The roc in real estate comes from debt financed depreciation. As long as depreciation (non-cash expense) exceeds principal payback on loans (nondeductible cash outlay) cash income is higher than taxable income. Thus they are able to pay non-taxable (currently) dividends to the extent of the excess cash flow.
However, taken in isolation on any single property, some day the principal payback will exceed the depreciation. Then taxable income is higher than cash income. However, this day of reckoning can be put off indefinitely as long as they keep on adding enough new, debt-financed properties whereby the tax shelter from the new is more than the tax cost on the old.
With respect to each lot of stock, roc dividends reduce tax basis. When basis is reduced to zero, the excess is long term capital gain. To illustrate, suppose you buy a stock for 15.00 and it pays a constant 1.60 per year dividend, all of which is roc. At the end of two years you have collected 3.20 of untaxed dividends. Your new tax basis of that stock is 11.80 (15.00 - 3.20). If you then sell the stock for 16.00, you have a 4.20 long term capital gain. If you do not sell, after 10 years you have collected 16.00. In the 10th year, you report a 1.00 distribution in excess of basis as a long term capital gain and the basis of your stock is zero. This is done on a lot by lot basis.
If you die holding the stock and the fair market value is 22.00 on the date of your death, the tax basis in the hands of your estate (or heirs) is 22.00. All the cash you collected is forever income tax free, as is the absolute appreciation from 15.00 to 22.00.
It's a GREAT thing. It's what got me into this stock and is why it is the largest position in my portfolio. The yield is WAY too high for the stability of the cash flow. While I complain about the recent price underperformance, the thought of selling has not even entered my mind. NRF has been through these down spells before and surely will again, but the dividends keep coming. Plus, the frosting on the cake is I expect the dividends will be 100% tax deferred return of capital this year and for years to come. Thus, it's cash now and, at worst, long term capital gain after basis is fully recovered.
Want 9.25% tax deferred?.....buy now at 17.30.
I just bought a nsam flip lot.....maybe a dinner trade with bargain hunters bidding whole market up into the close. Alternatively, wait for first earnings report and new projection in early Nov. My gut says bigger earnings pop for nsam than nrf.
NRF.....maybe a dinner trade today with climb to close. If not, yield is more than 9%...40 cents in about 5 weeks.
We'll see when today's short volume is reported. In my view NRF turned in a terrible price performance today.
Equity reit indixes up about 2% today and mortgage reits just under 2%. NRF struggled to end unchanged.......WAY short of reit price performance today.
Yeah, I made a grand flipping it today and intellectually I know any one day's performance is irrelevant to the investment prospects. BUT, I still don't like to see nrf at the bottom of my portfolio list when ranked by percentage change. Puts me in such a bad mood I'm taking wife out to spend some dinner trade money.
When the turn goes your way.
Another 1,033 for the 2015 Christmas fund out of NRF in 3 hrs and 12 minutes. Yahoo would not let me post a paste of the trade history entries at Fidelity.
Unless the Chinese come along and pay 1.4 million per room a la Astoria for nrf's hotels, it ain't gunna happen, imo.
IMO, the glory days of more than 100% annual total returns from nrf are over. The skim to nsam combined with market limits on leverage, asset yields and size are going to make it very difficult for nrf to produce cad PER SHARE growth of more than 10 to 20% per year going forward.
While spoiled from two recent years of more than 100% total returns, I'm satisfied with 15% annual returns in this inflation environment. Nevertheless, I think the next 12 months will provide substantially more as Hamo works on nrf's yield and the market sees in black and white that nsam is an asset-light cash cow.
As to nsam's dividend, imo, it was deliberately set low while Hamo decides what to do with excess cash. He left himself with lots of wiggle room on the dividend....a 1 cent increase is 10%, a respectable percentage. A purchase of a small reit manager would not surprise me nor would stock buybacks, as Hamo's bread now gets much more butter from nsam than nrf. His interest now is increasing nsam's cad per share. NRF will become an annuity with an inflation hedge, just like SUI. NSAM is where the stock price growth will come from.
What were you looking at that you can identify the sell side of a trade as a short sale?
I know if I make a short sale at Fidelity I have to enter a "sell short" in the order screen, so Fidelity knows it is a short sale. Fidelity's Active Trader Pro has a readable file of each trade, but I don't see a designation of a given trade as being a short sale.
Ameritrade's Trade Architect has a time and trade screen which shows the last 20 or so trades (no archive that I know of) but again I see no designation of a given trade as being a short sale.
Where do you get this info?
I don't recall ever seeing a higher percentage of short sales in NRF as last Fri.......a whopping 86.3% of reported volume sold short!! .......1.632 million out of 1.892 reported. Composit volume was 3.76 million so reported short sales were 43.4% at a minimum. Despite this onslaught of shorting, NRF up 1.32%. I hope this is a sign of momo turnaround.
Shorting in NSAM was 50.3% of reported, much higher than low to mid 20s recently and NSAM up 2.41%.
Same sentiment about momo turnaround
Correction: "private" is not the correct term. These are public reits which are not traded. The proper term is "nontraded" reits.
Ah, the nice little tidbits of information which can be gleaned from sec filings. You are about to learn something that 99.9% of the market does not know: Private reit fundraising ytd through 9/30 totals 627.1 million vs 800 million for year in projection budget. IMO, nsam will easily exceed 900 million for the year. I expect this adds 1 to 2 cents per share to nsam's cad per share for 2014 and 2 to 4 cents to 2015 cad.
The S-11 just filed disclosed Healthcare raised 552.2 million thru 9/30 vs 109.2 at 12/31/13......443.0 million YTD. Income 2 was 212.0 at 9/30 vs 27.9 at 12/31/13.....184.1 YTD. 443.0+184.1 = 627.1.
So, they are ahead of increasing by 50 million per quarter. 1Q = 150, 2Q = 200, 3Q = 277 = 627 ytd.
For the period, Healthcare was 552.2 at 9/30 vs 507.0 thru 9/11.........45.2 million in 19 days = 2.379 per day.
This compares to 2.236 in 28 days between 8/14 and 9/11.
All is well in fundraising land at nsam. Increasing the size of the offering by more than 60% (700/1.100 = 63.6%) also tells you something.
IMO, the market just has not grasped nsam's increase in cad for 2015. Current midpoint for 2H 2014 annualized = 66 cents. I'm currently now estimating by extrapolation 78 to 80 cents for 2015. That's an 18% to 21% increase and the stock is down 10% from its high. Hint. Hint.
Healthcare filed a S-11 last night. Offering an additional 500 million worth of stock and an additional 200 million for drip plan. This makes total to be sold 1.5 billion to public and 300 million for dripping. Allocations between public sales and dripping can be changed, just as they did with Income 1.
I go to the sec website. On the screen I bookmarked one option is "latest filings". These are practically real time. In the search box just put "northstar". This will return all recent filings with the word, so it gets any filing entity with the word in it, including a couple of entities which have nothing to do with the nrf group. However, it does show nrf healthcare, nrf income 1 and nrf income 2.
Had to get a bounce sooner or later. I think nsam has greater pop potential on Nov earnings/cc/guidance than nrf......the reason I bought low yield nsam over high yield nrf this morning at 17.9216 and sold it 1.5 hrs later for 18.1280 resulting in a 1,032 dinner trade. Wife will be very pleased.
Also, finally some volume in nsam behind the bid and ask. Was looking for a flip lot yesterday but only sandlot volumes displayed. Today, on 5,000, the buy took 2 executions to fill (100 + 4,900). The sell took 3 (2x100+ 4,800). More than the lightweights are at the plate today.
Collected thru 9/30 = 212.0 million vs 172.7 thru 8/11....39.3 million in 50 days for an average of .786 per day.
This vs .763 million in 19 days thru 8/11.
At 6/27 collections totaled 137.8 million to 212.0 thru 9/30.....74.2 million in 95 days averaging .781 for quarter.
Healthcare was 342.3 at 6/27 and 507.0 thru 9/11......164.7 in 76 days for an average of 2.167 per day.
With 20 days to go on Healthcare, I'm confident the two will slightly exceed 250 million for 3Q.
So the pattern is consistent...150 in 1Q, 200 in 2Q and 250 in 3Q......increasing by 50 million per Q. 300 million in 4Q will mean 900 for the year (vs 800 in presentation slide budget). When nsam reports 3Q and prepares new projection, I expect budget will be increased. This does not include RXR launch which should start this Q.
There! You now know something that 99% of the market does not know simply because they are not fast enough.
Start off by buying NRF under 17.78 and collect more than 9%. I expect at least several years of 100% tax deferred return of capital which converts ordinary income into long term capital gain or tax free income if you die with the stock.
Inversion....good idea. Can you tell us how much U.S. tax they would save with an inversion? Put another way, how much would the effective tax rate drop?