Selling at close to half book and with a 20% plus dividend (which according to guidance is felt by management to be sustainable) - I am willing to cautiously average down. I am not backing up the truck, although I am prepared to on any good news.
I bought in after CT tripped one of my filters based on Div Yield, PE, Mkt Cap, and FFO.
My subsequent due dilly (after trigger, pre purchase):
~ (+) 0.60 div still gets me a good yield ~ (+) still FFO positive ~ (-) may not be FFO positive if Macklowe doesn't unwind in a positive way. Though there is upside on Q4 earnings if Macklowe ois somehow recoverable. ~ (+) 1 yr credit extensions from MS and Citi... ~ (-) They need the JPM/Bear extension, and that's still up in the air... ~ (+/-) CDOs still meet all tests by the same margin as when they were originated. Thus may not have to repurchase. ~ (+) May have asset mgmt bonus at year end from managed funds... = bonus divy?
The big overhanging cloud is the whether mgmt has a good read on their markets. That mgmt missed the "quick deterioration" of the Macklow situation leaves me a bit worried about their judgement one whether to impair any more assets...
the Macklowe loan has a $50M reserve against it, so anything they get out of it from here is gravy
CDOs - CT is buying some of their CDO issues back from the stressed IBanks at crazy yields - the reasons for this are clear: they know what is in them (since they did the initial underwriting) and they are buying at an unreasonable discount (due to distressed sellers and the overall credit market disarray).
I think management has an excellent read on the markets. The Macklowe writedown was due to the single transaction having trouble because of the sensed distress of the seller - not the actual property fundamentals. The GM building sold at a 4.4 cap rate - same market as the buildings they own a mezz piece on at the 74% LTV level, if my memory serves. Does a 4.4 cap sound like the building was impaired beyond a 26% discount? I think not. Unfortunately, Macklowe was a forced seller. But, it has been my experience that CT is a very conservative bunch and they'll come out OK at the end of the day overall.