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Starwood Property Trust, Inc. Message Board

  • ferdiefor ferdiefor Jul 13, 2010 11:24 AM Flag

    STWD is Dead Money

    Let's get this straight. STWD is going to use $50M to buyback stock. It generates a 5.4% yield. There is nothing better to do with the money than buyback stock? I doubt the assets being held are worth so much more in the near term that a stock buyback makes any sense.

    However, my thesis that there simply too much money chasing too few deals reducing returns too much may be the reason for the buyback. Given the mgmt fees and the negative total return in STWD I would say STWD is dead money and may never generate decent returns to shareholders.

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    • STWD issued the buyback in order to take advantage of volatile equity markets if its shares fell significantly below book value for no economic reason.

      I think the buyback has put a floor to the equity price and I don't see STWD buying any shares unless its equity price falls 15+% below book value.

      STWD will be increasing its dividend over the next few quarters generating an approximate 8% yield based on today's stock price.

      STWD may not make you rich however it will provide some very nice steady, long-term returns, IMO.

      • 1 Reply to heystupidpeople
      • With all due respect you can probably make superior returns in asset classes like MLPs where there is less risk involved.

        The whole point of the STWD IPO was clear and that mission has failed. Distressed assets are pricing out too high because low interest rates have too many people chasing them down. Another $1.5B CMBS deal went to two hedge funds that JVed on their bid.

        Citi when it issued its initial buy expected STWD to pay 10-11% to reflect risk. Getting paid 5-6% is not acceptable. Book value, NAV.... whatever..... has no meaning when shareholders mark stock to this discount to nav. I think mgmt costs and fees have reduced nav lower than anyone estimates and I am guessing that STWD is trading very near its nav.

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