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Resource Capital Corp. Message Board

  • ruby.thedyke ruby.thedyke Dec 10, 2013 2:21 AM Flag

    The near future seems pretty clear

    Two things have become fixed at RSO. First, regardless of the logic, this is perceived to be in the same category as agency REIT's like NLY, and therefore is doomed to trade at near the same yield, even though arguably the business model here is much more forgiving to changes in interest rates.

    Second, as some on this board foresaw, the legacy securitizations are running down, the reinvestment periods are lapsing in sequence, and further repayments have to be returned to investors until they are paid off. Therefore, without new CLO/CDO entities being created, it becomes increasingly difficult to maintain cash flow. It would seem that if the securitization model was going to be revived, we would have seen it by now. Say goodbye to the long defended dollar, 80 cents is the new "promise", and how long will that stay good? They're scrambling for other business, but that changes the whole model of what RSO was about.

    So, can you own this? The return is very enticing. I think the answer is yes, but it's probably only safe to hold it for about three dividend payments (and be prepared to flee if there's a shortfall in AFFO). After that things could get dicey. And don't expect much in the way of price movement, if 80 cents is going to be it for 2014, then we're probably stuck right about here. I'm out, but considering coming back in, briefly, just as a place to park money. I'd like a better price, but it doesn't seem like there's much chance of getting it if you want the January dividend.

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