Say you have a friend that lent you $35 million. The friend is charging you 0% interest. That's not all. Your friend is willing to lend you $2 million more every quarter at 0% interest. Well, what are you going to do with this money? You could buy properties and lease them at 9-10% cap rates. You are USING YOUR FRIEND'S MONEY to earn 10% FOR YOURSELF!
Of course you have to pay him/her back someday, but you'll only have to do that when you NEED to do it to remain a REIT.
So simple. So profitable!
Anybody want to lend me $35 million at 0%? I promise I'll give it back to you someday.
GPT is not borrowing at 0%, it is accruing a fat liability every quarter since the accrued pref that must be repaid before common dividend can be paid. If mgmt ever hopes to attract true REIT investors to this stock (and earn their incentive comp) to raise the stock price, they need to pay a common dividend. I have owned many preferred issues, most of which have been called as interest rates have declined, and replaced by lower-paying issues. Except this turkey. But my basis is $1.50/share so I will keep waiting.