Ferdie. You just posted the following:
<< The big problem is TRZ keeps having to go downward on its estimates by much more than the peer group >>
Did Trizec not just confirm yesterday the guidance they gave in December? Some analysts might have adjusted their numbers downwards by a few pennies due to the Sears Tower delay, but that's a fart in a hurricane. I believe Trizec stuck with the same range.
Historically speaking, you are correct. Trizec is a serial profit warner. However, I suspect Callahan's big chop in guidance back in December was meant to be very conservative.
Unfortunately, all these war and terror concerns are suffocating the economy and many firms in many industries are likely to be chopping guidance in the coming months.
I went thru my posts. Where did I say TRZ was a POC? I don't think I said it but if I did I'm sorry because that isn't my normal way of thinking.
I was asked a question on another board assuming it was a TRZ poster and posted here re ARI vs TRZ rather than O/T on another board.
TRZ has some work to do if it is going to join the top tier office reits. Assuming 66% is the lever number that is still way too high. Now for those investors that want higher leverage to generate higher returns all I can tell you is that its difficult to invest long term because in scary times like these the dividend is being put at risk ala PGE.
TRZ took investors down a path of hard luck when they started the reit conversion process believing they could deliver a $1.30 dividend. Now being down to $0.80 is a real lesson to the downside of too much leverage.
Look, I post from the long term perspective to people who are looking at real stability of income over the longer term while they are holding their reits in a highly volatile market.
The 72% leverage came from an analyst report that I had in my file. It was a recent report. In addition, there was an article where GreenStreet Advisors recently referenced the 72% leverage number so its not some number out of the blue. If its down to 66% that is great but as I said above lots of work to do.
The message of the market right now at least is that too much leverage is not an attractive characteristic at this time.
All happy families are the same;
all unhappy families are each unhappy in its own way
the office reit market is in such condition now; some are suffering from excess competition; some from poor balance sheet metrics; some from unreasonable discount from NAV.
Well , it's an unhappy industry, and everyone's misery is manifested differently. the only cure is a pickup in office hiring sparking a need for space. absent that, they'll all be in the crapper
Ferdie knows his stuff.
I don't always agree with his comments and conclusions (like Trizec needs to issue Prefs) and I don't care what happens in the last hour of trading but I do respect his big picture opinion on the state of the real estate markets.
It's not enjoyable to have Ferdie call Trizec a piece of crap since we're feeling pain but we all screwed up and perhaps everyone should take two minutes and look at where we screwed up so we can learn something and become better investors.
If TRZ pays an 80 cent dividend $13 would represent a yield of 6.15% Does not seem reasonable on the surface that TRZ could sell at such a low yield anytime soon.
As far as 72% versus 66%. That may be a function of the last balance sheet which I have yet to look at.
You have to look at last hour trading today when virtually every office reit ended the day up and TRZ still stayed down.
ARI and CLI and four or five other mid-cap office reits are basically stable, slow-growth office reits that will move in tandem. TRZ, on the other hand, is designed to produce heavy heartburn, acid indigestion, and feelings of impending doom. TRZ is hated by the analyst community (they had hissy fits and fights at recent conference calls) and has no credibility with investment professionals. The nominal additional return that one might ultimately realize with TRZ is not worth the aggravation, agita, and gut-wrenching moves that one must endure to hold it
i would prefer 3 or 4 office reits over EOP (which has a market cap greater than ari + trz + hrp + cli) for another, more tax-focused reason:
since they will trade in similar patters, one could sell and replace within the sector to create tax losses more efficiently - in many instances ari, cli, and 3 or 4 others trade so much in tandem that owning a few creates massive tax savings opptys
which is all the more interesting because they are two of the best bargains in the office reit sector:
ARI is highly focused - if that's what you believe in. they have about the highest "barrier to entry" portfolio around (other than SLG's manhattan). And SoCal is one of the most vibrant markets around; and, ARI has the liquidity to support a buyback program to keep the stock in line
TRZ has a better overall property mix than most of the office reits, it sells in the crapper at less than 5x projected 2003 FFO, and has just taken on the most talented and experienced manager in the business. Does TRZ have problems - yes; can they be cured - definitely. Once cured, the stock should be at 13 per share assuming no change in the overall valuations of its peers
i would rather own TRZ, ARI, and CLI in a third-third-third proportions than own EOP
i think the total return from the three over the next 5 years would exceed the return from eop by at least 1.5 percent per annum
Repeat (see msg #422): TRZ's total liabilities/total assets = 66%, based on book values. This is only slightly higher than BXP's 64% at year-end 2002. However, as property assets get depreciated over time, a debt ratio based on book values can be misleading if the market values of the assets increase and throw off higher cash over time.
Times interest earned in 2002 was almost 2.5 times ($476 million/$192 million), which is higher than many well-regarded non-office REIT's. AFFO was $195 million ($1.30/share), adequately covering the proposed $0.80 dividend, even if occupancy should drop by 5% (say $50 million lower rents) in 2003.
I suggest you stop whistling the "72%" tune and find another theme!