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iStar Financial Inc. Message Board

  • quadruplemalt quadruplemalt Jun 4, 2009 4:37 PM Flag

    analytical torpor

    From Hangstrom's book on Buffet:

    "Owners of commons stocks who perceive that they merely own a piece of paper are far removed from the company's financial statements. They behave as if the market's ever changing price is a more accurate reflection of their stock's value than the business's balance sheet and income statement. They draw or discard stocks like playing cards."

    I wonder what planet some of these analysts are on or come from as well as the posting Cassandrae...

    At year end 2007 iStar had a BV of $2.9 Billion with 127MM shares outstanding. That's a book value per share of about $18.50. Post tender mid Q2 09 it seems that iStar has a book value of approximately $21.50 per share, give or take current quarter earnings and share repurchases.

    For all the analytical handwringing about liquidity, dire CRE straits, NPAs etc., Sugarman et al have navigated the last couple of years with great finesse. They have taken the asset hits, generated $1Billion in reserves and increased book value per share (the only kind of BV that really counts).

    I understand the analysts' trepidation at the circumstances in which iStar finds itself. The reality is that the analysts don't have a clue about how to manage through these circumstances and iStar does, as their last fifteen months of increasing book value per share should affirm. For all I know their poor outlook for iStar is a projection of their own imagined managerial inadequacies. If I were imagining piloting a 777 I wouldn't be forecasting a good outcome either.

    The Morningstar piece is a bunch of macro/sector groupthink about CRE and business models going forward. It doesn't really address any differentiating factors for iStar from the pack. It's remarkable for its lack of specifics about iStar and its excess of broad brush pablum.

    The Citi piece is more specific but fails to produce any insights. Remarkably it omits mention of share buybacks, increasing book value per share, available cheap debt, asset resolution metrics, or the company's focus on optimized recoveries versus immediate reduction in NPAs. It ices the cake by (imo) inaccurately extrapolating Sugarman's reasonable view of the CRE environment into some sort of failure imperative for iStar. One would think that "let's deal" realism and a quiver full of arrows within iStar might give some a basis for postulating a successful navigation of admittedly difficult market conditions.

    The analysts are throwing a bunch of dots out there and screaming "Wow, there's a bunch of dots!" They're not doing much connecting and really are showing a remarkable lack of independent and/or creative thought.

    I'm an entrepreneurial investor. Absolute risk doesn't interest me as much a the reward/risk proposition.

    A lot of analysts (and others) get wonked by 40% NPAs. Well, distressed asset funds might have 100% NPAs. The point is what can be done with them.

    I guess I'll have to maintain my long position in iStar without benefit of analysts company, mercifully.


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    • Quad,

      Great post.

      Personally, I'm quite jaded about the analysts attached to underwriters. There is supposed to be a Chinese wall between the analysts and the ibankers. But I just don't see how that can work. There is too much money involved.

      Back in 1999 or so, I was working for one corporate client and did their IPO. The lead underwriter dutifully issued a positive opinion. Then they went for a secondary offering, but secretly had chosen another lead underwriter. As soon as the original group found out they wouldn't be receiving the largest fee in the new deal, their analysts issued a very damning research report. I saw it as punishment for switching banks. I'm quite sure it was. The secondary went off fine as planned.

      After having been on the inside of a few such situations, I can only look at the research analysts as the servants of the people at these firms who really make the money.

    • Sugarman received his undergraduate degree summa cum laude from Princeton University, where he was nominated for valedictorian and received the Paul Volcker Award in Economics, and his M.B.A. with highest distinction from Harvard Business School, graduating as a Baker Scholar and recipient of the school’s academic prizes for both finance and marketing.

      If anyone can figure this business model going forward, it's this guy. I have a finance degree from U of Tenn and I have navigated the storm thus far with my B average and have actually profited great overall from this debacle all the while being heavily invested and developing RE, so I would guess Sugarmann has many cards up his sleeves to make us all wealthier..

      GL to all..

    • Quad, did you note the performance of FR "First Industrial Realty Trust (NYSE: FR) up 37.9% on news of closing three secured financial transactions for $154 million". The credit markets are slowly opening up and SFI will have the necessary access to them. While I wish things would move faster, I do have confidence the company will weather the storm and reward long term holders. It may not come until additional secured debt is signed up and a minimal dividend is announced, but it will come.

    • Good wrapup Quad, as usual. If we could be so lucky as to keep the analysts out. Don't worry, they will be back in with SCREAMING BUYS when they are ready to sell.



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