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NorthStar Realty Finance Corp. Message Board

  • dar200 dar200 Apr 30, 2013 1:14 PM Flag

    Morphing of NRF

    this from my 4/25 post: " I'm not selling flippers yet because I expect a creep up to earnings and I know core cash per share will increase. "
    Still not selling flippers and certainly not the core. I smell well over 10.00 after the CC, not only because estimated core cash to common will increase, but also because of the shift in the percentage of cash flow coming from equity reit properties, especially the manufactured home portion, and management fees from the non-traded reits, both of which are like annuity income. Slow growth income for sure, but very stable and reliable. The market pays a higher multiple and accepts a lower yield for annuity-like cash flow than for risky and volatile mreit cash flow.
    Cases on point....SUI (pure manufactured housing) (or ELS) vs NLY (pure agency reit....nothing but borrow from Peter short to lend to Paul long).
    In case you havn't noticed (it will be evident in next investor presentation) NRF has made a huge shift away from being a mreit with some equity flavor toward an equity reit plus annuity management fees with a significant mreit flavor. When the market understands this (and it should after it's spoonfed at the CC), the multiple pf cash flow goes up and the yield comes down. Translation = higher price on same cash flow because a much bigger portion of cash flow is safe like an annuity. Believe this and act on it before the market does and you make a profit.
    Before last December, nrf had a little better than 1 billion in net lease and healthcare properties....had'em for years.
    Then 326 million for manufactured homes (actually lot rentals), 275 million into the private reit partnership which is equity properties and another 865 million into the latest mfg housing deal. In less than 5 months, almost another 1.5 billion of equity reit properties. Add 40 million of management fees and you own a significantly changed NRF from a safety of cash flow standpoint. The market will pay up for the diminished risk, imo.

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    • Dar,

      I am interested to hear your take as to why Hammo has moved nrf in this direction?

      • 1 Reply to saacoo3
      • Males will understand this. Ever play shortstop and catch a hard grounder off a bad bounce in the crotch? Next time you wear a cup.

        IMO, the best thing Hamo did for nrf was to see the crash coming and get into survival mode as best he could. NRF stopped doing new business in 2Q 2008 and was in caretaker slow liquidation mode for 3 years. While many crashed and burned, nrf survived. Bad debts are the hard grounder to the crotch, especially when credit markets are next to frozen.

        Equity reits don't typically take big shots to the groin region. Slower growth for sure, but like a hard plastic cup to protect the jewels from the big hits.

        Just speculation. My being inside Hamo's head is limited to 20 cents in August.

    • Is there really much limit, for years, to the kind of growth that NRF is exhibiting? They have so many platforms and such good relationships. Compare the growth of NRF vs RSO in the last year. NRF has better relationships in the industry. So, where will NRF be in five years? This could work out better than we realize.

    • I have been thinking: another reit (#2), senior housing reit, mfg home reit. Add $30 million pay out to nrf/reit=$120 million. Just for this (forget other businesses), looks like about $.75 of stable dividends. OB

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