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iStar Financial Inc. Message Board

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  • hmtsorno hmtsorno Aug 22, 2009 7:22 PM Flag

    Liquidity timing

    Agree on 1.

    2. Are you saying the economy will recover soon and CRE will be up with that? I disagree but I don't have a strong argument on this. (I agree what Peter Schiff said.)

    3. Large book value? Depends on what you are compare with and how you define the book value. GAAP book value is low compared to its asset and it just lost more than 10% of it in one quarter. If you mark its asset and debt to the market, the book value will be close to 0 because its debts are mostly non-recourse. From the observation of CIT 3 billion loan, lenders don't lend to borrowers believing a company can avoid chapter 11. The 1 billion lenders are First Lien lenders, the new loan is probably to protect SFI from having a fire sale of its asset in the current environment. The new covenants relaxes a lot, the lenders are trying to keep SFI current on its payment instead of getting hooked by an NPL.

    Are you still holding the prefs? It's getting a little bit dangerous. The hope is that we have a real recovery across the board instead of a slower declining pace. I don't think we are having it until two years later, tho.

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    • HMT,

      Yes - holding the preferreds. Sitting on a very nice capital gain and have most of my basis back in just dividends.

      You said: "its debts are mostly non-recourse"

      That is true for the vast majority of mREITs, but false for SFI. Almost all SFI debt is at the parent entity level and is full recourse.

      Yes, when I hear about class A properties trading hands at a 10% cap rate, I think that is out-of-whack. When multifamily properties were trading at 4% cap rates, that was a bubble, when the same properties that are cash-flow positive are trading at 10% cap rates, that is oversold. These assets will return to 8% cap rates in short order, IMHO. That will result in increased volume of transactions and more reasonable valuation that what the market is showing today.

      It is real simple - properties that flow cash have a lot of value. Capital will flow in that direction. The ability to leverage will return. Asset prices will return to more normalized prices, although hopefully not bubble prices.

 

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