Yes, it could be sooner. Without really good
supply/demand data it's impossible to predict the "when". Even
when there is pretty good data imbalances still seem
to catch everyone by surprise (e.g. oil). I try to
be conservative in my expectations -- if it happens
sooner, I'm pleasantly surprised.
another supply/demand game -- KMAG, the leading
independent supplier of hard disk media. That's the actual
metal platters that go inside a hard disk. For various
reasons the average number of platters inside a drive has
dropped from 3-4 a couple of years ago to less than 2
today. The number of drives has increased, but not
enough to absorb the excess capacity (in an example of
atrocious timing the disk media vendors went on a huge
building spree in 1996-98). The result has been horrendous
bloodshed. Quite a few bankruptcies. Not Chap 11 re-orgs,
either, but total liquidations. Life for the survivors is
no picnic. Prices drop weekly, profitability is
impossible, having the best product means you might achieve
cash flow breakeven.
No new capacity has come
online for years, nor will it. At some point there will
be a shortage and prices will spike. Unfortunately
KMAG is the only public company in this sector and
they're staggering under a huge debt load. So I only play
it with spare change.
I think that you may be right about a future
crisis in this sector and it might even come much sooner
than you expect.
About March of 1999, oil was
$10 and natural gas was $1.00. For short periods the
prices dropped below those figures. On inflation
adjusted prices, both were at all time lows. Seeing that
both cars and houses were getting bigger, I figured
such low prices couldn't last.
liked natural gas because of electrical generation and
fuel cells. I figured prices would get back to $2.00
to $2.50 within a year. Well right now the price is
above $5. Unbelievable!
I guess oil and gas
wells are depleted faster than nursing homes get torn
down, but still things can turn around quickly
You are right about one thing, won't be
too many built over the next couple of years.
"Any type of real estate is selling for a premium
in today's market"?????
If you are a
commercial real estate broker stick to what you know. My god
man MT is in the middle of a bloodbath selling off
its healthcare ppties. At the present time these
ppties are selling for 20-25% discounts to ORIGINAL
As for four years to workout LTC??? If LTC must
fully amortize this credit facility AND if proceeds
from ppty sales must go to further reductions of debt
then you stand still at best and as mt_suit says you
contract at worst.
In other words, LTC goes into a
partial liquidation mode.
<<Any type of real estate is selling for a
premium in todays market!>>
assets are selling at 20% below book in "todays market".
You must be the world's most clueless commercial
hsm said: "Any type of real estate is selling for
a premium in todays market!"
Where do you
live? Silicon Valley?
doggy said: "Nursing home
assets are selling at 20% below book in "todays
In general I would agree and add movie theaters to
the list of general property groups that are down.
However, I think there might be quite a few nursing home
properties that could be sold at a profit above book.
Perhaps those in the forementioned Silicon Valley and
perhaps a select few other markets where land value alone
has sky rocketed, older properties that have been
heavily depreciated, and here where I live. Here in south
Alabama and probably south Georgia even more so, the
nursing home industry is quite strong due to Florida
That said, I was rather puzzled by the
press release mentioning possible capital gains from
property disposition. I wouldn't say it was impossible,
but I will be surprised if LTC can obtain a net gain
on property disposals.
Does LTC have many
properties in northern CA or near the Florida state line?