the unspoken benefit of the Sears inclusion in TRZ's nums in 2003 is that Sears, with only a 70 million investment, has a first mtg which, when added to its accrued int, is monsterous; while the actual cash flow to TRZ won't be significant until there's a real turnaround in the property, it is, and will be for at least 2 yrs, a tax shelter for the other rental income. You can't buy this kind of shelter anywhere else, not at these price;
it is thus possible that a 2.40 ffo in 2003 could be sheltered except for 50 - 60 cents; thus, the anticipated div of 1.10 will only be 50 percent taxable, and the balance of FFO will be totally sheltered.
over the next 5 years this shelter alone will be worth at least 2.50; at today's price, the stock is selling at a 35 percent disc from NAV - rock bottom; when you add the benefit of the shelter, this is one sweet deal.
very low vacancy rates at sears tower; trz takes it over next jan
garment centre bldg in midtown manhattan is fully leased
hollywood & highland - stayed in hotel there last week; looks like business is picking up (was there in june and it was dead)
A large chunk of FFO drop due to one time charges merger/severance.
Been reading articles saying that the office market is worse than the 1990's period.
This stock seems to be extremely undervalued.
The clean up continues with non core assets. Hopefully by 2003 end its complete.
$1 -1.2 divie should help valuation 8.85%- 10.60% at current prices.
he's hurting more than anyone; which is why he brought in new mgt
more than half the ffo dropoff was related to underestimating the merger costs - non-recurring issues
trz can do 2.30 ffo in 2003 which would keep it in the 15 - 17 range if it trades with peers
once they start paying normal divs in 2003, all the bull
The story here is how ffo has fallen off a freaking cliff here. At least 50 cents/share which is extraordinary compared to the peer group and thus is the reason for the selldown.
The other one of course is Monk. He's gotta go.
Are you saying NAV is $15.70. 35% Discount to current price. I thought the NAV was near $20?
What is normal discount to NAV for Office REITS ? Any range?
How would you describe the current office market?
the market discounts the NAV of TRZ by at least 35 percent; on a true asset value, debt to cap is fairly close to 55-45, whic is quite reasonable for an office reit
look at the relative values in EOP, BXP, VNO. You'll see that the cash flows which TRZ generates realtive to its debt service requirements are quite normal.
Remember, when they did the reorg in the spring they published a fairly complete registration statement; it is a good source of reference for this entire situation.
TRZ owns a 70mil second mortgage on sears tower giving them the right to assume 1st mortgage by a certain date. Right now they manage the building.
Div next year in the range of $1 -1.2 depending on FFO.
How do they pay down debt 61.3% debt /capital? get to normal levels. Before 1 time charges this year FFO 2.35.
1. they didn't "assume" the 1st mtg; they bought "subject to" - the difference is significant - worst case scenario - they drop property and lose 70mm (40 cents per sh).
2. they cover the 1st mtg with rent from all the big, medium, and little tenants in the building
3. yr 2002 ffo were impacted by a few "one-shot" situations - expectations among 2 analysts i've spoken to put 2003 ffo between 2.20 - 2.33 p/s
4. there are very few better bargains in office reits; there are none with as impressive a selection of CBD props
I hate to quibble, but mortgage interest is not a tax shelter. It is a real expense that reduces FFO dollar for dollar. Only non-cash expenses like depresication and amortization shetler FFO.
don'tquibble - the large mortgage on Sears Tower creates basis which is useable for depreciation to shelter the income earned on every other piece of property the company owns; it is a clear advantage - high leverage (the first mtg) with no personal liability (they acquire by foreclosing on 2nd). As long as they can cover the first, they can keep a shelter going.