The World IS On The Edge

It would appear that several private REITs are following the TIC industry and failing to deliver what was promised. While just about all TIC syndications I have seen up close are nothing but promoters scamming the mullets, the private REIT world seems to be a much more professional and serious business. However, investors in several older private REITs are now learning that timing is everything and up front loads kill your return on the way out. The pitch was invest and make 6%-8% regularly and at the end of the period of five or even years there will be a good capital gain. Often is has not worked out that way. In the TIC deals I have closely examined, the regular payouts disappeared, the cap ex was greater than the investors were ever told and the appraisals at the time of investment were often materially inflated, as many are. The brokers often don’t have a clue about the real estate but are highly motivated by big up front commissions and the prospect of getting the mullet to invest in follow on deals.  While there are some private REITs that are well run, honest and do work hard to provide the returns promised, there are too many others, especially in the TIC world, that are there for the fees and the ability to always find new mullets in the ocean of suckers.  One day maybe the SEC will finally look into this and especially the TIC business. As of now there are many investors learning for the first time that the pot of gold at the end never existed except in the brokers fantasy. 

Yellen gave a speech on Friday which was maybe more important than any recently. It is now very clear rates are not going up very soon, and possibly not until late in the year. When they do she made it clear they will move up very slowly. Maybe at on 12.5 basis points per move. It is now clear the economy is not rocking along with GDP in Q4 at only 2.2% and Q1 likely to be closer to 1%. Unlike last year when Q2 began with warm weather, this year the general feeling of uncertainty and foreboding is more widespread.