If you have ever taken a beginning level finance class you will have heard the word "risk." Many of the bears on this board - and many other Yahoo boards for that matter -don't seem to understand that with any investment or safeguarding of money there is a risk/reward scenario that plays out. For instance, whether you put your money under your mattress, in a bank, in JNJ or in SFI, there are definitely potential risks and rewards.
I am an attorney that does most of my work on a contingent fee basis. I am well aware of the risks associated with putting my time and effort into a case that does not have a guaranteed result and no guarenteed pay. Sometimes, albeit rarely, I litigate a case and don't win. I chose to work on a contingent fee basis because of the greater reward that I receive on all of the cases that I do win. If I accept a case on an hourly basis I charge my time at $325 an hour. I consider that to be my "risk free" rate. I rarely find a case interesting enough to take on an hourly basis. When I work on a contingent fee arrangement my typical hours worked divided by the fee works out to about $1500 an hour. Bottom line, the more risk I take in my professional life the more the potential reward is.
I have chosen to invest in SFI, and several other high risk stocks, because of the potential for high returns. Risk does not frighten me, in fact, risk has been very good to me. Only time will tell if my investment in SFI goes bust or goes to the moon. In any event, rest assured that I realize that SFI may be boom or bust. So, whereas the bears may believe that all those that invest in SFI are cave dwellers and delusional, let me assure you that is not the case. Some of us just enjoy a high risk/reward ratio and have a high tolerance for potential pain that might ensue.
My apologies to anyone who thought I was being cavalier. I just get a little tired of listening to the bears (and many bulls for that matter) that believe that just because a person choses to invest in what is commonly thought of as a high risk / high return investment they are stupid. Whether you have a little or alot invested, as either a bull or a bear, it hurts to lose money. I don't begrudge the bears when they are right, nor do I rub it in their face when they are wrong. I am not sure why anyone feels the need to do that.
On a side note, the information I have is not inside information. I do not work for IStar, I work for their customers. All of the information I was referring to is publically available on Lexis. Also, because I am extremely specialized, I do property tax litigation for large corporations, which is a big growth industry now, I have no worries of getting my fees cut. My client's are willing to pay me on a contingent fee because they consider it their "risk free" rate. After all, if I don't win, they don't have to pay.
I agree that if I was in the same position as alot of other people I would be alot more worried. In any event, I rarely post but I do read alot of message boards for the information that is available - not the petty bashing from either side. Of course, I generally believe the bashers from both sides have little invested, otherwise they would spend more time concentrating on the facts. So once again I apologize to anyone that thought I was being flip. That was not my intent.
I view this stock as a "deep value" stock. Commercial real estate is going to be in the toilet - I have no doubt about that. Having said that, I represent several companies that have either leased properties from SFI or SFI has loaned money to my clients on very nice properties. Additionally, I use Lexis and have done public records searches for SFI to see what other companies they are doing business with. My research is not exhaustive, I must concentrate more on my legal profession than my investing acumen. Having said that, I am comfortable that my little investigation is statistically sound enough to tell me that SFI is dealing with high quality companies. If these companies default, I believe the great depression will seem trivial in comparison. Whereas they are having a bad time with the Fremont acquisition I doubt that that will hold true for alot of the other properties that could be at issue.
As a matter of fact I am touring one of the IStar properties tomorrow. SFI did a sale/leaseback on the property in 2005 with my client. This client is in no danger of defaulting. However, if they did default there are several companies that would be lined up to take over this property. It is highly desirable even in this blown market. Obviously, this is just one property of many and therefore does not mean much.
My biggest concern for Istar is the bonds that are coming due in the next two years. IF, and I understand that it is a big IF, they can navigate the liquidity crunch, I think that with the quality of their counter parties my investment in SFI will be lucrative. If they can't, I stand to lose my entire investment. Although I am not convinced that even in a BK there wouldn't be capital left for the common stockholders. If anyone has thoughts on that, I would certainly be interested in hearing them.
The reason that I believe that they will navigate the liquidity crunch is because they are very proactive on foreclosing on their bad deals. I think that they will continue to foreclose and sale their REO in order to satisfy their bond obligations and at the same time they will buy back their bonds in the market at a substantial reduction. In other words, I like the fact that they can offset loan losses in the foreclosure by buying back their debt at a discount. As in many things in life I hope for the best but plan for the worst.