I've crunched a few numbers and I think that
Retired Paperman hit the nail right on the head when he
said that all eyes will now turn to occupancy with the
SI issue temporarily moved to the back burner. Why
it took until now for these guys to realize that
they could postpone their dividends until next year we
will probably never know, but isn't Bob supposed to be
an REIT expert?
As I calculate it, if you
combine PZN and OPCO, the actual free cash available to
pay dividends was about 25 cents a share. The picture
is not as bleak as that may sound, however, since
growth is a huge cash user (which is why I agree this
entity would work much better as a C Corp.). If the
company were to simply stop adding beds and increase the
margin per bed, I calculate they could support about a
33 cent dividend, even if occupancy stayed at
current levels. The current system filled up and at
mature profit levels could support a dividend close to
And if Doc's dream of all the new
beds being brought on in the fourth quarter were
filled and brought up to mature margins, the company
could pay a 55 cent dividend without financing, by my
Bottom line, this is why I stay in this stock. Either
they will be able to continue getting financing to
expand and pay dividends, in which case FFO will
continue to rise as long as the fundamentals of the
industry hold up, or they will not be able to get
financing in which case they will have to stop building,
fill the beds and pay a dividend consistent with true
operating cash flow. After the fourth quarter, I think this
non-growth, "mature" dividend would be north of 50 cents per
quarter or $2.00 per year, not a bad cash yield.
As to Bob being a REIT expert and them not coming
up with the "pay the dividend next year" strategy -
necessity is the mother of invention. You don't look at
something until your cash flow dictates that you do so. As
much venom as has been thrown at these guys (and a lot
of it deserved) you better start cheering for them.
I think they are going to deliver on a lot of the
occupancy issues outstanding, but you better hope and pray
they negotiate a deal with the strategic investor that
doesn't dilute us all straight to you know where. Their
ability to convince an si to give them financing at a
level that doesn't cripple the company's current
shareholders is very, very important to all of us too stupid,
stubborn, or optimistic to have sold this wonderful stock.
His no growth scenario, I believe, is similar to
yours: "I think this non-growth, "mature" dividend would
be north of 50 cents per quarter or $2.00 per year,
not a bad cash yield."
At that point, how
would debt (prinicpal) be paid back? (I assume your
cash flow available for dividends is after adding back
depreciation). Even my bank gets tired of interest only payments
after a while (especially lately).
If this method is legal, and I don't claim any
knowledge beyond what I have read on this board, it has
If the REIT-required
dividend for this year is deferred until next year, and
next year's is deferred until the year thereafter, in
effect PZN's shareholders will have made PZN a loan at
no interest in the amount of a year's worth of
dividends, perhaps in perpetuity. This method, regardless of
its effects on shareholders, certainly would seem to
relieve the need for PZN to raise money, or obtain a SI.
OR, if the need for the SI is only a matter of
financing growth, then the terms of that relationship may
be much better than we were fearing.
is given to wonder that, with all the financing
problems various REITs are having, if this method IS legal
why the hell haven't others heard about it and
adopted it as standard practice?
Next, if the
dividends paid out this year were all special dividends,
the tax status of those dividends for investors is
suddenly changed. ALL of the dividends become taxable, as
the special was to be! Another fine present for
long-suffering PZN shareholders.
One must also wonder
about the change in status of the dividends being
declared. The board has declared separate 'regular' and
'special' dividends all year. They even post separately in
my brokerage account. To change that status after
the fact would seem to provide ample grist to the
lawyers, should any be listening (should any understand
Last year I got my final
broker's statement in April, because REITs were still
determining the tax status of dividends being paid. I wonder
if IRS will understand PZN shareholders being unable
to calculate their tax returns for a couple of
there's usually some symmetry to tax
Even if the regular 1999 dividend is deferred as far
as cash payment, I suspect it would be taxable to
shareholders in 1999 in order for PZN to avoid paying tax in
1999. Do you know?
I am a lurker and I read the posts based on the
poster, not the subject.
I generally choose the
posters who have posts with substance and
Quad, NewMK, NHY, RP etc.
A lot of same guys on the
you must consider NOT doing.
One is that
you need to stop expressing certain "things" in a way
that causes the General to go to his wardrobe closet
and check the identification labels he's had sewn
into his clothing to tell him who he is and where he's
to be returned to, in case he's found aimlessly
wandering the deserted streets of some town in the wee
hours of the morning.
Some of your recent
postings (for which you've been criticized) have
frightened the General and caused him to verify that his
labels actually read, "GenJackripper," and not,
The other thing that's worth keeping in mind is that
it is NOT necessary for someone, such as yourself,
who has made significant contributions to the
discourse on this forum to have to respond to the likes of
those who haven't.
Know that the General doesn't
make it a practice to bestow board awards (with oak
leaf clusters, no less) to posters of little "worth"
or merit, and in his opinion, he's appreciative of
you being here as well as the horse you rode in on.
In fact, he can probably find a ribbon of merit for
your horse (sans oak leaf clusters
There are those who post here and those who merely
lurk. For lurkers who have followed this board for
awhile, they know who the "players" are. They don't need
a program to tell them that. They, together with
those who've made contributions here via their postings
constitute "the jury.'
The jury may be largely
"silent," but it's not stupid.
Got it. Actually I think I understood it earlier
today, then tried to go from memory this evening and got
things twisted around. Thanks for re-posting.
prospect of going through this another year is not sitting
well with me. After today's non-conference "conference
call", I can't believe any mainstream analyst can give
this thing a rating above 3. Hopefully, ML will play
ball and initiate coverage (I don't think they follow
us) with a Buy after they take us to the cleaners.
Any dividend declared by a REIT in Oct,Nov or Dec
and payable to the shareholders of record on a
specific date that month is considered received by the
shareholder on Dec 31if the REIT actually pays it the next
January. Code Sec 857(b)(8)(A)
In the 10Q it states, "New CCA has utilized cash
from borrowings under its line of credit, equity
issuances and payments from the Company for tenant
incentive arrangements and services provided to the Company
to offset its operating losses. New CCA expects to
continue to use these sources of cash to offset its
anticipated losses from operations; however, AMOUNTS
PRESENTLY ANTICIPATED TO BE AVAILABLE TO NEW CCA WILL NOT
BE SUFFICIENT TO OFFSET ALL OF NEW CCA'S EXPECTED
FUTURE OPERATING LOSSES.
Either they find someone
to put more money in new cca or they will end up
reducing their payments to pzn. That means a big drop in
div. I guess that is one reason we are now trading at