For 9 months.....including non-cash expenses such
as depreciation...what Opco and PZN would look like
Opco had a loss of ($84mm), PZN had net of
169mm...totaled that's $85mm net or appx. $.71/share.
lets pay UNcle sugar out of that too. What 40%? That
leaves a net of $.41 a share or a P/E or 22
Not to make things worst but Opco in the 3rd quarter
had a loss of $32mm or $128MM annualized...that's
means combined PZN/Opco would have earnings of
$41mm...take out $17mm for taxes and that's $24mm for the
combined organization or apprx. $.20/share for a P/E of
45. Ouch. So de-REIT might get them only $24mm of
retained earnings plus the non-cash items. Short term
would be rough it appears to me.
It seems that you are calculating by combining
9-month numbers and annual projections in the same
breath. Subtracting OPCO's 12 mo. losses from PZN's 9 mo.
earnings, etc. Calculating P/E based on 9 mo. figures.
That, or else I got lost in your analysis completely.
9 months...Opco annualized from the 3rd quarter
number of $32mm loss equal loss of $128mm. PZN
annualized would be $225mm for combined of $97mm or $.81
combined ($97mm/119mm)....with a 40% tax bracket woulld
give them net earnings of $.48/shares or 19
Annualizing Opco from the full year so
far...loss$84mm...would give Opco a yearly loss of $112M or combined
income of $113m($225PZN -112Opco) or $.94 non
taxed.....$.56 fully taxed or P/E of 16.
Lets consider the possibilities here ...if it is
Dreman tranferring that many shares to the high yield
fund. It sends me a message that he expects PZN to
remain a REIT. He wants the high yield for his fund, and
the only way is to remain a REIT...A this junture Mr.
limited partnership seems logical and I like that better
than a C corp. I believe this has to be projected out
for growth to come up with the correct answer..enter
If I understand it correctly, while the new Act
allows REITs to own 100% of the stock of taxable
subsidiaries, the Act still limits the total amount of profits
that those subsidiaries can contribute to the parent.
Therefore, while it would be OK for PZN to own all the stock
of CCA, it will not work in our situation because
OPCO would contribute too much profit.
point of clarification, it may sound silly to say that
OPCO would contribute too much profit to PZN when OPCO
is losing money but please understand that if OPCO
was paying "market" rates to PZN, OPCO would be
handsomly profitable and PZN would be generating the
It is particularly important to understand THAT as
we get the occasional call to set OPCO free from
Without above-market lease payments from OPCO, and OPCO's
ability to generate new business, PZN is a collection of
prisons who's value declines each year as the leases
slowly wind down. This is especially true given what
doc's actions have done to our Balance Sheet this past
year. That is why a combined PZN/OPCO "c" corp wouldn't
earn 50 cents a share next year. If we had not done
the REIT and instead simply merged PZN with CCA, our
2000 earnings would probably be close to $1.20/share.
Just got his report....from First Union.
estimates combined Opco and PZN would earn $.49 in 00' and
$1 in 01. His discount of future earnings puts the
stock at a level of $7-$8 per share, but based on
EBIT...$7-$10...if I wrote this all down correctly.
Interesting how we were just going through this exercise.
The following is from the WSJ.
Modernization Act would allow a REIT to own as much as 100% of
the stock of a taxable REIT subsidiary that provides
various services to REIT tenants and others. Currently,
REITs can own as much as 10% of the voting stock of a
"The change could resolve
potential conflict-of-interest issues: Since a REIT cannot
own more than 10%, the other 90% often ends up being
owned personally by the REIT's management or other
Does anyone know if this will
apply to PZN. If it does then maybe what is going on is
that OPCO will merge with PZN and PZN will stay a