Stock Buybacks vs. Dry Powder

Should REITs be using excess cash to buy back their shares at cheap prices, or wait and go bargain hunting for cheap properties?

Good morning. I am in day nine of my 14-day self-quarantine, and have yet to go stir crazy. Apparently, in Connecticut, liquor stores are exempt from the shut-down. Hmmm.

While we hear anecdotally that occupancy levels in seniors housing remain relatively unchanged, I do not see how that will remain so in the coming weeks and months. Companies and owners, such as REITs, are just beginning to report confirmed cases of COVID-19, along with the unfortunate deaths. While expected, we still continue to hope they can keep it to a minimum.

One thing I am a little surprised at is the announced stock buybacks by some REITs. Yes, their share prices plunged and represent an “opportunity” to lower their share count at bargain prices. However, I really think the long-term opportunity will be in what they do best. Buying real estate. After an unprecedented 10-year bull market, I believe we are finally going to have a pricing re-set, but for reasons no one could have predicted. If investing in seniors housing and other healthcare real estate was my focus, I would be preserving my cash for value-hunting in the future, as crass as that may sound in today’s environment.   

 

One thought on “Stock Buybacks vs. Dry Powder

  1. Greetings from Portsmouth NH on the beautiful Piscataqua River, where, 200 years ago there was an island named “Pest Island” where ships were stopped and checked for Smallpox, before being allowed inland. We are not unfamiliar with epidemics and pandemics.

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