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Mid-America Apartment Communities Inc. Message Board

  • rwitt785 rwitt785 Feb 27, 1999 8:40 AM Flag

    Bought FAX over MAA in an IRA

    I have an IRA which was 2/3rds in FAX (First
    Australia Prime) and 1/3rd in cash. For the 1/3rd in cash,
    I was looking for something with a yield of over 8%
    and a potential price growth of 12 to 15 % per year.
    I was looking at a 3 year time horizon.

    With
    REITs in a bear market, which might end this year, I
    searched this market for reasonably assured opportunities.
    I went through Value Line, Morningstar, searched
    the internet for business articles on the REIT
    market, used Hoover, Zacks and Yahoo for searches and
    lastly went to the Yahoo message boards!

    What
    was my conclusion from this exercise? It was that FAX
    had a more assured, less risky future than the REITs
    including MAA! Yesterday, 2/26, I invested the last 1/3rd
    of this IRA in FAX @ 5 7/8 with a yield of ($.72/$5
    7/8)x100 = 12.255% My arithmetic for FAX based on Value
    Line and other sources for the next 3 years is as
    follows:

    The next 12 months: To 3/2000
    Yield = .72 for year
    = 12.255%; target price of stock = 1.12 X 5.875 =
    $6.58; Total Return = 24.25%

    Year end 2: To
    3/2001
    Yield = 1.125 x .72 = .81/yr = 12.25%; target price of
    stock = 1.12 X 6.58 = $7.3646; Total return =
    24.25%

    Year end #3: To 3/2002
    Yield = 1.125 x .81 =
    .91/yr; target price of stock = 1.12 X 7.364 = $8.248;
    Total return = 24.25%

    The further out the
    forecast, the higher the risk of error. For year end #3: 3
    /2002 a yield of $.91/yr/shr may be high, the stock
    price of $8 1/4 looks reasonable. Should they have a
    dilutive rights offering as this past fall, then all bets
    are off, and I would sell all or most at the first
    hint of such an event! This projection is near
    consistent with value line projections. Anyway this
    projection seems more assured then those I could make for
    the REITs I looked at including MAA! There will of
    course be bumps along the way.

    I am 76 years of
    age and with mandatory withdrawals from my IRA, the
    above forecasts do not include any reinvestment of
    dividends. Since this is an IRA, the foreign tax of
    .004/shr/mo is not deductable for income tax purposes. .004 X
    1000 x 12 = $48/1000 shrs. or for 10,000 shares = .004
    x 10000 x 12 = $480 per year.

    Whats your
    opinion? Did I make the right choice?

    SortNewest  |  Oldest  |  Most Replied Expand all replies
    • What business is FAX in? Why is that dividend yield so high?

    • Take a look at the declining NAV-the distributions are not comparable to ffo.

      • 2 Replies to officejrb
      • Your reference to declining NAV is presumably applicable to some other company, not MAA.

      • Too late to buy now. I unfortunately sold most of
        mine a while back. What is interesting is the offers
        they are "supposedly" getting. Stock was $9.6875
        yesterday and up $1.125 today due to release that they have
        received offers on the whole REIT. They released that part
        of present management had offered $11.05 in cash and
        the outside directors said they had other offers and
        management's offer was insufficient - making one think that
        some of the other offers were higher.

        On a
        valuation level, I don't think that BRI has been that much
        cheaper than MAA recently and after today's rise in BRI,
        MAA is probably cheaper. I think this illustrates the
        depressed share price of most REITs. Although it is easy to
        be patient with a yield over 10%, I still wish
        management would do something to realize the value in MAA.

    • FAX scares me. They have too much of their money
      in overseas bonds which change value with exchange
      rates. Sure, the dividend is high, but unless you are
      going to Australia you just don't know how much of your
      $5.75 you will get back when exchange rates
      change!

      I would stick with MAA, although the charts on many
      REITs look absolutely dismal. FFO is great, and the
      outlook for earnings on these stocks isn't that
      bad.

      --Alfonso

 
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