It's true that iStar didn't hit a grand slam on the FMT deal, but they have the participation & the discount. That gives them a good starting point."
Hint, its best not to have a "good starting point" on a sinking ship.
After reading the WSJ article I will tell you why I would never invest in SFI. Forget about short term trading in SFI. That's for short term traders.
I am a long term income investor.
Sugarman in the WSJ article finally concedes he looked before he lept. He says meakly "we will make a positive rate of return".
This reminds me of CEO of Mills who ducked the question about Meadowlands rate of return for conference call after conference call saying they would make a positive rate of return on Meadowlands.
That turned out to be crap and Mills was taken down and had to be bought out by Simon.
I do not believe Istar will make a positive return on the Fremont deal. I hope there are some analysts reading these boards and I hope they start to focus like a laser on Sugarman's statement regarding a "positive return". That is meaningless.
Ask Sugarman at the cc the following:
What was the anticipated or expected rate of return on Fremont based upon the plan to float equity when Istar shares were still in the $40s?
What will be the expected return now that you cannot float equity anywhere near that price and will have to function with more debt than you originally planned to hold?
Because Istar will have to function with more debt rather than issue equity what is the anticipated future growth rate of the dividend?
Goldman Sachs indicated a cut in long term future dividend growth rate from 5% to 3% as a result of the dilutive equity offering at $28 last DEC.
Remember when Istar did this deal they had a stock with $45 handle and a 7.75% yield on it.
Had SFI issued shares at that level and had Fremont General performed there is no doubt that there could have been an enormous ROI. You could have equated the Istar Fremont deal with JPMorgan Bear Stearns.
However, that is not going to happen here and I suspect dividend growth becomes nil to negative as the realities hit that they overpaid for Fremont, there will not be a positive return on Fremont and they burdened their company with a giant negative value unwinding of a mess.
It happened because Sugarman looked before he lept. In spite of the last two days trading I think you have a real mess here.
I got fooled by Mills's representations about Meadowlands and positive rate of return. I won't be fooled again.