Doc, recombine PZN with Opco. The singular reason
for creating the REIT was to enhance the entity's
abilities to raise capital. For whatever reasons, and there
are plenty, it isn't working as planned. That is a
clear fact, not an opinion.
Combining the co's
takes away all the sideline issues that have grown into
forefront issues. If you had done this when PZN was at 20,
the stock would have temporarily dropped to 15 then
climbed back. Now, such a move would most likely be
greated with a move back to 20. HOT gave up REIT status
and PAH toughed it out. Look at the comparative
results. Is that a totally valid comparison to this
situation? No, but a lesson can still be earned.
remain convinced that the initial plan made sense but
things changed, some outside of PZN's control (Investor
disdain for REITS) and some within PZN's control (The
It doesn't matter. That's all water under the
bridge. Bring the company's back together before there's
nothing left to merge.
If you put the two businesses back together
(which is potentially the fair way to value the entity
anyway) the system generates substantially less reported
economics. PZN is supposed to do $300mm of FFO this year,
and it seems if OPCO is losing $40MM in cash after
getting paid $80mm in additional fees from PZN, OPCO is
really losing $120mm. So take $300MM of PZN FFO and
subtract $120mm of OPCO losses, and you get $180mm of
combined FFO (maybe accountants can monkey with this
number and take some expense and ammortize it, but cash
basis is fair way to look at economics). Divide $180MM
of FFO by 117mm shares (although share count may go
higher if they have to buy OPCO back in??), and you get
$1.55 of FFO.
At $1.55 of FFO, what multiple
does the business deserve? I suspect the multiple it
would get would likely be a discount to peer given the
credibility issues that have arisen at the
What do you think of this analysis, is it a fair way
to value the company as a system. If so, I can get
to a number for stock price of around $10 or $11
using a 7x FFO number, which may be appropriate for a
tarnished story w/ legal/other clouds hanging around. JMHO.
I they want to maintain their reit status. Reits
can only own the real estate,not operate the
business, unless they are a paired shared reit, which PZN
is not. And can't become one. Not allowed anymore.
...that he was comfortable with analysts'
earnings estimates for the next quarter and remainder of
the year, and that the various fees ($4000 included)
were included as part of Q1; if such is the case, then
FFOPS will present no surprises for the balance of this
Interesting thumbmail analysis. I'm away from my
home office so I can't do the analysis I'd like to do
but mine would go something like this...Pre-merger,
CCA was supposed to make something like $1.20 a share
(adjusting down for the drop in communicated growth from 40%
to 20%). PZN was about 1/4 the size of CCA so you
can almost exclude them from the equation but if you
choose to include them, it probably doesn't hurt my
Take $1.20 and give it a pe of 25 instead of the
previous 40+. A pe of 25 on a 20% grower would be quite
conservative for this market. I think the S&P pe is about 28
and growing under 10%. $1.20 x 25 is 30.
that cursury analysis done, my argument is that it
("it" being the numbers) doesn't matter. PZN has no
choice. They might have pulled off the REIT if they'd
operated flawlessly but the "mistake" is the end of the
great experiment. Regardless of the numbers, the market
has spoken. The stock is at $15 and going lower. IF
the debt deal goes through, they'll still need to
issue stock early next year and it's going to be at
horribly low prices.
Fortunately, they've run the
actual operations side of the business pretty well,
except for Youngstown. Otherwise we'd be at 10 right
In summary, the numbers don't matter anymore.
Credibility is zero and it can only be fixed by making the
whole entity a public corporation. Lose the REIT
status, PZN pays taxes at the lower corporate rate, I
stop paying at 46%, the stock goes higher than it
would otherwise. I'm afraid you won't find the answer
to this one on your calculator.
I can't do that. But I will admit that the CC was
I forget where it comes from, but that old saying
comes to mind (and has in the past year): "what a
tangled web we weave, when first we practice to
I really don't believe that Doc had bad intentions
in the course of all this. But I've been involved in
lot of brilliant deals that circumvented tax
prinicples while meeting the letter of the law, and I would
never present them to the public. That's the problem
with this REIT. It's a good idea, but it is way too
sophisticated to play well in the market. Even if the market is
wrong, it has passed judgment. This thing ain't gonna
bounce back any time soon. But in another year, if they
can survive the next two weeks, maybe people will
finally figure it all out.
It is NOT a REIT problem, per se. There are
plenty good REITs, with credibile management, that are
doing fine job and whose stock prices are finally
starting to move.
What we have here is MANAGEMENT
PROBLEM COUPLED WITH A CONVOLUTED
STRUCTURE WITH OPCO,
WITHOUT ANY REAL OVERSIGHT AND POTENTIAL FOR CONFLICT OF
INTERESTS AND SELF-DEALINGS.
So, to say, after all this,
that REIT is our problem, is quite disingenious of
you. I know, you are not dumb; but you seem unable to
bring yourself to one and only one conclusion from this
debacle: your hero, Doc, has no clothes!
didn't I cleonew.
It's nothing to be
ashamed of. Well many they PAH crap. Now THAT was smelly.
Buys all the way to $0 because you people had money
lend to them..shame. Nice Chinese Wall over there,
a former REIT. I haven't liked 'em for twenty or
thirty years. A growth company has no business being a
REIT. Somebody posted that the trouble with CCA began
when Doc's son arrived. True - again, not because of
bad intentions, but because the bright guy "grew up"
in Goldman's REIT dept when REITs were enjoying the
good wishes of a brilliant market & analysts like you
& Litt. If you can find it, go back and read about
HOT's decision to be taxed as a C Corp. And speaking of
HOT, of which you have NEVER responded to polite
requests for explanation of elegance, your buddy Barry got
a pretty lousy review in Forbes recently. And the
REIT bubble let a guy like him thrive.
never should have been set up. I said it before and
will repeat it - Doc's first disingenuity was at last
year's shareholders meeting when he said PZN raised $400
million with no dilution for CCA's shareholders. B.S. - I
calculate 20% dilution post-merger. Anyway, it came into
being when you and others were in love with REITs. As
Doc confessed, it was so easy to raise money that
way, why not go whole hog. Now all you REIT lovers
have turned on him and he's got his otherwise
brilliant self tangled up in the complexities.
got it right. Merge with OPCO, get some mortgages,
take the hit and get back to a single business with no
dividends!!! Sorry Flip.
Oh P.S. Cleo - you didn't
advise on the VC/VTR REIT deal did you?
And the head, hitting that nail, is yours! No
wonder, then, your postings are what they are!!
remind you, last time this board was so-o-o negative on
this stock, was in April-May 1998. Hopefully, even
you, with your damaged brains, could see, what
happened to the stock since then!
I do not love or hate REIT structure. In fact, I
have investments in some REITs. And I am NOT a REIT
I do agree, in general, that for a fast
growing company, a REIT structure probably is not the
But, my problem here, is HOW THIS REIT HAS COME INTO
BEING, WHAT COMPENSATION CCA SHAREHOLDERS GOT, etc.,
etc. we went thru that many times.
Should I take
your saying, that problems at CCA began with the
arrival of Junior, as a tacit agreement with my view,
that he should be let go??!!
Whether Doc, Junior stays or goes isn't up to me
or you. I don't know him and have nothing against
him. As ususal, YOU missed MY point: CCA got into the
REIT business because the "market" loved REITs. They
came up with a better REIT idea (as far as REITs go),
and the "market" couldn't figure it out.