public and private space. This is reflected by ADC’s very strong balance sheet with a proforma net debt to recurring EBITDA of just 3.8x (including the settlement of recent equity proceeds). This puts ADC in a good position to outbid higher leveraged private market buyers. As such, higher rates can actually work in favor of ADC, as management suggested in its recent conference call:
Given our improved cost of equity capital, we are able to invest in even greater spreads and provide additional cash flow accretion. Our superior cost of capital, combined with our fortress balance sheet positions us to pursue many exciting opportunities while levered competitors have exited the market. We are seeing distress amongst owners and developers and are intent on leveraging our strong positioning. While once again raising our acquisition guidance, we are cognizant of the dynamic macro environment and will remain disciplined to our strategy.
Moving on to our Development and Partner Capital Solutions platforms, our team continues to uncover compelling opportunities with a growing pipeline. Cap rate expansion, inflationary pressures and rising construction interest rates have uniquely situated us to deliver projects timely and on budget.
Meanwhile, the recent share price downturn has pushed ADC’s dividend yield up to a more attractive 4.1%. The dividend was recently raised by a robust 7.8%, one of the highest in the net lease sector, and comes with a very safe payout ratio of 72%.
I also find ADC to be attractively priced at $67.58 with a forward P/FFO of 17.3. While this sits just below its normal P/FFO of 17.6 over the past decade, I believe a buy rating is justified considering the accelerating growth that ADC is showing and its very strong balance sheet, putting it in strong position to capitalize on the currently weak real estate market. Sell side analysts have a consensus Buy rating on ADC with an average price target of $81.30, equating to a potential one-year 24% total return including dividends.
Investor Takeaway
In summary, I believe ADC is a very well-positioned net lease REIT that is attractively priced following the recent market sell-off. It has strong investment grade tenancy, e-commerce resistant tenants, and a very solid balance sheet that puts it in good position to take advantage of distressed selling in the currently weak real estate market. As such, I find ADC to be a buy at present for income and growth investors.
Investing
As we start the fourth quarter of what has been a dreadful year for stocks, it is important for traumatized investors to remember one thing. Take a look at a long timeline chart for the S&P 500 going back 30 years. Along the way, there have been some huge financial and geopolitical ups and downs. More than once, we were on the precipice of a financial collapse: Long-Term Capital Management’s implosion, the dot-com bubble, 9/11, a global financial crisis and mortgage meltdown, the Iraq and Afghanistan wars, COVID-19 and so on. Yet, through all that, the S&P 500 still went up at more or less a 45-degree angle over time.
Remember that crisis points are generally resolved and issues, regardless of their origin, get sorted out. The current bear market will run its course. While the ultimate bottom may not arrive until next year, there are stocks that can hold up. For those with cash to put to work but who are wary of the rising interest rates, the so-called sin stocks may be the way to go.
Sin stocks are one category that some portfolio managers really do not want to discuss in their portfolios. These are companies that sell tobacco and alcohol products, run gambling casinos, or are in sex-related industries, weapons manufacture and now even marijuana producers. While at the margin they do not all seem sinful, some money management companies refuse to own any of them.
We screened our 24/7 Wall St. research database for companies that fall into this dubious category and found seven stocks that look like outstanding values. They are all rated Buy and should hold up well even in a protracted bear market. It is important to remember that no single analyst report should be used as the sole basis for any buying or selling decision.
Altria
This maker of tobacco products offers value investors a great entry point now as it has been hit as cigarette sales have slowed. Altria Group Inc. (NYSE: MO) is the parent company of Philip Morris USA (cigarettes), UST (smokeless), John Middleton (cigars), Ste. Michelle Wine Estates and Philip Morris Capital. PMUSA enjoys a 51% share of the U.S. cigarette market, led by its top cigarette brand Marlboro.
Altria also owns over 10% of Anheuser-Busch InBev, the world’s largest brewer. In March 2008, it spun off its international cigarette business to shareholders. The stock was pounded this summer when the U.S. Food and Drug Administration announced the ban of all sales of Juul vape pens. This decision was made after government officials and public health institutes claimed that Juul is too focused on selling its nicotine products to high-schoolers. A court and the FDA granted Juul’s request for a stay on the ban, allowing the company to still sell the products while an appeal is made on the decision.
When Nathan and Hailey Wright wanted to sell their house and move to a larger one to fit their growing family, they knew they had to act fast. It was May and the housing market appeared at its peak as mortgage rates rose.
They put their 2,000-square foot townhome in East Downtown on the market and within a few days had it under contract for 10 percent above asking price. But then the buyer backed out. By the time they put the house back on the market in June, mortgage rates had jumped by about half a percentage point and home prices were reaching record-highs. Suddenly, offers dried up.
“We saw firsthand the market just flipped upside down in a matter of weeks,” recalled Nathan Wright, a construction management professional in his early 30s. “We went from having six offers within a few days to having just two showings a week for several weeks in a row.” They ended up selling the house in early August for about 5 percent under asking price, he said.
Then they quickly realized how tough and expensive it was to be on the other side of the housing market. Competition was still stiff among buyers, and mortgage rates added to the unpredictability. They decided to do something they never thought they would do again: rent. The Wrights found a 3,000 square-foot single-family rental in Pearland with the help of their agent David Moore and plan to lease it for a year.
The Wrights are among would-be homebuyers opting to postpone purchases amid high mortgage rates and high prices. Even if buyers can afford to purchase, some are still choosing to wait, hoping that pricing and competition will moderate. That’s keeping more renters in the rental market for longer, supporting strong demand for both apartments and single-family rentals that is expected to keep rent prices up.
Hailey and Nathan Wright are expecting another child soon so wanted to sell their townhome in East Downtown Houston to move to a larger home in the suburbs. But when they were trying to buy earlier this summer, they found the for-sales home market was too competitive and pricey now so they’re holding off while renting an single-family home in Pearland that they found with the help of their agent David “The Locator” Moore.
Kristin Silliman Photography LLCAlthough mortgage rates haven’t hit the double digits of the 1980s, the jump in rates is creating sticker shock. A buyer getting a standard 6.7-percent mortgage rate today on a $320,000 loan could expect to pay about $714 more monthly than a year ago when rates were 3 percent.
“If you’re monthly payment is going up by a few hundred dollars, that’s another argument for renters to just renew their lease and stay longer in their units,” said Bill Kitchens, an analyst in Texas with CoStar.
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And that’s what many residents are doing. Houstonians have signed 26,380 leases for single-family home rentals this year as of August — about 17.5 percent higher than the same time last year, according to data of leases listed on the Multiple Listing Services from Houston Association of Realtors. On the apartment side, Houston renters filled a net 14,400 additional apartment units in the past year — down from last year but still 48 percent above the historical average, according to CoStar data.
Landlords of large apartment complexes are noticing.
“It’s become harder and harder to buy homes which is why we’re seeing fewer and fewer of our residents leave to purchase homes,” said Ryan Terrell, managing director of client services for Greystar, a national apartment manager with 45,000 units in Houston. Last year, about 22 percent of renters who left the firm’s apartments were moving to buy a house. Now just 18 percent of move-outs are for home purchases, Terrell said.
The widening availability of single-family rentals in Houston makes renting more appealing to residents who don’t want to live an apartment. The supply of single-family rentals expanded significantly during the pandemic as a rush of investors snatched up houses and turned many into rentals, said Jennifer Wauhob, HAR Chair with Better Homes and Gardens Real Estate Gary Greene.
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Institutional investors made up 10.5 percent of all home sales transactions last year in Houston — or more than 11,400 transactions — a record for the past decade, according to property data firm ATTOM. Meanwhile, real estate developers such as Wan Bridge, Howard Hughes, HistoryMaker and Clay Residential are planning to build neighborhoods of homes exclusively for rent.
Those new single-family rentals will likely fill up even as rents climb. Average single-family rents reached $2,313 in August — about $349 more monthly than two years ago according to HAR data. But homes are still getting leased at a faster pace — spending 22 days on the market, compared to about 28 days two years ago.
Eventually the pace of rent growth for single-family rentals could settle as more supply comes on the market or as the home-sales market picks up again, real estate experts say, but very few are expecting rent or home sales prices to retreat back to pre-pandemic levels.
“This is kind of the new normal; we don’t see anything becoming more affordable,” Wauhob said.
Some renters are expected to return to the home sales market. The Wrights plan to pick up their home search again next year, when their lease expires.
“Looking at homes in the Pearland area, you can see the houses not only are sitting on the market longer, they’re getting price reduction,” Wright said. “We’ll definitely be keeping an eye on the market to just keep a pulse on it and see what is out there. But I believe we made the correct choice.”
marissa.luck@chron.com
ASHWAUBENON – An upscale Ashwaubenon hotel will be sold to the highest bidder in a mid-October auction after the hotel went into receivership this summer.
Aloft Green Bay, 465 Pilgrim Way, in Ashwaubenon, will be sold to the highest bidder in an online auction scheduled for Oct. 17 to 19. The minimum bid? $2.5 million. The purchase is subject to a transaction fee based on the price.
The LoopNet auction listing has been viewed more than 450,000 times since being posted Sept. 1. Representatives of Paramount Lodging Advisors, the sale’s advisors, did not respond to emailed requests for comment.
The sale results from a Jan. 28, 2021, mortgage foreclosure filed in Brown County Circuit Court. Wilmington Trust and Morgan Stanley Bank loaned the hotel’s owner, AB Hospitalities LLC, $9 million to build the hotel. Wilmington claimed AB Hospitalities did not make required monthly payments from August 2020 through January 2021. At the time of filing, it said AB Hospitalities owed more than $8.2 million plus interest, costs and taxes.
Attorneys for both parties did not respond to emailed requests for comment.
The civil complaint requested the appointment of a receiver to manage and maintain the property until it could be sold.
The case documents show Brown County Circuit Judge Beau G. Liegeois appointed Philadelphia-based GF Hotels to serve as the property’s first receiver in February 2021. The company managed the property, negotiated a new franchise agreement with Marriott International, owners of the Aloft brand, and paid $41,000 in delinquent Brown County lodging room taxes. GF Hotels, according to its website, counts more than 120 hotels among its portfolio and has an expertise in loan workouts and receiverships.
The case continued into 2022 and in June, Wilmington Trust requested Liegeois appoint a new receiver to sell the hotel. The financiers claimed AB Hospitalities’ did not have enough assets to pay its expenses, taxes and the $8.2 million loan balance.
In July, Liegeois appointed Michael Polsky to serve as receiver of the property and business under Chapter 128 of state law, which serves as an alternative to bankruptcy protection for businesses struggling to pay creditors.
On Aug. 5, Polsky filed a notice of receivership and set a Nov. 4 deadline for AB Hospitalities’ creditors to file claims with Judge Liegeois’ office. Polsky did not respond to an email request for comment.
Built in 2009, the 105-room, four-story Aloft features a daily room rate of $108, per the auction listing. The hotel amenities include a business center, fitness center, swimming pool, hot tub, patio and bar.
Brown County property records indicate the hotel’s 2.5-acre parcel has an assessed value of $7.7 million and a fair market value of $8.2 million.
The hotel sale includes the new license agreement with Marriott International Inc. for the Aloft brand but does not include any debt or property management contract.
There are more than 160 Aloft-branded hotels in North America and more than 210 worldwide. The chain features modern design and technology-focused amenities in order to appeal to business travelers.
Contact Jeff Bollier at (920) 431-8387 or jbollier@gannett.com. Follow him on Twitter at @JeffBollier.
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