You will soon have about 1.3 billion less common equity in front of your preferred to absorb losses. In addition, you will have about 20 cents per common share less of cad to be subordinate to preferred dividends.
Common shareholders get all of the NRE equity and earnings freed from superior claims of preferred holders.
In other words, preferred holders will have a riskier position post NRE spin, as with nsam, but nsam was and is asset light. It only took about 170 million of equity out of NRF. NRE will take about 7.6 times more. You will have the same superior claim against a smaller, weaker (earnings-wise) NRF.
You're welcome very much.
From 7/3 post: "As yesterday shows, the selling ain't done.....nrf down while vnq up...again, and again and again."
And again today. NRF down over 1% while VNQ up over .5%.....that's a telling spread. The selling ain't done.
NSAM getting creamed. Hedgies voting with their feet.
A guy owes a bank 100 dollars which he is unable to pay. He says to the banker, you loan me 120 and I'll pay you back 100. The banker requires essentially control over the guy's future spending such that a 120 loan can be repaid over time. Hell no, says the guy. I'm gunna have my family vote on whether we turn over spending controls to you. The family votes to reject the bank's conditions for a new loan.
The guy goes back to the bank and says my family rejected your conditions. Now I want you to reduce my delinquent loan to 80 and loan me 130 so I can pay back your 80 with no new conditions.
And he expects the banker to do this? If yes, Darwin should take over so this guy cannot reproduce.
Nope. Management screwed the cash shareholders with their obscenely excessive compensation. Only 112.4 million out of 346.8 million shares (32.4%) voted for the compensation package. That leaves a population of 234.4 million share owners who could be angry enough to sell. As yesterday shows, the selling ain't done.....nrf down while vnq up...again, and again and again.
The pending dol regulations remain a pending negative cloud over nsam. Even though nsam said retirement plans are only 40% of their sales, they are restructuring new deals into exempt form and implementation is probably more than a year away, it's a big negative on future growth. Plus, this year's fundraising has been dismal compared to what it could have been had Lieberman got the Healthcare follow-on declared effective before the initial offering sold out.
Lots of other negatives including macro forces. IMO, it's gunna take actual positives, not talk, to turn the tide.
Despite all the current negatives, I'm holding nrf for yield and nsam for growth.
I have said again and again here that nrf is now a slow-grow equity reit. Equity reit is get rich slowly. Accept it. Buy and hold it for what it is, a steady source of income which will grow slowly. That's all it is other than pops which may come from spinoffs. NRF is no different than SUI other than the purity of the income stream. NRF is diversified. SUI is pure manufactured housing. In either case, the market limitations on cad per share are similar, but differ by sector.
I hold both. Other than the obscenely greedy compensation at nrf, I expect to continue to hold both for what they are......slow grow dividend payers.
Hamo et al just needs to hear from the big tutes....loud and clear....we are not going to stand for your raping us with excessive robber shares.
It was not a rebuttal. It was intended to help you understand exactly what dilution or dilutive is and how it is calculated. Your language below shows that you equate share issuance to dilution.
"....You are correct in that they could invest the new proceeds into something that compensates (or better) for the dilution, ....."
You are presuming any share issuance causes dilution, which is not correct. If you ever made the above statement on a witness stand as an expert witness, you would get destroyed on cross examination. You cannot, repeat, CAN NOT reach a conclusion on dilutive, neutral or accretive without first doing the calculation I illustrated. You are mis-using the words, "dilutive" and "dilution".
The only share issuance which can positively, correctly be called dilutive at the get-go is one where nothing is obtained in return.......specifically, shares given away for free. These are absolutely, positively dilutive to every other shareholder. That's why robber shares are a real expense because the same earnings are divided by more shares.
Very nice job, cdouprey. Obviously, a considerable amount of work went into it.
I would like to make the concept of dilution more focused for you. More shares outstanding is not, per se, dilutive. Whether or not a stock issuance is dilutive, neutral or accretive is determined by dividing the incremental earnings resulting from the proceeds of the issuance by the incremental shares issued.
Your illustrative reference to the manufactured housing portfolio is correct but not complete. A given shareholder's ownership in the manufactured housing portfolio may decrease by 11%, but that does not make the incremental 34 million shares issued dilutive. That same shareholder owns the same percentage of whatever was bought with the proceeds of the issuance, something which did not exist before the new shares were issued.
If pre-issuance cad per share was 44 cents per quarter, suppose the new 34 million shares result in an additional 17 million of cad per quarter. Incremental revenue per Q = 17 / 34 new shares = 50 cents per new share. Then the issuance is accretive, not dilutive. If the incremental cad per new share is 44, it's neutral, not dilutive. Only when the incremental cad per incremental share is less than pre-issuance cad per share is the
Furthermore, dilution or accretion is not measured by number of shares. It is measured by effect on earnings (or cad) per share. To illustrate: Suppose there are 400 million shares out earning 2.00 per share. Cad is 800 million. Now suppose 40 million new shares are issued. That's 10% of the prior outstanding. 400 million is now 90.909% of total outstanding post issuance. Suppose the new shares earn 1.90, which is dilutive, but by what percentage?
400 x 2.00 = 800
40 x 1.90 = 76
So 876 / 440 = 1.99 new cad per share. The dilution is 1/2 of 1%, NOT 10% or 9%.
I'd say you were wrong. We were expecting a Feb, 2014 dividend of 22 cents had the penny per quarter increase continued. Hamo surprised us with 25 cents (50 cents on a split adjusted basis). So there was a dividend increase in 2014, as with 2013, 2012 and 2011.
Now he has until the November dividend to keep the "annual increase" streak alive.
The numbers were not estimates. They were made up to flesh out an illustration of how aggregate taxable distributions and roc are calculated. Nevertheless, they were numbers in a big ballpark when the ballpark would not surprise me.
If I were going to a per share calculation, I would use 385 million as an annual number. In real life, the number on each record date is used......too much work.
I think you are correct.....the equity put into NRE (plus their bragging about appreciation) will far exceed this year's E&P, resulting in a good chunk of roc which will put many old, already reduced-basis lots into a taxable long gain situation.
BTW, schwartz, it's nice to see a "thinking man's" post now and then with some original analytical work.
The fair market value of the NRE stock will be the dollar amount distributed in the spin. This amount will be added to cash distributions to arrive at total distributions. Next is to determine whether all distributions are taxable. NRF has no accumulated earnings & profits (E&P) going into 2015. I know this because some of the 2014 distributions was return of capital. Thus, 2015 distributions will be taxable to the extent of 2015 E&P, which is a modified form of taxable income.
For purposes of illustration, let's assume cash distributions total 685 million comprised of 600 million to common and 85 million to preferred. Let's also assume the fair market value of all NRE stock is 1.8 billion at the date of distribution and the basis of the stock in NRF's hands is 1.3 billion. NRF will recognize a 500 million gain on the distribution. If NRF has held NRE stock for more than one year as of the date distributed, NRF's gain will be long term capital gain. If not held more than one year, it is a short term capital gain which, for reit dividend taxability to shareholders, is ordinary.
So total distributions will total 2.485 billion (685 million cash plus 1.8 B FMV of nre stock). Let us now suppose that NRF's taxable income excluding the gain on NRE is 300 million (because of depreciation and robber shares). Total taxable income is 800 million (300 regular plus 500 gain on distributing nre stock). Assume adjustments to get to E&P are 40 million positive. Thus, current E&P is 840 million.
The first 85 million gets allocated to preferred which is 100% taxable and 755 million is left for common. Common got 2.4 billion and 755 million is taxable (probably ordinary). Thus 31.46% of the common distribution is taxable (755 / 2.400), probably ordinary, and 68.54% is return of capital.
Jerk brings up a 2005 change in accounting for stripping costs. Hey dope, it was a charge to retained earnings.......a write-off of previously deferred costs.... they switched to direct write-off, a more conservative accounting method.
I understand that you shorts will post anything negative about a stock that you can think of, but this thread is as lame as it gets. First you bring up something they did 10 years ago....as if it cast a negative shadow on their accounting and then you get the balance sheet effect wrong.
Morbid stupidity is defined as a level of brain activity so low it just about keeps the vital organs functioning. There is no energy left for even the most rudimentary intellectual activity. This thread is a classic example.
I live on dividends which are more than enough to pay the bills. If you don't own the stock, you don't get the dividend. We've been through this before and will do so again in the future. I held before, am holding now and will hold through the next downturn and the downturn after that. It is highly unlikely that I will ever be forced into selling principal. Thus the price is not important to me except psychologically. Financially, it is meaningless due to the dividends.
"I'll take it, sit and collect ROC divi's and wait for spinoffs"
I suggest you not count on much, if any, roc dividends this year, (assuming they distribute the spin shares this year), because the distribution is a taxable event to nrf, hence to us.
4.625% is less than half the dividend cost on common at today's price (over 9.5%), there is no 1.5% nsam fee until stock is issued and the lender has agreed to take stock as payment at some formula price after the public has been told stock will be issued. I wish I knew the pricing formula which I suppose could make a great deal a lousy deal (like 70% of then market price per share), but if the pricing formula is at market or up to a 5% discount, it's a great and clever deal, imo.
I'll save you the work since the one month chart results are so pathetic.
Next worst but less than half of NRF's decline is HCN, down 4.43%. YUP, nrf down more than double the percent of the next worst in the group.
VNQ....the index which was supposed to boost nrf price with Vanguard buying 22 million shares, down 2.25%, which means nrf dragged the index down.
MAR and CLDT (hotels)....down 1.37% and 1.08%, respectively.
SUI....UP 3.06% in the last month.
So it is NOT correct to say that NRF is down in line with other reits, not today, this week, one month, 3 months or 6 months. Only HCN was worse over 6 months.
I think more appropriate comparisons are with VNQ, the index it just joined. The announcement was May 12. NRF joined at the close on May 29. Also appropriate are pure plays in NRF's major sectors. I suggest SUI for manufactured housing, CLDT & MAR for hotels (nrf is partners with cldt and bought some from them and most are Marriott) and, since I own it, HCN for healthcare.
Try it, right here on yahoo. I think most telling is the one month chart since it captures addition to the RMZ index, which VNQ tracks. One month also covers the annual meeting (5/27) where 49.5% of the votes cast were against the compensation package. The one month lookback is perfect for the compensation vote effect on price.
Guess who is the one-month loser.