Thursday, January 19, 2017

REITS: How Cops Teachers Firefighter Pensions Get Robbed

The low hanging fruit to be plucked in a downturn is the pensions of the public service workers.  Here is how it goes.  First, this is paid article placement, in the Washington Post:

Maybe that’s why so many retirement plans—like those for teachers, firefighters, and more—use REITs as part of their investment strategy. In fact, you may be invested in REITs right now through your retirement plan and not even know it.
For America, REITs have helped revitalize both large and small downtowns and redeveloped old and new suburbs across the country, and helped foster innovation in communications, health care and more.

As I noted here, investment advisors flog reits to the public service workers.

Now, when all that ex nihilo credit is directed to build a pointless mall, such as this $190 million mall built in 2005 (last in, first out?) and the debt cannot be serviced, what happens?
The 1.1 million square foot mall, once valued at $190 million after being opened in 2005, sold at a foreclosure auction this morning for $100 (yes, not million...just $100).  According to CBS Pittsburgh, the mall was purchased by its lender, Wells Fargo, which credit bid it's $143 million loan balance, which was originated in 2006, to acquire the property.
So Wells Fargo, which has a license to create ex nihilo credit, did so to the tune of $143 mil way back when, and are still owed, under capitalism.  So they "bid" their $143 mil debt paper, plus another one hundred dollars, and won the auction.

Well, so what, now they have a money losing property on their hands. It appraised for 11 million last summer.  The mall itself is a waste. What did they win?

They own the leases on the 55% of the mall that is occupied.  Then there is this:
So it's probably safe to keep buying those mall REITs...afterall those 3% dividend yields are amazing alternatives to Treasuries and you're basically taking the same risk...assuming you overlook the billions of property-level debt that ranks senior to your equity position. 
They tap into the equity funneled into the projects by the REITS, and Wells Fargo has first call on that now.  Your pension moves over to the bank, you get ...well... nothing.

The hegemon is stage managing the economy until the fall of 2017, when the Trump regime is well-settled, and then comes the big crash, and with that the Donald has the team and time to manage the economic correction necessary for regime maintenance.

Who pays for the excesses of the ex nihilo credit regime?  Check your 401K to see how much you'll be charged.

Better start a business.

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