CapitalSource is a leading commercial lending, investment and asset management business focused on the middle market. As of March 31, 2007, CapitalSource managed a $18.3 billion portfolio, including $9.5 billion in its commercial lending and investing business, $5.6 billion in its RESIDENTIAL MORTGAGE investment business, and $3.0 billion managed on behalf of third parties. Headquartered in Chevy Chase, Maryland, the company has approximately 540 employees in offices across the United States and in Europe. For more information, visit http://www.CapitalSource.com.
Delaney already has made one fortune building a commercial health care finance company about 15 years ago and selling it to GE. Farallon Partners, one of the country's top hedge funds, is a very large investor. CSE converted to a REIT several years ago, principally to get tax-advantaged treatment for its investors and avoid double taxation. The company bought a large mortgage portfolio, hedged out the portfolio's risk and became a REIT in the process. The primary business here is still commercial finance, not mortgages. Don't bet against this management team, I know some of them personally and they are very, very smart.
YOu are an idiot. They recently raised their dividends and provided guidance. In the prior conference call they said that business was excellent. How much more can they say? No guarantees will be provided.
CapitalSource became a real estate investment trust in January 2006. As a REIT, the company will pay substantially all of its income as dividends. I like this move because REITs pay less tax to the government, which leaves more money for shareholders.
To comply with REIT requirements, the firm purchased and continues to hold a very large portfolio of mortgage assets (almost 40% of total assets at the end of 2006). While these represent a large percentage of assets, they constitute a very small percentage of the economic value of the firm because CapitalSource has very little equity capital dedicated to these assets and accepts basically no credit risk and no interest-rate risk. As a result, the yield on these "compliance assets" is similar to what a U.S. Treasury bill would pay.
That is the beauty of a market place. You are free to short cse if you think they are going to suffer because of the subprime mess while I am free to buy the stock since I think they will weather the storm. Time will tell which one of us is correct.