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iStar Financial Inc. Message Board

  • iprice1 iprice1 Jan 8, 2008 12:21 AM Flag

    The Problem with SFI...all about debt

    The main problem with SFI is that its Fremont acquisition was poorly timed and conceived. It's NPA's will continue to move high and other parts of its portfolio will be stressed. Specifically its land (14% of portfolio),condo (16%) apartment residentail (16%) and construction (can't remember exact figues. NYC is its largest exposure at 17% of the portfolio and i agree NYC is a strong market but with financial layoffs etc. the market is due to weaken. IF you disagree look at SLG one of the best reits which has fallen 38% from its highs.

    Also remember sugerman said that if liquidity does not return by feb we have a real problem.

    However the real problem comes in June 2008 that is the moment of truth when the firm will have to re-finance close to $2bn on its bridge loan. Unless the markets start coming back it will not be able to roll over the loan. So what will happen the firm will try to issue equity if it can (but due to the share price right around book it will not be able too). So the firm will have to borrow against its assets on the balance sheet which will cause the firm to lose its precious investment grade rating. The irony of the fact is that SFI was smart not to lever up and use CDO financing but it still got caught in the cross roads of the debt crisis. It can not issue unsecured at these levels and make money and it does not have the ability to take advantage of the opportunities in the market.

    Remember financial companies that go out of business rarely due so because of high credit losses its because they run out of liquidity or borrowers demand more collateral. That is SFI's problem and if you are looking for a bargin its not quite there either still trading slight above book.

    My other question is how can someone consistently underwrite with a 67% LTV with yeilds of 11.5%. How good do you think those assets are? Ask youself what rate your unsecured borrowing are at, or what rates high yield bonds avg etc?

    Just my thoughts...

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    • The main problem with SFI is that its Fremont acquisition was poorly timed and conceived. It's NPA's will continue to move high and other parts of its portfolio will be stressed. Specifically its land (14% of portfolio),condo (16%) apartment residentail (16%) and construction (can't remember exact figues.......


      Finally, a post of quality on this board. Please keep posting your thoughts. Nice to see someone dealing in reality for a change.

    • They will get the financing. If you're short, you better cover. It is you who are speculating that these remote events might happen. If they don't, you stand to lose a lot of money. How many more dividends are you going to pay at 14%? Investors are going to be mesmerized by these unlikely threats for only so long. Eventually, they will bid these shares much higher.

 

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