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Apollo Commercial Real Estate Finance, Inc. Message Board

  • bobwas98 bobwas98 Sep 1, 2002 1:16 PM Flag

    ARI dividend coverage

    Based on latest earnings report, Funds Available for Distribution (FAD) were 54 cents per share, down from 62 cents per share. Dividend is 50.5 cents. This is a payout of more that 93%. Any thoughts on whether they will be able to maintain the dividend?

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    • if you and i owned a few office bldgs in partnership with third party management we would:

      1. dsitribute cash only to the extent that we couldn't use it more efficiently in the business
      2. be more concerned with maintaining and building value than in immediate cash income
      3. use opportunities in a down market to strengthen our position by doing tenant buy-backs and by upgrading our tenancy by using cash for TI
      I am an investor in ARI for the next 30 years - i hope
      I want them to use their funds as efficiently as possible
      In this period of cheap money, high asset values, and terrible occupancy rates, there are better things to do with cash than distribute it
      So don't worry about the dividend - worry, if you have to worry about something, about the office market

      • 1 Reply to DiamlerFord
      • Speaking on behalf of the "dividend first and foremost crowd" I totally disagree.

        I too want to hold my substantial position in ARI for the next many years but I do expect mgmt to set and pay a dividend consistently.

        We saw reits piss away a lot of money on internet initiatives. My golden rule on reits that want to diversify beyond real estate is to tell mgmt the following:

        1. Develop the plan for alternative use of funds.
        2. Make the presentation to the BOD.
        3. The Board takes the plan, rolls up dog shit in it and reminds mgmt to do the only thing they are good at in life which is real estate.
        4. Take the monies believed to be available for the plan and immediately issue a special distribution so that it cannot be pissed away on some other stupid idea.

        Diamler makes the mistake of assuming that real estate can go up and up and up. There are periods when it will go down due to lack of demand in particular areas of the country. In time all areas experience this lack of demand trend. Stabilized rents that pay consistent dividends are the only thing that can keep that reit's stock price up in such times.

        I will remind Diamler I am not in a partnership w/ARI. I am in a reit where the rules are defined. You want my capital in order to diversify your risk, grow your reit, provide ready liquidity to the previous private ownership for their own estate tax planning considerations....... all I ask is that you continue to show me the dividends.

        One final thought, you must distribute 90% of your taxable income anyway. Diamler's suggestion that "use opportunities in a down market to strengthen our position by doing tenant buybacks and upgrading our tenancy by using cash for TI" DOES NOT DECREASE TAXABLE INCOME BY ONE PENNY EXCEPT TO EXTENT OF DEPRECIATION OF TI AND AMORTIZATION OF TENANT BUYBACK INTANGIBLE VALUE. Therefore, you could be in a cash crunch (assuming you are not going into debt to pay dividends) and required to payout dividends to the extent of taxable income anyway.

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