REIT valuation sounds good in theory but Market would discount it back to par.
From SA article on other small REITS: "Small-cap REITs have always been seen as more risky bets than large caps. They often do not have the diverse revenue streams or stable cash flows that allow them to weather difficult economic environments (like their larger-cap counterparts). Small cap stocks are also more susceptible to wide swings in price due to lower trading volumes. This greater volatility deters action and often invites selling. The lack of Wall Street coverage and investor interest can also result in shares remaining undervalued - especially in down markets - for extended periods of time."
REIT RICK would be too small and specialized.. it's 1 + 1 = 1.
Hahaha.....Shorty has found a friend, awwww......but you two are too funny. The REIT will ACT as a subsidiary of Ricks that just happens to own all the real estate and be publicly traded. The REIT will most likely issue some type of preferred shares to Ricks......allowing Ricks to maintain control and receive compensation for managing the REIT. What the overall impact of valuation of Ricks ends up being after a REIT is spun off to shareholders, will depend on the dividend issued. The idea that it will be less valuable giving a dividend with less tax burden is kind of ironic. Both you believe management is inept, so by extension, you should believe the market is discounting management's ability to reinvest its cash flow currently. So a dividend should reduce that discount, since the money will in your theory have a better return in shareholders hands.
Sell off the REIT raise the leases and RICK shares will be worth less than RICK+ REIT. The REIT would have to raise leases to have any money to pay a dividend. Those running the REIT would get to keep the 10% that doesn't get distributed to the REIT shareholders as a dividend.
Maybe Eric could be CEO of both companoes and collect another salary?
He did say "same management" of both companies, so yeah ... probably two salaries.
But here's why it won't work in practice: Look at other REIT spin-offs like Marriott. One type of shareholder wants a hotel growth story; other type wants the real estate rents without much risk. That's the RICK theory in the conference call ... no?
But here REIT RICK would be so risky, it would just be the same set of RICK shareholders that would want it ... RICK isn't attracting any new shareholders with a REIT ... that's why it won't value.