#5 on the first page of the Feb release shows a reduction of quarterly cash flow of $5.8M. For 2009 that equates to $23.2m in lowered cash flows. Assuming the return at 6% that means that $387M in assets of Taberna just vanished or were devalued in accordance with GAAP. The cash flow of $174.4M as of 12/31/08 has therefore been reduced to $152M or 13%. The loss per share in the 1st quarter just from that one item will be $387M divided by 64M shares or $6.50 per share.
I now see why the Prez resigned and took another job...his 1/2 M salary may have been in jeopardy. I now see why ras pointed out the rules regarding paying dividends with stock
The Investments in securities shows TruPS & subordinated debentures at $1,644,666. The numbers are not separated so we really don't know which the -$387M relates to..or maybe a combination of both. In any event...this is very poor reporting on the part of ras.
The foregoing is the downside. On the bright side..the assets that are performing will still produce an operating profit...and it would appear due to the reduction in cash flow that ras will not have the cash to pay the dividend. The price of the common is too low to use to pay the div. SO, WHERE DOES THAT LEAVE US?
IMHO..fellas...ras will have to create a loss reserve to wipe out all the 1st quarter profits. This can be reversed later in the year if the situation warrants.....leaving us with no 1st quarter profit according to GAAP and no div responsibility.
I challenge Davis and anyone else who grasps what I have disclosed to refute the foregoing disclosures and that includes RAS. Make no mistake, RAS has some goon who reads the stuff we post.
We all noted the $5.8M reduction in cash flow when it happened. That's not news. Your headline would be news if it was accurate, but it presents the extrapolated loss for the year as if it were a first quarter loss, and that's not accurate.
What is accurate, as discussed at the time, is that $5.8M translates to about 9 cents a share, or a reduction of the 4Q earnings to about 24 cents a share. I don't know if things will be that good 1Q or not (I would guess not), but a 1Q dividend in the range of 20 cents a share (perhaps as high as 22 cents a share) seems likely that ballpark of numbers. I figure the cash portion of the dividend will be in the 2 to 4 cent range and that stock will fill out the rest. So long as that cash is used to pay off debt, buy discounted bonds, and retire preferreds (in that order), I'm OK with it.
I think that Mr. Cohen's move over to the combined AFN/Cohen and Co. represents very little more than a need to put focus on those businesses (AFN was completely his baby from the start and conversion to a class C does open major opportunities to realize long term gains using the companies cash and cash flow). The very little more I see is a gap between his preferred approach and that of Mr. Schafer, who I believe has been an advocate of somewhat more conservative approach. I believe Mr. Schafer has won the day, and that the write downs we saw 4Q represent a movement towards a more conservative statement of accounts. I don't know if he's gone as conservative as Crystal River, which saw substantial "unexpected" cash flow from portions of the portfolio they had written down to nothing, but conservative is probably the way to go right now, as RAS forecloses an increasing number of properties and moves slowly towards becoming more of a property REIT than a mortgage REIT.
Beyond that, its pretty clear that the write downs are mostly in TruPS and residential. You can see the numbers broken out in the statement. The value of the residential portfolio is reduced and the value of the TruPS portfolio is moving towards the status of noise on the balance sheet.
Beyond that, there is nothing to refute in your message, which is mostly guesswork. The environment is pretty horrible out there, but RAS continues to make what appear to be the right kinds of moves to survive going forward, and for me, at least, the long term is all that matters. Mind you, I'd rather have a 20-24 cent cash dividend than a 2-4 cent cash dividend in the shorter term, but I'd also rather have stock in a company that is setup to survive this mess and thrive down the line.
I was a bit slower than the rest in absorbing the release. Other than what has already been said..my main concern was the asset depletion represented by the reduction in cash flow..I have to assume that the 378M was Taberna v111 & 1x. While Taberna's fugures were combined with subordinated debt..I assumed that it was Taberna that represented the reduction in cash flow. While I would love to see ras buy back more of their debt at a discount...I can't find where the $ will come from....maybe you can.
Doesn't the JRT scare you just a bit? Or CRZ, or CBR, or whatever? The market seems to be saying the MREITS have a major capital strucutre problem: Intensive leverage in the face of falling assets...think of the trash compactor scene in Star Wars sans-R2. It has been staring at us since last summer, at the latest.
"...leaving us with no 1st quarter profit according to GAAP and no div responsibility."
FYI, the need for a REIT to pay dividends is based on taxable income, not financial statement reporting. Reserves and valuation changes do not affect taxable income.
Unless RAS writes off some loans during 2009 it will have taxable income, even if at a reduced rate, as expected. Schaeffer mentioned the Rev. Prov., which allows even ordinary income dividends to be issued in stock during 2009 without a ruling request, but he didn't commit one way or the other.
Anyway, as with NRF, trade the common and hold the preferreds if you want cash flow for 2009. I got out of most of my RAS common this morning and am looking to get on the ladder again lower down. Hopefully we can play this game all year, it doesn't take much of a bounce to earn a profit down here.
From where I sit it seems ras will certainly earn an operating profit in the 1st quarter. Inasmuch as the cash flow impairment may effect their ability to pay the div....I would just as soon see them get rid of the profit with a loss reserve. They are not as dumb as the Taberna purchase indicates. If rashad the funds to buy back the common at under a dollar a share, they would. The fact that ras is not buying back stock tells you where their cash position is. A no profit 1st quarter with no div will have no impact on the stock...imho and I see ras surviving thru 09.
i came to the realization with all the stuff going on that RAS could easily mark down/impair and have no dividend income this quarter and buy distressed debt for this quarter...
that's what i would do...
i just wish they had enough cash to buy back stock...because if the company survives they won't get it down here...