This was supposed to be the year that equities cooled down, after the too-hot-for-anybody’s-good 1996.

Well, some must like it hot, given the market’s generally strong performance so far this year. And the Westside offices of investment banker Sutro & Co. Inc. had three REIT common stock offerings out of the chute last week.

A fourth is on the way this week.

“We have seen tremendous appetite for REITs in all major property types,” said Scott Wendelin, managing director at Sutro. “I don’t know that the market is cooling off.”

The three offerings were all “follow-on” or secondary offerings, for existing Big Board REITs, or real estate investment trusts. The REITs wanted more cash to buy more assets.

The three offerings were:

– $60.2 million for Los Angeles-based Price REIT, which owns Price Clubs, Home Depots, Home Bases, and power retailing centers;

– $60 million for Santa Fe-based Thornburg Mortgage Asset Corp., which invests in residential mortgages;

– $44 million for Boston-based MGI Properties, which runs a diversified portfolio.

REITs offer investors a great way to own real estate, but with the advantage of liquidity, said Wendelin.

“It’s a lot easier to sell a stock than an office building,” he noted.

With more than 200 REITs on the market, and the number growing, Wendalin discounted the contention that REITs haven’t been properly packaged.

Some have said that too many REITs are essentially grab-bags of different property types, in different regions of the country. Thus, if one beleives that downtown office buildings and Northeastern retail space are not good investments, it might be hard to find a REIT with a “clean” portfolio.

But Wendelin said not to worry.

“Today there are many highly focused REITs by property type, with specific geographic portfolios,” he said. “Or, you can buy a diversified portfolio.”

But back to the market.

At the start of 1997, the general consensus seemed to be that the year would see 10 percent up on the Dow, if everything stayed nice.

What does Sutro Managing Director Tom Weinberger think?

“When you have been in this market more than 10 years, you know it can also go down. I just wonder how many other people know that,” Weinberger said last week.

More on real estate

Buying real estate, distressed or otherwise, from belly-up banks and thrifts portfolios may sound like yesterday’s news, but it is still a very lucrative market, according to Stephen Collias, vice president at Santa Monica-based Kennedy Wilson International Inc., the publicly held real estate auctioneers and investors.

“It’s a risky investment, but these investment pools are some of the most lucrative situations in the country,” said Collias.

The Federal Deposit Insurance Corp. (FDIC), an arm of the federal government, has gotten more clever in packaging and marketing mortgages and properties in the last five years, and buyers are much more aggressive, reports Collias.

“It used to be you would buy this stuff at 10 cents (buy mortgages at 10 percent of face value), and sell it for 20. But the margins are a lot thinner now. The pools go for 50 cents, 60 cents.”

Nevertheless, because the mortgage and property pools can be bought using leverage, a sophisticated investor can still hunt down some elephant-size returns, says Collias.

“When you get 400 percent, we call that a four-bagger,” said Collias.

For Kennedy-Wilson, buying the mortgage pools has been welcome diversification from the tough business of property auctioneering.

“We are a big player in this market, and it is having a big positive impact on our bottom line,” said Collias.

Ordinary investors, or groups of investors, can play in the game too, although they are advised to team up with knowledgeable partners, says Collias. An FDIC information center in Irvine will send lists of upcoming pool sales.

The FDIC groups like properties into pools, such as “performing apartment buildings,” or “non-performing business loans.”

Pool amounts range from $1 million to several million. Buyer beware.

Short takes

– It’s an ill wind that blows no good, so evidently the last blower to run through Los Angeles was sickly: It knocked down “100 year-old cedar pines” onto the BMW, and to a lesser extent the house, of investment banker David Dennis, the managing director at Donaldson Lufkin & Jenrette offices in Century City.

Among many other duties, Dennis is the top man at DLJ in connection with the old NME Enterprises Inc., which Chairman Jeffrey Barbakow has moved to Santa Barbara near his home and which has been re-named Tenet Healthcare Inc.

The good news is that no one was hurt in the cedar pine fall-down, although the BMW is now just expensive scrap metal.

– Definitely not looking windblown or crushed was Michael Milken, as seen at a Milken Institute for Jobs & Capital Formation breakfast last week.

Milken, who is in remission from prostate cancer, looked vibrant, tanned and fit, and spoke easily and confidently to a crowd of about 100.

Milken may not like the Wall Street Journal, but he was scrutinizing the paper closely during the seminar, and then quoted from an article during discussions.

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