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Apollo Commercial Real Estate Finance, Inc. Message Board

  • turkeyknob turkeyknob Oct 30, 2002 9:04 AM Flag


    I don't own Arden, but I noticed this item so I thought I should post it.

    Arden Realty (ARI / NYSE)
    Lehman Bros
    Downgrading our rating to Underweight, with a $20 price target. Also reducing our estimates, to match the company's new guidance for vacancy rates. We believe the company may have to cut its dividend.

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    • In the ARI cc it was stated that the dividend would hold. Their basis is that occupancy would have to fall another 400 basis points AND they are willing to defer on discretionary capex. They gave the example of reroofing where they will patch now and replace later.

      I will be looking more closely but it seems to me that LA/SD doing better this quarter versus last quarter and rents appeared to be more stable.

      • 1 Reply to ferdiefor
      • if they don't earn the div after the costs that running the business should entail - including roofs, tenant improvements, etc. - then they should cut the f'n dividend

        the aggregate properties may be worth 28 net of debt, but that doesn't generate 2 a share now with adequate reserves for ti. it's just a function of a recession, a shitty office market, and a little pain in the economy that's being shared all around. if you care about the long-term value of your investment, the last thing you should care about are short-term price movements or dividends.
        as far as buybacks, if you think the company is so undervalued, you should actually want them not to do buybacks - you would get a higher return by buying additional stock yourself without having to compete with the company on price
        my understanding of the company is that it is still the best play on west LA which has about the highest barrier to entry outside of midtown manhattan. on a long-term basis, this is the best play on an area with continued growth at a cost at least 30 percent below replacement costs.

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