September 2009
Issue: 73

This time of year always reminds me of new beginnings. It goes back to the days of starting school around Labor Day. There was so much excitement about seeing my friends again to share our stories about summer, the anticipation of what I would learn and who I would meet.

I still experience that excitement. I always wonder who I'm going to reconnect with, look forward to knew people entering my life and learning a new skill.

Take the time this fall to learn something new and meet new friends--you'll be glad you did.

Paula Signature

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From Bill's Corner...

Imagine you owned a growing investment that was yielding 7%, but you could never touch it.  Welcome to the wonderful world of individually held private REITs.  We have deemed them an alternative investment.  Steer clear.  While the overall asset class of REITs may be an opportunity, individually held private REITs are dangerous.

A REIT or Real Estate Investment Trust is a portfolio of real estate holdings.  REITs primarily invest in commercial properties.  Each private REIT has its own prospectus, set of terms, payouts, surrender charges and other unique features that vary greatly.  Investors typically have an equity stake and receive income in return for their investment.

In some cases, you will be prohibited from touching principal and income for years.  You may appear to have paper gains, but they'll be illiquid.

The underlying assets of a REIT is real estate.  This fact enables REITs to leverage their holdings.  In today's marketplace, real estate values have dropped precipitously and many REITs have become over leveraged.

REITs come in two flavors, publicly traded and private.  Both structures are hemorrhaging cash, have declining occupancy rates and have highly leveraged structures.  Many will not survive this credit crunch and underlying assets will be sold at a fraction of their true value.

Publicly trades REITs have done a credible job of improving their balance sheet during this turmoil.  Well run publicly traded REITs may go or have gone to the capital markets and recapitalize or "re-cap" their balance sheets. Unfortunately, this action has decreased shareholder value by diluting the shareholder value.  Dilution is unpleasant but its better than demise.

Private REITS have not responded by recapitalizing; in most cases, they can't.  They are in a very dangerous position and lenders are saying clear.  In order to obtain capital, they are going to make large adverse concessions in order to obtain financing.  If the velocity of low occupancy rates and declining cash flow heats up, many REITs will sell assets at a fire sale.  Many may not survive.  Stay clear!

Many REITS may be well run, suitable investments.  However, we want to caution against buying individual private REIT issues.  The risk, the complexity of the offering and illiquidity are too great to allocate toward a single holding. If REITS are a must in your portfolio, consider publicly traded REITS, a REIT mutual fund or an index based REIT exchange traded fund.

Bill signature
In This Issue
Time to Share. Create a Buzz.
Stocks 106: Gathering relevant information
5 lessons from the crash
Cut your spending by $500 a month.
Find a cheap (and tasty) restaurant
About us
Time to Share. Create a Buzz.

From the Mozzarella Maven. You keep asking. "When is your next mozzarella class?" Okay. It's October 14 at 7:00. It will sell out fast. Details here.  Want to read the juicy details of a recent class, then check out this blog.

Stocks 106: Gathering relevant information

Knowledge is power when it comes to investing, and your success as a stock investor depends on your ability to locate information and determine its importance. Here's where to find what you need to know.

Read on...

5 lessons from the crash

One year ago a perfect storm on Wall Street nearly destroyed your portfolio - and our financial system. Now it's time to take stock.

Read on...

Cut your spending by $500 a month

In today's tight economy, who doesn't want to free up some cash? Trim the fat but not the fun from your budget - here's how.

Read on...

Find a cheap (and tasty) restaurant

Looking for a bite in an unfamiliar town? You've got to get out of your food comfort zone.

Read on...
About us

WH Cornerstone Investments, LLC provides wealth management services to a select group of clients. Regardless of their background or future vision, all of our clients commit to a plan that targets their long-term financial growth and stability. While some of our clients concentrate on one part of their investment strategy, others opt for a more holistic approach.

WH Cornerstone clients demand customized objective, expert advice, which they know can come only from a firm that is truly independent-a firm not tied to financial institutions. As an independent Registered Investment Advisory firm, we are fee-only and therefore free from any outside institutional influence.


Paula Harris and Bill Harris, CFP
WH Cornerstone Investments

Sound, visionary stewardship