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Apollo Commercial Real Estate Finance, Inc. Message Board

  • MilesFinucci MilesFinucci Nov 30, 2002 10:06 AM Flag

    Southern California still pretty good..

    Per Barron's Nov 25 issue, Ray Torto and Bill Wheaton of Torto Wheaton Research say "Geographically, Southern California is still pretty good, whether it is Los Angeles or San Diego or Orange County. That doesn't mean they haven't shown some deterioration, but relative to other markets those places have done fairly well."

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    • Creating a little FUD are you? Better cover, the price is going back up in January. The odds of a dividend cut are 0.

    • dividends should be a reflection of performance; price of stock is down 30 percent; currently, the div yield is almost 9.4 which is ridiculous

      but the properties are xlent

      and they have massive growth opportunities

      so, if div is cut (or if it is maintained by cheap borrowing, or by some other bs) the long-term outlook of the company is still xlent

      it's all about the properties

      and yes, even great locations take a hit in a recession. the difference is that there is no additional office construction going on in west la. when there is a recovery, they will have massive pricing power (as opposed to southern or midwestern reits, where anyone can get zoning just by sending a hooker over to the commissioner for an afternoon)

    • With all due respect you want both and I will tell you why with background and detail.

      Real estate mgmt teams know one thing, real estate. The moment any of these guys think they know more is when things get dangerous. Must I recount how much money has been pissed away by reit mgmts on internet strategies? Why in god's name did any of them think they needed a strategy in the first place?

      Hundreds of millions were pissed away and that is the result of keeping too much of our cash. Would we the shareholders have benefited from a successful internet strategy? On the margins.... no. Mgmt would have taken the marginal income from internet for itself.

      Furthermore, w/o dividends most reits would get into trouble anyway as they would become blind acquirers as they did in the past. Dividends maintain a discipline in our reit ppties.

      I want that income to live on as I move closer to semi-retirement. I want long term appreciation of value.

      You are making the tech case (no dividends and reinvest it all) for real estate and I think you are wrong because real estate cannot deliver quick enough returns on investments necessary to justify retention of excess cash flows as tech can.

    • what you want is property that has appreciation potential; there's a f'n recession on; of course there's bound to be some erosion in cash flows during a recession, and if you have a heavily leveraged reit, just like if you have a heavily leveraged direct investment in real estate, you'll have to give up some cash in a recession;

      but buying office reits is something to do for a 20 year cycle - at least 1/2 of the economic life cycle of their portfolio. and, in the case of ARI, that portfolio will become more and more valuable every year.

      sure, there are growth areas in other parts of the country - but none (other than midtown manhattan and san francisco) are as building constrained as the west end of LALA land (yeah, the place where the beverly hillbillies moved to live next door to monica lewinsky)

      even if the div drops to 1.60, this company is worth 24; don't forget, there are plenty of office reits in the 6-7 yield range - and there's no question that ARI has a better aggregate demographic than BXP or EOP

      it's not as big, and yes, there's a snobbery about LA in the investment community

      but they ain't making any more building sites on wilshire blvd, and that's where a lot of people want to be

    • I think there is a built-in prejudice against west coast reits by east coasters. In any event ARI's dividend is threatened at this point in time. What I think that means is that investors steer clear to see if there will be a cut or a fallout from a cut.

      I don't think investors understand that ARI's market is one of the most dynamic in terms of neverending reinvention of itself.

      I think the focus is on reits that can sustain their dividends thru a cycle and the money steers clear of reits whose dividends are at risk.

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