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I have seen this so many times before. We are going to sell this and buy that except they cannot compete in the marketplace for the best ppties because the dividend yield being paid is beyond any returns available in the marketplace today.
You tell me what malls out there are selling at 12 caps. Any mall selling at a 12 cap is a basket case needing lots of capital for a turnaround ala MLS and the Cincinnati mall I referred to in a previous post.
Say what you will but when the top mall reits are paying 8.5 CAPs for excellent mall-based ppties GRT isn't even in the running.
The bigger fear is in fact that Polaris has offered its highest levered ROI it can deliver immediately after developmt completed.
The best use of any free cash flow generated by GRT is to buy in stock so that it can reduce common dividend payments. There is no better investment. Suggesting that selling this and buying that is typical corporate blah blah blah.
Ask GRT what better investmt can they make in today's market then simply buying in their own shares and reducing dividend payouts thus retaining more free cash flow than they can generate from any other investment alternative.
A couple reminders for the record:
A lot of posters said the same thing last time GRT hit the 14 area. Previous to that a lot of posters said this when it went to 16. A lot of posters previous to that said it when it was a day or two in the 12's. You would have lost money based on those comments then, since GRT went up from those lows. Using long-term explanations to excuse short-term blips is always dubious. Whenever GRT hits highs or lows usually the board talks about the trend continuing in a more radical manner. Consider for yourself how accurate the past comments like that have been.
A constant mention of CAP rates has been mentioned. If we are heading into bad times, there will be worse considerations than that. Closing of stores and having a heavy debt load will be greater concerns as well as the ability to hold on to tenants by having quality locations. The idea that the midwest is about to go into the gutter when costs become paramount sure makes a lot of sense (cough). The west coast and east coast markets are overpriced and tend to tank fast and spurt fast. They are also built so dense life is about tearing things down sometimes and rebuilding on top of old locations. Talk about cost and longer build times.
If you are concerned about the quality of the GRT locations, especially the community centers, take a look at them, in person if you want to do real due diligence. It will likely calm you down.
In general, a major brokerage downgrade usually hits GRT for AT LEAST 1.50 points, this was less that usual. So what gives? You might also notice that for months now the Yahoo compilation average for buy ratings (1 thru 5 divided by number of covering brokers has been inaccurate, and they aren't the only site). Well, guess what, it was accurately recalculated 10/28 with no changes in the recommendations of covering brokers, and yet the average rating went down (because the program finally was taught how to divide again). You want to bet how many people using automatic pilot investing by computer calculations just had this stock kick off the computer FOR NO GOOD REASON but a former math error? Cough.
The reality is more simple. Interest rates remain very low, the new malls are still not aged enough to be working at full throttle. Most of the old community centers have had their repairs done and continuing upkeep is already covered by the base rent and budgeting reserves taken out each and every time. In other words, that's not an issue that will rise in the next couple of years , and given the comments against GRT here are based on an even shorter view (basically sell now or forever hold your peace because I want to buy at this low price fool etc), you got to ignore that noise.
There remains only two key considerations in the 2-3 year time period view, which alone can have been anything to do with this spike. The concern over the retail picture over the next year (a.k.a. store belly-ups) and the ability, and when the economy will pick up.
Unless the economy goes worse into the toilet over the next year and basically remains slushy for 2-3 years, taking out your money now will over that 3 year period end up a loss.
Where would you put your money instead? Nothing pays any income right now. EEE bonds maybe at 5 percent? Maybe War Bonds when those come out and they never do it seems.
Any suggestion to put your money in other REITs or stocks runs into the same attack that was put on GRT to make you leave it. Stocks have been going down like heck, have a worry about the economy, and are considerably more sick in the balance sheet department than GRT. And they pay absolutely no dividend, their worth also totally depends on being a continuous daily operation, GRT on the other hand actually has hard assets, a.k.a. real estate, and could go private without being significantly devalued, if at all. You can't say that about most stocks.
This is the usual after dividend short-term move out of money and the downgrade effect. Unless you read tomorrow that Kmart closed all it's stores, this certainly has little reason to be considered more than the usual blip.
However, one caution. If you have most of this stock on Margin, you should consider reducing your exposure once it rebounds to satisfactory levels. Otherwise, you've been crazy since you started investing.
Good luck and no matter what, show a little calm. Even if you go totally broke panicking to death before you have a whiff of any fire will only burn you in the long run.
Up to now, the basic pattern for insiders is to sell newly acquired stock at normally 18 -20, occasionally a bit lower. They have also been acquiring stock in the 12-17 area, mostly through the exercise of options. The turnover of such newly acquired stock is expected as in effect it remains part of their pay. One must also consider how the rest of the investment and retirement portfolio of the insiders, just like most people's, have probably gone into the el toileto, so that they may have a great need for keeping their personal accounts flush with funds.
Given all of that, I've seen no insider exodus. Some one tried to suggest that earlier, with a bit of a light touch, but overall, then I'll call that a light snow job.
And for what it is satirically worth, since when has GRT ever traded based upon it's news, it's prospects, or what it is probably really worth. Does never sound about right to you?
Now back to ignoring this thread for the next 6 months.
I like the idea of buying some of the common back, it would help GRT with there cash flow(email@example.com) and it would cut some of the dilution of there previous stock offering (more earnings per share). However, going thru there quarterly report they have bought back preferred and that has to be at the sold cost so no benefit except for dividend savings. They also stated that they are going to go into more joint ventures in the forth quarter. There business model is to grow ffo by selling community centers and reinvesting in Malls which have done well for them this past year. Can they get a 12% return investing in malls in this economy, I don't think so but that is there plan. I have gone over there Q3 report and it doesn't look that bad, however 2003 might be a bit of a challenge. They don't seem to be worried!
When you point out returns available from acquisitions, are you factoring in the fully levered return from debt financing half the purchase price? In my experience, an 8.5% unlevered return can easily become 12% with good secured debt financing.