Very good, lunco. I see you have been paying attention on the nrf board. You are correct the offering is a follow on, not a secondary.
You are also correct on dilutive to bv. However, I believe it will be slightly accretive to adjusted earnings or at the least neutral on a per share basis. IMO the dividend is more than safe in the current interest rate environment.
Also, thanks again for the dinner card. Had both kids the week after 4th of July so took them to the restaurant.
Still have enough left for one or two more dinners there.
BTW, I got 3,000 in taxable account (for dinner trade) at 27.0427 and 4,000 in IRA (probably keepers for yield) at 27.042. Dilution freaks went nuts on this one. I'm happy to profit on lemmings.
The entire deal closed before the market opened. NRF is selling 22.5 million shares directly to the underwriters for about 18.00 (18.40 to public minus 40 cent underwriter's discount) per share. DB is doing the same only DB is borrowing 22.5 million shares. The offering sells out immediately because the underwriters buy the entire offering and assume the risk of reselling them at a profit. This sale does NOT hit the market volume.
After the offer is priced to the public (18.40), the underwriters get on the phone to tutes trying to get them to subscribe to the offering at 18.40. Those who subscribe buy shares from the underwriter which is acting as a principal. These sales from underwriter to subscriber are NOT open market sales and do NOT get included in open market volume. You cannot determine by market volume how well the offering is selling.
Any shares the underwriters cannot sell to subscribers can be sold in the open market by the underwriter. The underwriter hopes to get a price higher than the offer price. However, if tute subscriptions are low, the underwriters get stuck with a lot of unsold shares which they do not want to hold. To unload unsold shares, the underwriters "eat" some of their discount by selling under the offer price. So, at 18.35 the underwriter is making 35 cents per share instead of the 40 cents they thought they would make.
A PRICE below the offer price and very high volume means the tute subscriptions were low and the underwriter is dumping shares at a discount just to get rid of them.
This offering was not well received by the tutes, probably because of the forward sales contract.
Offer price = 18.40. Anything under, imo, = bargain. 1.60/18.40 = 8.7% yield which I believe will be tax deferred roc through 2016. A table-pounder under the offer price for yield.
DB shorting 22.5 million shares as part of the forward sales contract. NRF going to be on hard to borrow lists.
Offering price = 27.61. Now selling under 27.10. Buy under 27.25. Going ex div end of sept so price today includes about 58 cents of accreted dividend. Thus a buy at 27.25 = 58 cents for dividend and 26.67 for stock.
Annual dividend = 3.50 / 26.67 = 13.12% yield. IMO, offering will not be dilutive so dividend is ok.
NRF going big time into hotels. In 2Q earnings press release, closed on 1.1 billion hotel portfolio with nrf share about 90% or close to 1 billion.......193 million of equity invested with 18% expected on equity. Between 7/1 and 8/7 closed on another 273 million worth of hotels......expecting to earn 18% on 52 million of equity.
With offering press release, have another 700 million of hotels under contract and are close enough to a contract on another 1.1 billion of hotels. If closed, this makes about 3 billion worth of hotels bought in 2014.
Add this to 1.1 billion worth of healthcare properties acquired in 2Q plus 4 billion Griffin deal....etc.
Hamo ain't thinking small this year. Return on hotel equity is very high because leverage on hotels is very high.
45 million share offering netting 18 per share = 810 million new equity x 1.5% for nsam = another 12.15 million of nsam revenue which might approximate another 5 cents of cad on top of 6 cents from Griffin issuance.
Sooner or later the market will figure out that nsam cad per share is growing much, much faster than nrf cad per share.
Looks like the reverse of yesterday's morning spike. 18.94 at 9:45 to 18.81 at 10:00. Smackdowns alive and well.
Has some smell of short attack. Could also be some "sell at 19" people jumping the gun. Maybe some of each.
As is usual on a green start, the volume on the ask is small, letting buyers bid up the price. When the buying stops, the sellers start unloading and chase a falling bid until exhausted. Yesterday a new all-time high. Today the same. Yesterday after the spike there was no big wave (relatively speaking) of sellers. Today the sellers were found. This is to be expected as each penny higher into uncharted territory finds previously unwilling sellers suddenly willing.
The momo is up. The yield at 19 is 8.42%, still too high. I expect the price will continue higher into the very low 20s, with plenty of mini knee jerks in between. Excellent flipping opportunities because if you guess wrong, the yield is great. I bought a flip lot last Fri just before the close at 18.51 and sold it at 10:27 yesterday morning at 18.79. Yeah, I had to hold over the long weekend so it doesn't count as a dinner trade. But I got 1.49% holding this lot for less than two trading hours. I'm willing to do this over and over and over again......as many times as the market lets me....and each time holding a great yield.
You missed the context which would be a hypothetical nrf not doing well......unless something changes nrf will go broke a little bit, in which case common gets devastated and preferred comes out whole or almost whole.....a scenario which makes preferred the smart buy now. My point is, IF such a situation arises, guys like Hamo do not go down quietly. They throw hail Mary passes to save the day and turn around the business......HUGE, long shot bets. If the pass is caught, you win the game with huge profits. Much more often than not, the pass is not caught and the business goes down in a spectacular failure......ALL stockholders get wiped out. Yeah, common goes down the toilet first, but the preferred goes in the next flush.
Your argument actually strengthens my proposition that preferred has little downside advantage over common in a very long term hold situation. Hamo et al, with all their superior smarts, experience and connections are very , very unlikely to get into a situation of going broke a little bit. If I did not believe this I would sell all my shares. If this is correct, then preferred is only marginally safer than common.
Preferred has the big upside over common ONLY in a situation where nrf is going broke just a little bit. I will put it another way: IMO, if common loses 100% of its value (a situation I consider highly unlikely, like 1 %), I give a 98% probability that preferred goes worthless also. I suspect common would hit 7 cents per share before preferred went under 2 dollars per share, so a nimble preferred holder could salvage something.
For me, I'd rather risk losing 100% of common value than 95% of preferred value because I get compensated for the additional risk. Common has ALL the long term upside. Preferred has next to none.
The threshold question is are you willing to risk your money on NRF management? If the answer is "yes" and your expected holding period is more than 3 years, IMO, you are nuts to buy nrf preferred instead of common.
Your preferred dividend will NEVER increase. The price of preferred is capped by the call provision at about where it is now. You have next to no upside. You have no inflation protection. Eventually inflation will erode the purchasing power of both the dividend and the principal. Yet the long term risk of nrf going broke is almost the same for preferred as common. I'm not talking about market gyrations....common will certainly be much more volatile than preferred....a valid concern for short term investors. Very long term is risk of failure. I have worked with over 100 guys like Hamo. They do not go broke a little bit which would advantage preferred substantially over common. When guys like Hamo go broke, it is a colossal, spectacular failure......there is not enough left for unsecured creditors. All stockholders get wiped out.
NRF preferred is weaker now than before the NSAM spinoff. A source of revenue (nontraded reits and brokerage)is gone, 158 million of cash equity is gone, and NRF has burdened itself with a net management expense of in the neighborhood of 80 million a year. All done without the consent of preferred because none was required by law or the terms of the preferred. The same could happen to preferred with the next spinoff.
If you are going to risk your money on NRF you should buy the stock with upside which is common, IMO.
NRF closed 2013 at 13.45 so we have to double that for the split to 26.90.
August closed at 18.51 for nrf and 18.49 for nsam, a nice even 37.00. But we have also collected 1.50 of cash dividends which makes total return 38.50, a 43.12% increase from 26.90.
NRF closed 6/30, just before the split/spin at 17.38 which is 34.76 post split, pre spin plus 1.00 of dividend = 35.76 total thru 6/30 from 26.90 = 32.94% thru 6/30 vs 43.12% YTD.
From 35.76 thru 6/30 to 38.50 at 8/29 = 7.66% increase from 6/30. Frankly, I had expected more from the spin,
especially from nsam. Using the 7/1 close as the start, nsam closed at 19.20 and nrf closed at 16.80.
Now we have nsam at 18.49, down 3.7% from 19.20 on 7/1.
NRF is 18.51 plus 50 cent div = 19.01 from 16.80, up 13.15% from 7/1.
To me, nsam has been an early disappointment and I lay the blame on Hamo. The only thing we know now about nsam that we did not know in May is they will pay a 10 cent div for 3&4Q. 40 cents/18.49 = annualized yield of 2.16%. Whoop dee doo.
They had the opportunity to include 1/2 year of Griffin cad in the Aug presentation, but didn't. They could have announced buyback authorization. They did not. They could have given us an update on the RXR offering. They didn't. Same with Aerium prospects. Silence. They could have raised their 2014 nrf fundraising estimate to 850 to 900 million. They didn't.
A company with no history, no independent financial statements, just expectations, and Hamo did nothing to improve those expectations. Shame on him.
Nevertheless, I'm more than content with 43% so far this year. Ain't selling either. NRF = wonderful yield. NSAM, I expect much more with Nov report on 3Q and a new forward look. I can wait and will.
Sooner or later somebody is going to complain about no dividend increase in 5 quarters when NRF used to raise the dividend by a penny each quarter. The penny per quarter began with the Aug 2012 16 cents vs 15 in May. This continued through the Nov 2013 payment of 21 cents. I was expecting 22 cents in Feb 2014 and was very content with this pattern of increases as, I suppose, were many shareholders (except preferreds who did not switch to common when I suggested it in April, 2012).
Hamo broke the mold with a 3 cent increase to 25 cents in Feb (actually Mar) 2014. Now we must adjust for the reverse split. Penny per quarter becomes 2 cents per quarter and the expected 22 cents in Feb 2014 becomes 44 cents. Actual of 25 cents becomes 50 cents.
So, how we doin compared to penny per quarter? We get 50 cents x 5 = 2.50 vs 44,46,48,50 and 52, which = 2.40. Of course this counts the nsam dime as nrf for the two announced dividends.
If we get a dividend increase next May, I expect it will be a very small one since NRF is up against a loan covenant that they will not pay out more than 100% of cad in any rolling 4 quarter period. That's ok with me because 50 cents does not fall behind penny per quarter until the Nov 2015 dividend.
As to nrf, this is from almost 29 million short at the end of Jan this year. I wonder what percentage lost money on the trade. My guess is more than 90%. Stubborn (or stupid) bunch.
As to nsam, the 7/15 settlement date was 7/10 trade date, the spike above 20 on the griffin rumor.
Most of this group covered at a modest profit.
BTW, the survey is still open. If you drip nrf at a broker not named above OR if you paid more than 1/2 cent different from the prices paid above, please post to this thread, the name of your broker, the price you paid per share to 4 decimal places and the date it was posted to your account.
Looks like Schwab will be the goat this quarter.
Drip shares bought on 8/19 when hod = 18.49 and lod = 18.10.
Fidelity: 18.2445, .2446, .2447, .2449.....differences at the 100th of a cent are mere rounding.
USAA, which uses Fidelity...18.2449
Drip shares bought on 8/22 when hod = 18.54 and lod = 18.26
Etrade....18.4264....not the highest for a change.
Drip shares bought on 8/25 when hod = 18.70 and lod = 18.40:
As all can see, not all drips are equal. In addition, those buying on or after the pay date are "stealing" (my opinion word) interest on the dividend cash which the broker received electronically on 8/22, the pay date. Those who bought Friday will not pay for the drip shares until tomorrow. The Monday group will not pay until Thursday. In the meantime, they use your dividend cash to pay down their lines of credit, thereby saving interest expense while paying you no interest. To me, imo, that is theft.
Was that a coordinated short attack or a big guy dumping both at the same time. Looking at both on a one day
chart makes one think they are joined at the hip, which, of course they are not.
I can't wait for the next offering hoping NSAM goes down in knee-jerk sympathy with NRF.
What is so difficult about 4 decimal places? Is it difficulty with long division, a lousy calculator, inability to understand the criteria for posting? All of the preceding?
Looks like Schwab has shifted to buying the day after pay date instead of on it. Let's have a post from Ameritrade and any other brokers not already mentioned unless you have a different drip price.
Merrill, Scottrade, Interactive, Sierfert...and all others. The more brokers named, the more useful the survey.
You're lucky you don't hold ETP at Etrade. ETP offers a 5% discount on the price to drip into new units issued by ETP. Fidelity and Ameritrade automatically enrolled in the discount drip plan for all who drip etp. Schwab will enroll only if called and asked. Etrade refuses to participate. Vanguard denied such a plan existed (according to a poster on the etp website).
The above was learned from drip surveys I placed on the ETP board.
I have accounts at Fidelity and Ameritrade. I had accounts at Schwab and Datek which was bought by Ameritrade. The only reason I have anything at Ameritrade is I like their streamer better than Fidelity's.
All I have at Ameritrade now is NSAM. I moved the NRF to Fidelity. Since the amount was more than 100 grand, amtd called me and asked why the move. I told them I don't like the way they drip.
Actually, the call came from a young-sounding female. I actually said, "Because I don't like the way you drip". She said, "Excuse me?" I said, "Not you. I don't like the way Ameritrade reinvests dividends."
It has been almost 10 years since I left Schwab, so I don't know how good their website is now. I can say that Fidelity is head and shoulders above anything I have seen. If you have more than 1 million, you get red carpet treatment.