an NBR "heads up," I wound up with egg on my face
(NBR failed to deliver as promo'd).
So here I
This evening's broadcast (on your
local PBS TV station) of The Nightly Business Report,
promo'd a segment scheduled to be on tomorrow's (Tuesday,
5/11/99) broadcast that would appear to be bullish about
REITs. They've titled it, The REIT Stuff.
If your info. is accurate this is a temporary fee
Start up cost are higher than normal
operating cost, but you are
inferring collusion to serve
special interest.....This can be a
against the clips....
A paperclip reit, unlike a pair shared reit
(which is a real estate and operating company all under
one corporate roof) is two separate companies, which
have the same management and same directors. I'll
preface this by saying I am not real knowledgeable about
PZN, but from what I understand PZN is a paperclip
reit. The reason the stock has been falling is that the
reit has agreed to pay a fee to the operating company
to subsidize losses that the operating company
incurs on the start up of a new prison facility. This
has the aura of conflict of interest. It is like the
management taking the money out of the reit shareholder's
pockets to supplement another company which management
has an interest in. Prison had been paying a fee
which was about $800 a bed, and they just agreed to up
it to about $4,000 a bed. This will cut two
percentage points off the ROI. This was all announced at the
same time a bond offering is in the process. Investors
are worried it might derail the bond offering.
Analysts feel that management is unsympathetic to
For those who missed last Tuesday's (5/11/99)
airing, hopefully this url will work. At least it did in
When the Table of Contents for the 5/11/99 broadcast
appears, click on The Return Of The REIT.
on paperclipped REITs. Isn't this discussion more
germane to PZN than discussion of paired shares? My
understanding of the paperclipped REIT issue has to do with
delivering rents plus operating income to the REIT in the
form of greater than the utility of mere rents. Abuses
occur when non-related income (i.e. gambling income
with hotel rents) is passed to the REITs. PZN OPCO
seems to be attaching services implicit to the
operations of a facility to the occupancy utility; not
dissimilar to some services imbedded in an office rent
(cleaning, security etc.) What's your take?
My question wasn't meant to be a critisism of
your statement. I understand that HOT is the world
biggest lodging co. and has big Gaming interests. My
question, more specifically, is why did they sell off
Ceasar's while continuing to expand their Hotel/Resort
properties if gaming is that important to them? It appears
they are trying to move away from gaming and
concentrate more on Hotels and Resorts. Is that not really
indicative of their direction?
You should do your research before you
777 Westchester Avenue
Plains, NY 10604
Casinos & Gaming
Barry S, Sternlicht, Chmn./CEO
Ronald C. Brown, Exec. VP/CFO
Thomas C. Janson,
HOT is a hotel operator and gaming company operating
both directly and through its wholly owned
subsidiaries. For the fiscal
year ended 12/31/98, revenues
rose 58% to $4.71 billion. Net income available to
Common from continuing operations before
and accounting change increased to $125 million vs. a
loss of $270 million. Revenues benefited from the
number of hotels due to the reverse acquisition of ITT.
Net income reflects higher gross profit margins.
"(...HOT, was one which just converted to a C corp rather than get out of the casino business.)"
If that is why HOT converted to a C corp, why did they just sell their casino assets?
The only way to be a reit and an OPCO, is to be a
type of reit called a paired-shared reit(I think there
are only 4 or 5 of this type. When the current reit
laws were enacted years ago, the reits that were
opco's were grandfathered, any subsequent company
incorporating as a reit could not be operators. Legislation
last year changed the paired shared reits status. When
the hotel reits, that were paired-shared reits
started buying casino's all over the country, the
government thought that this tax free status was being too
generous for these very profitable companies,(Starwood
Lodging, HOT ,was one which just converted to a C corp
rather than get out of the casino business.)The
Legislation last year said that from now on reits could not
buy or expand their operating companies but existing
companies were grandfathered again. So there is a few out
there. There is another type of reit called a paperclip
reit. But thats for another day.