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iStar Financial Inc. Message Board

  • rajivshorey rajivshorey Jan 31, 2010 11:28 AM Flag

    SFI Preferred

    I would like to know from those who a better understanding of the SFI business, its balance sheet and its potential risks -
    How safe is the preferred dividend ?

    All opinions, appreciated.

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    • If the stock is at $5 or $7 or $9 and they issue some shares, you are really looking at a very different company.

      I agree that it is higly unlikely that they will ever be able or interested in issuing 500 million new shares.

    • I don't see them issuing equity.

      Won't even respond to the idea of issuing 400+ million shares - the poster is obviously not informed with the Istar nuances.

      Issuing equity wouldn't be such a bad idea, if it were doable, at a reasonable level. But don't think they'd get any takers - not in sizable quantities.

      I know the common longs love the idea of the common buybacks - but I see it as wreckless behavior. I'm actually surprised it wasn't written into the debt deal in 2009 that no equity could be repurchased.

    • I'm sure they don't want to issue more equity but you have to look at it as a possibility. Most REITs have. If the stock goes above $5 and they can sell some and solidify their future it wouldn't be a bad move. The lenders are going to ask for more equity at some point and it makes sense if they are still close on the TNW. At some price you just atke some risk off the table by reissuing.

    • eshvarts Feb 1, 2010 10:13 AM Flag

      I am long on SFI preferred.
      1. They are still payinf divi, but it does not matter. I will survive without.
      2. The key thing: in 6 months or in 24 months they will cost:
      - either $20-$25, if SFI will survive without bankrupcy or "reorg"
      - or around $0, if we will have another deep dip in Commercial real Estate, as some are predicting, and SFI go Bankrupt.

      I do not know - and I believe nobody knows - the answer.
      If you want a bit less gambling, I can advise wait until Feb 25 (approximately) for quarterly earning report, extremely important. Expected loss is $2 per share (checked last month)

      • 1 Reply to eshvarts
      • I get the feeling there's a changed relationship in the marketplace right now among the preferred series. It looks as though there's a greater value being placed on the amount of discount to par than on the current yield. Traditionally D's out trade the other series, but recently, it's been trailing all but the E's (the second highest dollar priced series) on a current yield basis... Only reason I can figure is an increased speculative appeal of the ability of the preferred to run to par... If not that, then D's right now represent a better value than they normally do historically.

    • Well, there are not many preferred shares...
      i.e. in the tens of millions, the low tens.

      I'll guess 25 million, simply because it takes
      too long to look it up at TDAmeritrade...

      So, they need around $12 million cash flow per
      quarter to cover the divis. According to another
      source I use:

      Operating Cash Flow (M) 168.59

      Whether that flow is quarterly or yearly, it
      would cover the expense. reports
      that quarterly operating cash flow is $62 million.

      Now, they do have senior bond obligations...
      when I look at the common share, trading at
      just under $3 when it is book value $18.21,
      I have to assume the market is pricing in
      secondaries to come this year.

      In trying to decide my confidence level in
      the preferreds, I combine this knowledge with
      the stochastical signs I see in the common share.
      First, some basics about this year to come:

      Shares Out. (M)

      Shares Float (M)

      % Held by Insiders

      % Held by Institutions

      EPS Est. Current Year

      EPS Est. Next Year

      EPS Est. Next Quarter

      The common SFI is now rated long by Marketwatch,
      a hold by Jaywalk, a sell by
      the Marketwatch report looks a tad bearish...
      as if the common may have a retracement coming...

      In reality, what brought me in to buy up the
      preferreds with confidence was this:

      Look at that volume explosion in the first week of January.
      Something changed. I do not know what. But, the
      big fishies approve. That signal tells me that
      the preferreds are looking better now... for
      reasons unknown to me... the market said, "Buy some."
      I listen and obey...

    • You will eventually get the preferred dividend if iStar does not go bankrupt even if iStar at some point has to deferred the dividend for a period of time.

      That being said, I expect with an 80% certainty that the preferred shares will continue to pay their dividend without interruption.

      The risks are priced into the preferred shares. You get a higher dividend to account for the risks.

      This is my opinion. Do your own due diligence. Others are likely to have a different opinion.