At 23.88 the current yield of this preferred is 9.2%. It is also 3.6% below the redemption price of 25. At the same time NRF is reaching new highs.
Why is this so cheap?
Except to preserve our qualification as a real estate investment trust for federal income tax purposes or in connection with a Change of Control (as defined below), the Series C Preferred Stock is not redeemable prior to October 11, 2017.
Upon the occurrence of a Change of Control, we may, at our option, redeem any or all of the shares of Series C Preferred Stock at any time and from time-to-time within 120 days after the first date on which such Change of Control occurred at the redemption price.
No question NRF has moved away from mortgage loans. Only 17.5% of 2013 investments have been loans.
They got higher fixed rate leverage on hard real estate at low rates so risk adjusted hard assets were a better use of equity than loans. Their legacy loans and securities are running off and their deep discount cdos will be finished in 5 years or so. So, mreit by itself may be too small to stand alone.
However, I can see spinning out the directly held real estate leaving the private equity deals in with the mreit assets. Then you have a newco which is pure equity reit which may then offer stock for stock to take out ELS or SUI or some other equity reit. Alternatively, they could spin out just manufactured housing which may become a target for ELS or SUI. Alternatively, NRF mfg hsg, els and sui could consolidate into one giant manufactured housing company thereby saving tons of overhead.
The taxation gets very dicey when a second transaction happens with a spinoff but clever minds can find workarounds. Lots can be done to increase shareholder value on a tax deferred basis. If I can think of a few, Hamo can think of twice that.
I agree that preferreds are bond type investments but isn't an over 9% yield a little much. The issue is cumulative so they have to make good on the div,the common pays 84 cents per share that div would have to be eliminated before they stop paying on the preferred. I would call the NRF preferreds a very safe investment for people looking for only income 3% gov paper VS 9% safe preferred is way too much of a spread