Here is what Dar posted on Investor Village today, September 24th ...
Here I am #$%$ about no news from nrf about what they are doing with 376 million from the August common offering. I should have done this exercise earlier as it also tells us an equity offering was necessary.
A little paying attention to the 2Q earnings press release (which I just did a different way) and pushing some 4th grade addition and subtraction, it seems Hamo had most of the money committed before the offering was announced.
Here's the short version: 6/30 unrestricted cash was 531 million and the press release says nrf funded in July its 357 million obligation to buy into PE2. So, 531 - 357 = 174 of 6/30 cash left. But press release says 7/31 unrestricted cash was 220 million (after funding PE2). Musta had net cash in from July ops.
The press release also says that subsequent to 2Q they committed to 778 million of investments requiring 444 million of equity. HEY!, ya can't spend 444 million when ya only have 220 million. So whadda ya do?? You issue 40.25 million new common shares raising 376 million. Thus, 220 + 376 - 444 = 152 million left after announced (without detail) post-2Q commitments closed and funded.
Hamo had the money committed before the offering was announced!!! So, IMO, the time lag between collecting 376 million on Aug 9 and putting that money to accretive work will be MINIMAL.
No dilution from Aug offering. I suspect slightly accretive for 3Q and a nice surprise for us with new estimated 2013 cad midpoint from 1.06 at Aug estimate to 1.10 to 1.12 when 3Q earnings are announced. I'll wait for 3Q earnings report, but I'm beginning to smell 1.50 to 1.60 for 2014.
Hamo is off my "no news" #$%$ list. He already announced it, but without any details. Maybe some will be released at the 10/1 conference.
Sometimes you have to look again and again to see the tea leaves.
"I'll wait for 3Q earnings report, but I'm beginning to smell 1.50 to 1.60 for 2014." $1.55 X 75% payout = $1.1625 dividend, cap rate 7%, $16.61 stock. No way, too good to be true, but I hope I'm wrong.
I don't think we will see more than a penny per quarter as long as the market does not revolt over why not higher. Tylis said at one of last spring's conferences that their objective was to increase the dividend while, at the same time, bring the payout ratio down. He did not say whether they had a percentage target, but did mumble something about being in line with (meaning payout ratios) of other similar reits. So, I think below 70% might start some talk, but not before then, imo.
Taxable income will not force an increase because equity reit assets have lots of depreciation, a non-cash tax deduction AND the first three dividends of a year can be treated as distributions from the prior year's taxable.
income. Thus, no pressure to increase by the 90% rule.
We'll see if depreciation has become a significant factor if less than 100% of the common dividend is taxable.
Remember, preferred carries out taxable income first. On the other hand, we're still recognizing deferred cod income from 2009 and 2010.
As to a lower payout ratio, as long as the retained cash flow is invested in more accretive investments, I'm fine with it. 94 cents in 2014 is 20.5% more than 78 cents in 2013. That's OK with me as long as the retained portion is earning more than the prior cad per share.