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CommonWealth Reit Message Board

  • takemebacktooxmoon2 takemebacktooxmoon2 Dec 9, 2011 12:49 PM Flag

    Fritz Tell Us

    Fritz, what are your reasons for owning CWH?

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    • What is so hard to understand???????

      RMR gets 1/2% of the acquisition cost of all assets. That is NOT A ONE TIME cost. It is an annual cost.

      That is the ANNUAL cost to the shareholders for rmrs management of the business. It is over and above fees earned for property management, stock options, bonuses, etc, etc.

      So if rmr acquires $8B in gross property acquisitions-it earns $40m right off the top. Increase the portfolio to $8.4 billion by acquiring a $390m property in chicago and it earns an $42m off the top or an extra $2 million ANNUALLY by virture of the fact that it added A SINGLE BLDG TO THE PORTFOLIO.

      The market cap says that the bldg portfolio is overstated by $2.4B after depreciation. But rmr also gets paid on the $900m in depreciation which means it is being paid 1/2% on $3.3B or $16,500,000 on the $3.3b shortfall.

      Since there is no penalty for buying junk property why not just continue to add to the portfolio without regard to the quality of the assets purchased. The business management fee is 1/2% of both good and/or bad bldgs.

      And it is the same for GOV.

      If you dont understand this then you deserve to be taken.

    • Bubba, take a look at the admin expense ratio/assets now as compared to Dec. 2007...the ratio is roughly flat despite a material increase in property, around 20% or so...So how are they double dipping or bonusing themselves?

    • First of all I own close to 6000 "D" shares and only 1200 common.
      The d's are solid in the black and the common is a loser.
      As far the company goes,I never thought that after close to 4 years reits would still be struggling to get and keep tenants like they are today
      I own the shares because it always paid a above average div and were high quality(debt rating). I also thought that someday wallst would price it on par with their office peers that aren't doing much better if better at all.

      • 1 Reply to rfritz10
      • Think I finally figured out the income shortfall on cwh.

        I compared the management fees paid to BDN with those of CWH for the year 2010.

        BIG DIFFERENCE.

        Bdn has 233 properties of which 208 are office bldgs. It generated $523M in total revenue and total assets are $4.7B. Total in house and outside management fees paid in 2010 was 29.1M. This reit has mostly A quality suburban office bldgs and bdn was the developer contractor on most of their bldgs.

        By contrast, cwh has $6.6B under management and total revenues were $793m. It total compensation for 2010 included $27.5m for property management and $35m for business management fees. See pages f-23 to f-25.

        Because property mgmt fees are higher for office bldgs than industrial then bdn should be expected to earn more as a percentage of total revenues relative to cwh which has both office and industrial.

        So-what does the $35m in business management fees represent. It represents an override of 1/2% on all of the assets owned by the trust. That is an extra $.50/share that cwh sucks out of the ffo and the cad.

        Bdn doesnt charge any such fee.

        Any comments.