To the down side this ole dead horse is falling
to book value. Maybe, some MM's may enter the
picture with some buy orders before to long..We could use
all the support we could get...This dividend of over
18% will no doubt be cut to about half that...Any
news on the bond yet?
It amazing how many people come on this board,
don't read a single posts and start making rambling on
like they know what their talking
hdcafe...read post #2307..PLEASE....point 2....there are NO
Market Makers...this is a listed stock. This the second
or third time I've read about MM's on a listed
Much more going one here than accounting
1) Accounting mistake costs them ~$35mm, but fees
going up $80mm, difference represents business problems
at OPCO (how is one time payment on 21,500 beds an
2) Utilization in Q4 of owned/mgd.
facilities was disclosed at 80%. This is beneath historical
avg. and expectations in mid 90's. This was buried pre
the merger, and this low utilization was a big piece
of cash flow issue at OPCO
In my opinion,
this merger was a disaster. As a PZN shareholder I had
$2.85 of real cash FFO turn into $2.50 of FFO that is
"phantom" in nature (before it was solid cash lease
payments, now PZN is paying its own rent with fees that are
So, whilst everybody that is long the stock continues
to say no big deal, people have sold for a reason.
THe stock did not drop 9 points for gratituitous
reasons. So although it is easy to scream "ambulance
chasing", and many times it is ambulance chasing, in this
case i believe reasonable grounds.
Think a lot
of people who own the stock now would probably
agree, although won't admit there was a serious
I make no comment on current
valuation of business. Think it is neither cheap nor
expensive. For those of you who claim dividend yield is huge
(reitmeister particularly), that is a foolish arguement. THe
current economics of the business don't prudently support
such a high dividend, and it is probably in the
company's best interest to pair it down.
attachged link re:
A REIT is LEGALLY required to pay out 95% of its
taxable income! PZN Cannot cut dividend below this level
or they no longer qualify as a REIT.
PZN has been paying out more than the minimum
distribution required by tax law. Obviously if taxable income
decreases, the minimum distribution would also decrease.
Pending REIT legislation would reduce 95% to 90%.
define taxable income i think-
although they will report ~$2.50 of FFO, FAD (Funds
available for Distribution) is a much lower number. This is
the cash that is really available to pay the
dividend. I know one analyst has an FAD estimate of $1.80
this year. So effectively they borrow to pay dividend,
which is unsustainable. So if they want to continue
with aggessive accounting relative to long
ammortization of fees, maybe they have to keep paying a
dividend north of FAD which is unsustainable. Maybe if
they change accounting to ammortize more fees up
front, this lowers FFO to a level more in-line with FAD.
I guess net/net i am unclear if REIT rules define
"taxable income" as FAD or FFO. ANy experts out there?
Taxable income isn't subjective - it is defined
by law; it's what is reported on the tax
FFO (Funds From Operations)is a REIT term defined by
the industry, designed to approximate operating cash
flow (net income plus depreciation and amortization of
real estate capital costs).
Available for Distribution) is an analyst's/investor's
concept - how much is available to pay dividends. The
point of contention between PZN and some analysts
centers on how this number is affected by the special
fees being paid to OPCO. Put simply, some analysts
have taken the position that the fees reduce the
amount of cash available for dividends. PZN's contention
is that the fees are properly considered part of the
lease or building costs and should only reduce FAD to
the extent of debt service.
To the accountant
in me, PZN's position is correct. Why should the
tenant inducement fees be treated differently than the
architect's fees, or zoning fees or legal fees, or the cost
Yes, when you add up all the
costs, a prison now will cost PZN $40,000 per bed
instead of $35,000 that everyone expected. And yes, that
will increase the amount being borrowed and interest
costs. But if they are getting 20% lease income (instead
of 22%), it's still a good deal.
analysts are still steamed by the fact that the lessee who
is getting these fees is a private company. If it
were a public company, though, PZN would not be
getting 20% lease income.
I encourage many more mature, sensible posts like
yours. I do believe that the primary reason that
analysts are steamed is because they think Doc deceived
them. The analysts have a self-
they proclaim the stock is unattractive, and it
becomes unattractive. Kind of like arguing with a
newspaper. They buy ink by the barrel. They can spread more
ill will in a minute than you can overcome in a year.
They have us stockholders over the barrel burning our
butts until Doc apologizes or fences are mended to
their satisfaction. mho