Love it. Another 335K to cover when the will or ability to keep fighting the price runs out.
In for 1,000 flippers at 41.91. Don't mind a hold if I'm wrong because I expect modest dividend increase by next April. More than 6% partially tax deferred return of capital from this glacier of cash flow is just fine with me.
Hmmm, looks like 24 million increase in depreciation over last year. Plus, preferred gets the first 6 million of taxable income. Looks to me like a bigger percentage of roc for 2013 vs 2012.
Actually, the retail long is a "nothing" to the shares available to borrow issue. If they are in a margin account, the broker borrows them for free. At a Fidelity, Vanguard, Schwab, if there are no free retail shares available, they go to their captive mutual funds to borrow. The funds charge a lending fee which the broker marks up to charge the customer shorting the stock.
Tutes do the bulk of the lending to shorts It's a moneymaker for mutual funds.
Shares in a margin account can be loaned without the knowledge or consent of the customer. I don't know if there is a rule prohibiting a broker from borrowing shares on which there is an open sell order. Whether a broker reduces the number of shares available to be borrowed when sell orders are open as a matter of prudence, I don't know.
The sure way to prevent the broker from borrowing your shares without asking your permission first is to move them to a cash account.
Be that as it may, as of a couple of minutes ago Fidelity is showing 9.8 million shares of nrf available to borrow. I cannot make a significant dent in that number .
Several months ago Fidelity had somewhere around 23 million shares available AND, at the same time labeled them HTB with a small interest charge. I called them and asked how they could call 23 million vs average daily volume of 3 million hard to borrow. The answer was many of the shares were in cash accounts and therefore could be hard to borrow.
48% x 1.03 = 49.44 from equity reit x 15 = 7.42 + 2.68 from mgt + 3.21 from mortgage = 13.31 from sum of the parts at reasonable market multiples.
9.35 / 13.31 = 30% discount to sum of the parts.
61% of cad from equity reits and management fees and we now sell at 9 times this year's cad.
Hamo will not let this continue beyond another year, imo, because the discount is too big and equity is already big enough to stand alone, as is mortgage. Add managing separate Northstar Equity and Northstar Mortgage to Management for market fees on top of fees from nontraded reits and Northstar Management is big enough to stand alone.
oops.....48 + 13 = 61 equity + mgt 39 from merit
Since you obviously did some math, you finish the job with 48% instead of 42% at 15 multiple..
I think by this time next year, if the market doesn't show some respect for the sources of nrf's cad, we'll be hearing about the spinout of Northstar Equity Reit.
Assets at 9/30 totaled 5.8 billion. Subtract 1.2 billion for the remaining consolidated vies leaves 4.6 billion of core Northstar assets. Operating real estate, net of depreciation is 2.145 billion and the private equity deals are 625 million for equity reit assets of 2.87 billion, so say 3 billion when working capital is added. 3/4.6 = 65% of assets. Since real estate is more highly leveraged than loan/debt assets, it accounts for 42% of cad.
ELS, the largest manufactured housing company, with a 3.5% yield with their just announced 2014 dividend is selling for 17.5 times estimated 2013 ffo (36.41 / 2.08).
SUI, the next largest mfg housing co, with slightly less than 6% dividend yield, is selling for 13.23 times estimated 2013 ffo (42.34 / 3.20).
Let's see 42% (equity reit cad) x 1.03 2013 cad = 43.26 cents from equity @ 15 times = 6.49 price. from equity reit cad.
Management fees = 13% x 1.03 = 13.39 cents x 20 for the annuity = 2.68 from management.
Mortgage reit cad = 39% x 1.03 = 40.17 cents x 8 for mortgage reit = 3.21.
Hmmmm, 6.49 + 2.68 + 3.21 = 12.38. Why is the price 9.35, a 25% discount from the sum of the parts? No respect is the answer, probably from ignorance. If it continues, I expect Hamo will spin out equity, which will pay a management fee to NRF. Then management is bigger. By the end of 2015, management will be big enough (revenue-wise) to stand alone. When it is spun out, it will manage Northstar Finance, Northstar Equity and 4 nontraded reits, managing 13 to 16 billion of assets.
Count on it. Hamo can do the same calculations I can, but with much, much more precision. I'm doing back of the envelope and can see it. So can Hamo.
Since I am very heavy in reits, I had a lousy week, down 2.32% while s&p 500 up .51%. That's OK as I'll trade my dividend yield to the s&p any day. Just gotta tell myself, as I reach for my second drink, that it's meaningless in the long run for a yield investor.
NRF did well today relative to other reits, especially agency reits and other equity reits. NRF had a lousy week though, but better than others. On an ex dividend basis, from last Friday close, 9.65 to 9.35, down 3.11%.
SUI, a pure mfg housing reit with close to 6% yield, some tax deferred, 44.36 to 42.34, down 4.56%.
VNQ, an etf of equity reits, 69.49 to 66.62, down 4.14%.
Let's see, a company which has raised the dividend 9 quarters in a row with an expected 2013 cad of at least 1.03 is selling for 9.08 times this year's cad. I estimate 2014 cad at 1.40, so 9.35 is 6.68 times forward earnings. The dividend about to be paid annualizes to 84 cents, 8.98% of 9.35. I expect 94 cents in 2014 (penny per quarter) as a minimum, which is 10.05% of 9.35. Someday the market will figure it out.
I am right, of course. Humble too.
Even though we're disappointed midpoint isn't 1.10 to 1.12 due to new equity raised in August, think of the guidance this way.
As of 8/1 they guided to 1.03 to 1.09 with 5 months to go.
As of 11/1 they guide to 1.03 to 1.07 with 2 months to go.
With 3 more months in the history book, they reaffirm 1.03 as the lower limit, and THIS is the number Hamo does NOT want to miss. Hamo looks out for Hamo, so I feel pretty good at 1.03 being the floor.
1.03 vs .74 for 2012 is an increase of 29 cents. The calendar dividend increased 16 cents. Comparing just the increment, the payout ratio on the increase is a little better than 55% (16/29).....one way of measuring accretion.
Calendar 2012 payout of 61.5/ 74 cad = 83.1% payout ratio. 78 cents in 2013 / 1.03 = 75.7% payout ratio.
So they did what they said they wanted to do....increase the dividend while reducing the payout ratio.
While I'd like it to be better, 2013 is turning into a great growth year. I expect 2014 to be similar.
Est 2013 cad at the 8/1 estimate was 210-222 million. At 11/1 it's 224 to 234, an increase of 14 to 12 from the 8/1 estimate.
On Aug 9 they got 368 million from the new common offering. If they made 15% on that for 4.5 months, it would add 20.7 million.
The 3Q press release says they funded 1.1 billion in 3Q. However, 2013 investment for the 8/1 presentation were 2.580 B. At 11/1 they are 2.778 B, an increase of 198 million from 8/1. In all of August, September and October, they only closed 198 million of new deals.
Time lag in getting the new 368 million to work is the only reason 2013 cad not 1.10. Did they fall asleep on closings? I doubt it as this team is too smart but prudent. I'd rather have good deals slowly than rushed bad deals. As long as they close the 1.3 B of pendings before 12/31, 2014 cad per share will be just fine.
Take advantage of those who do not understand this.
I'm not thrilled with it either, but it is all timing, imo. If you look at the new investment schedules as of 11/1 and 8/2, a little subtraction will tell you all but a little bit of 3Q closings were in July.
Per the cc, they have 1.3 billion of pendings which they can close with no new equity raise. Let's suppose that takes 600 million of nrf equity, 400 million of which is new debt so return is only 13% (vs 17% weighted average ytd). 13% x 600 million = 78 million / 250 million shares = 31 cents per share added in 2014 if they close all in 2013..
As I have posted again and again, new common is dilutive until the money is fully at work. Estimated cad dollars are up from 8/2 estimate, but weighted average shares are up more, proportionately. It all turns around when they close the pendings. They did ok in 3Q because of July closings, before new stock was issued. They had excess liquidity and borrowing capacity at 11/1. Hopefully, closing the 1.3 billion of pendings will take care of that.
Looks like they expect slow closing of pending deals. Range is 1.03 to 1.07. Can't overcome the effect of additional 40.25 million shares outstanding. Gotta get the money to work, but prudently.
Still a great growth year since 2012 cad was 74 cents. So, on a per share basis, growth is 39.2% to 44.6%.
At 1.05 and 9.37 price, a growing company with growing dividends is selling at 8.92 times this year's estimated cad.
I skimmed it last night and early this morning. Saw nothing negative to the growth roll continuing. Saw no negatives to operating results understanding there are market limits to leverage ratios, cap rates and rates on loans. Will study in more detail soon.
The only negative to nrf now is stock market image, imo. It's still a mortgage reit. Deconsolidating the remaining vies, imo, is important to shedding the image even though I know that will be confusing to the market. Confusion = uncertainty, which the market hates.
I'm comfortable with the growth fundamentals and am willing to collect above market yields while I wait for a slow market to understand.
The discount drip price is 95% of the average of the daily highs and lows for the five trading days immediately preceding the pay date which is 11/14. Thus the computation begins with 11/7 and ends with 11/13.
I will post the results here after the close on 11/13.
Lotsa detail in there. All who have significant money at risk in nrf should read.
As to rising interest rate fears, yes, if long Treasury rates rise, the risk premium ratio must change, resulting in a proportionate decrease in price for the same dividend. HOWEVER, a 100 basis point increase from here will have a negligible effect on nrf profit. In fact, over the next 9 months, it would increase profit by a little better than a penny per share. Longer term, a decrease of less than a penny. See interest sensitivity toward the end of 10-Q.
Obviously, dividend didn't scare them into covering. Yeah, they will take a cash hit on the 15th, but the price was down more than the div on ex div date. Possibly some ex-divi dumpers, but also reits were weak as they have been lately.
It's going to take fundamentals to break them. I'm confident it will happen, but don't know when. Not worried, but feeling frustration that market has not recognized sources of nrf's dividend cash flow. Hamo cannot reduce the cost of capital until the yield goes down by the price going up. Just gotta wait it out while collecting above market yield vs asset category. I'm cool with 22 cents in Feb, then 23 cents in May......and so on for as far as I can see, which is thru 2014.
Sentiment: Strong Buy
Learn the rule: If they do not pay out 100%, they pay some tax on the undistributed, say, for example, 5%.
If they do not pay out at least 90%, they lose reit status, a horror show of epic proportions.
Also understand that the first 3 dividends of a fiscal (calendar) year, say 2014, CAN be considered distributions of the prior year's (2013) income.
NRF is under no tax rule pressure to pay any extra dividend, imo.
Usual chart pattern but a little later than 10 am. Little spike on steady buying followed by a sharp smackdown,
Shorts keep at it. Will pay 21 cents for doing do. Of course price will drop 21 cents at Wed open, but that will soon be forgotten as the march to 10 continues, imo. Sooner or later the shorts will run out of ammo or the will to lose more trying to save already underwater positions.
Sentiment: Strong Buy
It's not #2. They have no pressure from the tax rule.
#1 is not a problem with equity reit investors. It's welcome. The depreciation shelters current cash flow from taxation. Gladstone (GOOD) brags about it on conference calls.
I was upset at SUI's big decrease in roc percentage because I was counting on a bigger percentage of not currently taxable.
3Q D&A = 33.6 million vs 10.5 million 3Q 2012. YTD = 69.9 vs 32.9. Add another 25 million in 4Q and the increase is 62 million over 2012. Moreover, preferred dividends carry out taxable income first, meaning preferred dividends are 100% taxable BEFORE any taxable income is left over for common.
I'm actually hopeful that the combination of increased depreciation plus increased preferred dividends results in some roc for common dividends for 2013. On the other hand, they are still reporting deferred cod income from 2009 and 2010.....phantom taxable income.
Put another way, if nrf announced they expected between 40% and 50% of common dividends to be tax deferred roc, I'd buy more stock. If all other things were equal (which they are not), I'd rather have 8% tax deferred from GOOD than 8.5% nonqualified fully taxable from NRF.