It refinanced a tiny portion of its debt in 2008, and even miniscule portion this year. I read the 10-K that came out in the last week, and it is strange how the company has prepared its balance sheet, since it did not break down "current" liabilities from long-term liabilities. But, it has over $300mm in a credit line due in December 2009. It seems that because it has the "option" to continue that for an extra year, that is is qualifying that (by default) as long-term debt. But, being able to continue it for an extra year is subject to not violating the covenants. It seems like that $300mm+ plus the other $200+mm that seems to be coming due this year, make for some BIG problems for GRT.
It's problems are very much ahead of it, not behind it.
You are right that NOI doesn't include interest expense, i got the definition wrong.
But you just contradict yourself by saying noi is 182 millions, not 100 millions you said before.
182/82 is 2.22. Yes, not 2.25, but close enough, using YOUR numbers.
To get NOI : from the 12/31/08 income statement take the net of $16mil,add the interest expense of $82 mil. To that add from cash flow statement the depreciation of $84 mil. That gives you about $182 million in net operating income. This is the NOI I refer to which is essentially a return on assets. This is the cash available to pay off debt and give cash to stockholders. Trust me. I know something about this.
I just shown you how i got the ratio, it's from YOUR numbers. YOU assumed NOI of 100 millions and interest expense of 80 millions. Simply NOI/interest expense is not any cover ratio because NOI has deducted the interest expense already.
2008 statements shows net income to common is negative 668 thousands while depreciation is 84 millions. Where you get this 185 millions from??? Can you read financial statements?
Usually banks look at operating cash flow i believe. 94 millions of operating cash flow and 82 millions of interest expense from 2008 statements give interest cover ratio of (94+82)/82 = 2.15. This result ignores debt service for principal payment because most commercial real estate gets interest only mortgages, loans and for simplicity sake people assume the company can refinance its debt.
If you review the income statement and cash flow statement you can pull off net income, interest expense and depreciation, but you don't have the principal reduction. Principal reduction plus interest should equal total debt service except that the line of credit would fluctuate.
I don't know where you got your ratio, but a 2.25 is not correct.
If you take net income and add back depreciation and interest you get about $185 million. Total long term debt is about $1.7 billion. Divide the cash flow before debt service and you get about 11%. This is a reasonable number since a typical mortgage constant in todays market would be well below that number.
You have to add back the debt service in the numerator in your calculation because NOI included the debt service in its expense portion. Think about what your sentence " If that number is 1.0, that means there is just enough cash flow to pay the debt with none left over for distribution to the equity holders" actually means. Using your number, the cover ratio is (100+80)/80 = 2.25. GGP situation is at roughly 1.7.
Kudos to community bankers like you, who actually stuck to your knitting. I don't know about bright, but at least you did not tank the economy. But, the person you responded to was me, and I had mentioned both balloon payments and the credit line. But, again, I advise you check on GGP. I have not followed that one too closely, because GRT has substantially broader problems. But, GGP has much more valuable assets relative to debt than GRT and is still having problems keeping all the balls in the air. GRT, quite frankly, is toast and the market knows it. You have a better prospect in CBL, although I would avoid all the mall REIT's, as we are overstored in the US.
I am proud to be a banker and will stand up when I say that. Now, I will say that I am a community banker from a smaller town and not an employee from one of the big boys from larger/metro areas. I personally think the big boys have gotten too big for their britches and its coming back to bite them in the butt. Im sorry to say it is hurting the industry....but we will weather through it.
As far as me studing the filings, etc. of GRT I really haven't dug that deep into them...I was attracted here because of their historical dividend payments. (Not sure they will be able to continue but looking in the rearview mirror they look attractive.)
My only comment and post was disagreeing with the previous poster about balloon mtgs. and I still say they can be rewritten or refinanced upon maturity. They seemed to think that THEY COULD NOT BE.
If this stock improves or I'm around here when the economy improves I might do better DD and possibly purchase some.
Not here to argue or analysis this stock just stating my opinion / thoughts and try to respect everyones elses.
Your comments concern me because you seem to have a 1960's or 1970's opinion of bankers. While some may leave and golf at 2 everyday there are others that work for their customers and are proud of their profession. (Someones left a bitter taste in your mouth about bankers ... sounds to me like you need to change banks)....Later
What should matter most when evaluating a REIT is NOI divided by debt service. This number is usually referred to as debt service coverage. Cash flow, usually net income plus depreciation, is divided by the required annual debt payment. If that number is 1.0, that means there is just enough cash flow to pay the debt with none left over for distribution to the equity holders. Less than 1 means the REIT must borrow to make its payments. Greater than 1 means the the REIT could use its surplus cash for distributions, debt reduction or asset acquisition.
This ratio is usually required to be greater for speculative or riskier real estate than less risky. For example if I am financing a WalMart, just over 1.0 will suffice versus say a spec office building where maybe 1.3 based on the projections might be required.
GRT NOI divided by its interest expense is about 1.25, about $100 million divided by about $80 million. But that is just interest expense and does not include required principal reduction.
Maybe someone out there knows what the actual annual debt service is for GRT. I haven't been able to pull the numbers off the 10K, but they are probably in there somewhere.
"Could you name any new loans (not extensions of existing loans) to regional malls for over $50 million that have been in US during the last 90 days?"
Your question has a lot of qualifiers. Excluding extensions of loans may actually prove the point of the bulls - lenders who know their borrowers are granting loans. They are in the best position to know their customer's ability to repay.
A better question might be:
"Could you name any new bankruptcies by a regional mall in US during the last 90 days?"
Or go to a mall and see for yourself. It's not financial analysis, to go to a mall. But everyone who has been watching the evening news about the crisis the consumer is in, might actually be surprised when they go to a restaurant or go shopping.
Any REIT that needs financing and can't get it will be in trouble. No way around that. If credit dries up permanently, GRT won't be the only one in trouble. I'm betting that credit will be available to REITs when needed.