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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