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Resource Capital Corp. Message Board

  • income_ant_1 income_ant_1 Aug 9, 2012 6:28 PM Flag

    RSO Should be doing an offering

    very soon. Just like the othe REIT's.

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    • Agreed. Book Value is $5.44, and I would not be surprised to see a SPO at around $5.50. A lot of SPOs have been hitting the market recently and it appears the timing is right with the lower volatility. I would not be surprised to see RSO drop into the $5.40 - 5.50 range...

    • Just another example of how RSO gets confused with agency REIT's. Of course those REIT's do offerings, they're just like mutual funds, they can expand (or contract) depending on demand for shares. RSO is no such beast, offerings are dilutive.

    • waynesonnen Aug 9, 2012 8:40 PM Flag

      RSO is currently trading at BV, so a common offering is not a good idea: It would be very difficult to get returns of 16-18% just to sustain the now 20 cent dividend.

      Instead of selling common, RSO has an ATM plan to sell preferred. The effective cost of capital here is 9%, which when invested and leveraged via one of their credit facilities should generate 15% returns.

      So for now, the game plan is to sell more preferred and slowly increase the common EPS. They sold about 500K shares last quarter, and they noted that there was lots of room to sell more.

      Sure, if this were trading at say 10% premium to BV, then an offering would be appropriate. But when the pps is right at BV, then any offering would dilute -- period. The selling of more preferred was discussed in the last CC. (See the SeekingAlpha transcript.)

      Maybe in another quarter or two we'll see this trade at 10% premium. But right now, RSO still needs to "prove" itself worthy. I think they are turning around nicely, but that is going to take time. There are no short-cuts to that.

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