Update on non traded reit fundraising.
479 million collected ytd
208 million in 2Q ( I estimated 200 million)
97 million in July.......an average of 3.1 million per day
Now let's connect some dots, something the market is too slow and lazy to do by itself.
Since they collected 150 million in 1Q, 208 in 2Q, 97 in July = 455 thru july
479 ytd - 455 thru july = 24 in aug thru yesterday...6 days = 4.0 million per aug day
Now you know something 99% of the market doesn't know.
NRF is not going to speak for nsam at a nrf cc or in a nrf press release.
However, a separate nsam press release tomorrow announcing an intention to pay a nov and feb div of 10 cents would not surprise me. Then the whole world would be told the dividend in the aggregate is not going to decrease due to the spinoff. I think this is needed to close the circle. I would not be too surprised if such a press release announced a board authorization of a stock buyback.
I posted here already......my apartment has a common wall with nrf's boardroom.....and it is thin.
Announcement of the Nov dividend today did not surprise me, but I must have been on the phone when they decided 40 cents instead of the 36 I predicted. If nsam is 10 cents in nov. I also missed the "keep aggregate the same" conversations.
BTW, if you holders of preferred in retirement accounts do not switch to common before the price goes over 18, IMO, you are nuts!!!
In a taxable account, you have to consider the yield on after tax proceeds from selling preferred. It makes the yield swap more difficult.
Let's assume the price is 17.50 just before ex 50 cent dividend. That means 17 ex div.
So, we get a minimum of 1.60 dividend going forward. 1.60 / 17 = 9.41%.
Suppose it's 18.....1.60 / 18 = 8.89%.
Suppose it's 19....1.60 / 19 = 8.42%
Suppose it's 20.....1.60 / 20 = an even 8%
Plus, with the loss on exchangeable notes, additional depreciation and additional preferred dividends, I'm 99% that all common dividends will be tax deferred roc.
Yield investors, a table-pounder is staring you in the face.
I wonder if the 40 cents is a signal of 10 cents from nsam.
NorthStar Realty Finance Declares Second Quarter Common Stock Dividend
NEW YORK, Aug. 6, 2014 /PRNewswire/ -- NorthStar Realty Finance Corp. (NYSE: NRF) ("NorthStar Realty") today announced that its Board of Directors has declared a cash dividend of $0.50 per share of common stock, payable with respect to the quarter ended June 30, 2014. The dividend is expected to be paid on August 22, 2014 to shareholders of record as of the close of business on August 18, 2014. NorthStar Realty's common shares will begin trading ex-dividend on August 14, 2014.
Following the completion of the spin-off of NorthStar Asset Management Group Inc. as of July 1, 2014, NorthStar Realty expects to pay a quarterly dividend of $0.40 per share of common stock for each of the quarters ending September 30, 2014 and December 31, 2014.
Or, will nsam pay 14 cents, resulting in an aggregate increase. I doubt it.
At the spin the insiders owned the same percentage of nrf as nsam. 1.00 out of the left pocket = 1.00 (pre-tax) into the right pocket.
Just to illustrate, assume nrf and nsam each had 200 million shares outstanding at the spin and Hamo owned 2 million or 1% of each. 1.00 from left pocket = 1.00 into right pocket.
Now let's issue the Griffin shares. Max = 68.8 million and min = 54.6 million, depending on the price of nrf. So let's say 60 million are issued. Now nrf has 260 million outstanding. Hamo still owns 2 million, so now Hamo owns .7692 of 1% in nrf while he owns 1% of nsam. So now, 1.00 going into nsam's right pocket costs Hamo 76.92 cents out of his left pocket.
Gee, nrf's cad doesn't increase the first year after buying griffin. Hamo gets no free "performance shares" in nrf.
BUT, nsam's cad increases by 10%, so the nsam board lavishes Hamo with 300,000 free shares because he did such a good job. Now Hamo owns 2.3 million nsam out of 200.3 million outstanding or 1.148% of nsam. Now 76.92 cents out of his left pocket (nrf) turns into 1.15 (rounded) into his right pocket.
If Hamo allowed himself to be influenced by his own financial interest, guess which way the wind would blow.
I don't even remember flipping it. I must have bought the dilution freak knee-jerk on a follow-on offering. I was out in a very short time....so short I don't remember the trade or the facts surrounding my flip decision. I have more than enough reits..
For those not overloaded already, I suggest buying nsam for relatively short (4 mos at the outside) trading gain.
Yeah, yeah, I know the "Buy the rumor-sell the news" routine, but the market reaction in nsam to the Griffin deal baffles me. I think it is wrong and will correct when the market sees it in the rearview mirror and/or Hamo spoonfeeds the info down lazy throats.
Financial times broke the griffin rumor on 7/8.
NRF closed at 16.72 on 7/7 and 16.53 on 7.8.....down 1.14%.
NSAM closed at 18.90 on 7/7 and 19.46 on 7/8....up 2.96%
So now we have the fact of a deal which NRF says will not be accretive to cad in the first year after closing.
Rather, the immediate benefits are size, scale, connections, diversity, opportunities for more deals. A good deal, imo, but no immediate increase in cad.
NRF closed at 16.14 on 8/4 and is 17.33 at this typing.....up 7.37%......the opposite of down 1.14% on the rumor.
I think 17.33 is still too low for a multitude of reasons.
Even a market novice can figure out that NRF will issue 1.1 billion in new common equity to close this deal which means at least 16.5 million of new nsam revenue and a 6.6 cent increase in annualized cad over the May midpoint of 66 cents. That's a 10% increase in the bottom line for nsam in one shot.
NSAM closed at 17.72 on 8/4 and was 17.99 before I started typing this.....up 1.52%.
Just does not make sense to me. Look at 5-day chart of nrf and nsam. Does not make sense to me.
I attribute it to a slow, lazy and this time stupid market.
Ya got a hint yesterday.......nrf is cad neutral with an 11.5% return on leveraged equity while nsam grows cad nicely on equity issued by nrf to fund leveraged growth in assets. Don't wait for the 2 x 4 to hit you on the head.
The real money is made before the market figures it out.
I noticed that....over 45% short. Not so with nsam though. Short volume percentage did not spike at all.
The credit agreement is attached to the 8-K just filed with the SEC.
Whole bunch of the usual financial covenants like debt to asset ratios, fixed charge coverage and restrictions on dividends which are not burdensome.
As to dividends, NRF cannot pay out in any rolling 4 quarter period more than the greater of:
1. 100% of CAD......OR, if higher,
2. The amount necessary to pay no tax while maintaining reit status.
I don't believe taxable income will be the driver for several years, so the effective limit is 100% of CAD on a rolling 4 quarter basis. With 1.64 as the midpoint forward cad from 7/1 (per May presentation adjusted for reverse split), paying out 1.40 or 1.44 will not be a problem.
5,000 @ 18.1416. I'm expecting some "multiple expansion" words in earnings press release, perhaps a separate press release from nsam, and CC. IMO, Hamo's got something up his sleeve which will be known Thursday.
Geeze, this market is slow. NRF said in its May presentation that NSAM cad midpoint is 66 cents (split adjusted).
It also says that for every 1 billion of nrf equity issued, nsam cad increases 6 cents (split adjusted).
So, yesterday's close was a stinko 17.72 which is 26.85 times estimated midpoint cad. NRF just told the world it will issue 1.1 billion of equity in the griffin deal.....so that means 6.6 cents added to nsam's cad. Even at the stinko multiple of 26.85, 6.6 cents adds 1.77 to the price.
So here we have nsam selling at 18.12, up all of 40 cents.....less than 25% of the increase called for by a lousy multiple.
Yesterday = 17.72 / 66 cents = 26.85 multiple. Now 18.12 / 72.6 cents = 24.96 multiple. Griffin deal grows nsam cad per share by more than 10% and the multiple goes down. Hint, hint....slow, lazy, sometimes stupid market.
Wish SA would publish a transcript of CC. My audio feed had a lot of breaks in it, so I did not hear the whole thing clearly.
NRF was selling at about 10 times estimated first year cad of midpoint 1.64. There were several mentions that NRF expects that multiple to be higher before the closing on Griffin. Thus the collar on shares to be issued is very much in NRF's favor. The target is to deliver 3.75 worth of nrf stock per share of griffin. So, if the price of nrf (determined in accordance with the merger agreement) is between 16.00 and 20.17, each share of griffin gets whatever fraction of a nrf share which will yield 3.75.
BUT, if nrf's price is below 16.00, then the biggest fraction is .2344 nrf share (.2344 x 16 = 3.75). The presentation materials say griffin has 293.7 million shares outstanding. Thus, the most shares of nrf than can be issued (largest risk of dilution) is 68.843 million (.2344 x 193.7).
The least number of shares to be issued is 54.599 million (.1859 x 193.7) which will happen if the price of nrf is 20.17 or higher. (20.17 x .1859 = 3.75).
So, the higher the nrf price between 16.00 and 20.17, the fewer nrf shares issued, which reduces the risk of dilution.
There were several mentions of expectations/plans to "expand the multiple". They expect griffin will be cad neutral, so that does not change 1.64 estimated cad. It's the multiple they are after. 10 = 16.40, 11 = 18.04, 12 = 19.68, 13 = 21.32 (collar kicks in at 20.17), 14 = 22.96 and 15 = 24.60.
They also said the size of this deal will not impair nrf's other pipeline business. I expect some "multiple expansion" news with earnings and the CC. I also expect a follow on offering to fund the equity portion of the other business they are doing.