I'm somewhat confused by information in previous threads....If I remember correctly, if Taberna collections improve or loans are paid off, RAS's balance sheet incurs an increase liabilities....Does that mean more GAAP loses?
Does anyone have a guess how many years Taberna will be a drag on RAS and will it ever produce income?
Seems to me RAS will never really catch the markets attention, as long as GAAP losses plague their balance sheet.
First, your summary explanation of what is happening with the Tabernas, at least until it is RAS bond holdings in the Tabernas that move into the money, and it continues to have significant holdings of rated junior debt. The information we have doesn't provide any reasonable basis for guessing when that will happen, and at this point I'm no longer convinced that it will happen in a time frame that will matter. I am sure, however, that RAS is doing its best to accelerate a resolution and end the "drag" as quickly as it can.
That said, I think that there is considerable evidence that RAS is catching the markets attention and that Tabernas effects on GAAP earnings is having, at most, a modest effect on the stock price. Consider institutional ownership, which ended 2012 at 47%. Institutional ownership is all about the market noticing, a stock, and it continues to grow. Indeed, by stock screener currently puts institutional ownership at 57%,, a number which reflects, among other things, the Blackrock ownership increase that recently showed up in a 13KG. It may be that other institutional players would be in RAS if it was should showing GAAP earnings, but institutions tend to be sophisticated players. They probably understand the effects of Consolidateion.
Second, consider RAS' dividend yield, which has been, and remains, one of the lowest among dividend paying mortgage REITs for over a year now. Just to be clear, a low yield means that the stock price is high relative to the dividend, and that high stock price is another indication that the market is is aware of RAS and is pricing it based on an expectation of growth; especially growth in the dividend. Assessment of yield is complicated by RAS large holdings in RE. Property REITs generally sport lower yields than mortgage REITs. Still, even if we assume that RAS is being priced between mortgage REITs and property REITs based on its hybrid portfolio, it can still be argued that the market has a sophisticated awareness of RAS.
Worry less about GAAP and more about operating earnings, AFFO, and the dividend. That seems to be where the market has its attention focused right now.
You seem quite knowledgable about Tabernas. I am trying to figure out if there will be a potential impact from Tabernas on future AFFO. Looking at their 2011 10-k, they state they had $279 mn in restricted cash with $84 mn "reserved" for the Tabernas CDOs. Then in the Q3 10-q, they state that restricted cash is down to $115mn and $88mn of restricted cash was used to repay senior tranches within the Taberna CDO structure. That would seem to imply they no longer have any "reserved" cash set aside for any further issues there. Based on their Q4 release, restricted cash is down to $90mn. I do not know, however, if there are any more senior tranches, not owned by RAS, that would require further payments under trigger agreements.
Also, a statement in that 10-q has me bothered. Here it is:
"The increase in cash inflows during the nine-month period ended September 30, 2012 as compared to the same period in 2011 was substantially due to the use of restricted cash to repay the most senior note holders of a consolidated securitization"
It sounds like, if it wasn't for the reserves the AFFO would have been much lower. But the question I have is are there any more potential payments to be made within Taberna and, if so, where is it going to come from? I have a query into IR but, so far, no response.
Also, they have a convertible bond that converts at 7.28 share price which would dilute with an additional 15.4mn shares (out of 49 currently out). That seems pretty significant.
It is a pleasure to ask a question and see constructive dialogue develop on the this message board.
I wish to rephrase my remark regarding "RAS catching the markets attention"... What I should have written was....When will the market's perception of RAS change to that of a typical REIT?....REITs were known for a 'buy and hold' for the dividend. Prior to '08 RAS was and lightly traded and not subject to volatile swings such as today....Nor was it the object of shorting strategies.
Seems to me the GAAP loses always cause the other shoe to drop....