Your guess sounds reasonable. Certainly, there is major construction occurring on the coastal cities. And apartment dwelling has its benefits for those that need/want flexibility and mobility. Probably most of the renters in IRT properties are not in a position to buy, although it might be almost within reach. Yet, who among us can give up that community swimming pool that none of us use?
If the properties aren't built with interest rates this low, when will building in the heartland restart? Rents can continue to steadily rise unfettered until the supply of apartments increases. Maybe the retail malls will all be converted into residential properties:-)
Book is a very misleading number in RAS's case, as it is with many REITs. RAS has hidden equity in the $500 million of Rait 1& 2 notes that it owns and consolidate to zero thanks to GAAP. It is arguable that RAS has hidden equity in properties it took over at below market value during the downturn. If RAS were a pure real property lender, which it is not, one could equate it to a bank and perhaps book value would have some meaning.
In any case, the way RAS raises funds has everything to do with how the markets work. RAS will take capital for the cheapest perceived source that is open to them at the time they need to raise. When the markets were shut down, it issued common shares like toilet paper to deal with the convert that was looming. Later it borrowed by pledging some assets as collateral. Then it cut a deal for a new issue of prfd. D. Then some common, Then some unsecured bond debt traded on the NYSE. That's just how it works..........whatever is the cheapest coupon. If one goes back to the Q3 CC, Scott addresses just this topic and states.......(I paraphrase) "RAS will continue to raise funds in the cheapest non-dilutive way possible." Maybe someone will be kind enough to post the actual quote.
The capital raise will go to the cheapest form of capital. As of today, common costs north of 10%. Prfds cost about 8% and can be raised incrementally as needed. And I doubt that unsecured bonds are available and cheap for the moment, but as of this past summer it was costing RAS about 7.5%.
They could also refinance some properties, or sell some properties (both unlikely sources of funds). RAS also owns $500 million of Rait 1 & 2 notes. They could pledge those to raise cheap secured debt. They still owe $80 million that they raised in this fashion (currently tying up $140 million of investment grade bond collateral owned by RAS). Many options in the current marketplace.
Maybe no one will notice that RAS will be booking a major loss for 2014 if they release the earning pre-market. tiptoe like. I won't tell if you don't.
According to the way I read the interactive map on the RAS website, they are all relatively close together, but not literally next to each other. The way I interpret it, they are all probably withing a mile or so of each other. RAS can sell them piecemeal as it makes the most sense.
The other big piece of land that RAS owns at St Pete Beach is one big property and can probably only be sold in a single large transaction.
It required more than a cursory read of the 10Ks & 10Qs.
It also required some thought on how to present "facts" that would look bad, if one lacked a proper frame of reference. Charting out Scott's tenure against the shares issued looks bad, but anyone that really looked at each one of the common share issues would be able to determine that it was the correct move at the time.
Presenting half information that leads the reader down the wrong path and to the wrong conclusions is........"an art form"........ of sorts.
The presentation of the book value dropping......."cleverly misleading" but basically accurate in facts. Again the stupid reader goes down a blind alley. The smart reader knows better.
The not covering the dividend. Amazing that the SEC settlement permitted the CAD to drop due to the extraordinary expense permitting one more misleading, but accurate path for the naive to follow. Amazing. The sheep got sheered and someone made out very well.
It wasn't a Noble gesture to write that piece of "fictional fact".......it was American Greed. Just amazing.
I think RAS owns about 5 different properties in Daytona Beach. There is an interactive map on the RAS website for all properties owned. The hotel being the biggest in Daytona and, perhaps, the most valuable one. Clearly, RAS will need to sell these properties to a developer.
DF has speculated that these properties were taken back in a property for forgiveness of TruPS deal. About a year ago, during a CC, Scott mentioned that they planned on selling in perhaps two years. He stated that they were waiting for other owners of land/damaged properties that were in a bigger hurry to sell and start the redevelopment process. If DF is right, it would seem that the debt on the properties would probably be very low interest only loans payable to the Tabernas.
The writers of the SA thing were clearly knowledgeable about the details of RAS, while presenting in the most misleading and inaccurate way. There is always a motive for actions like this. It is not Noble. The writer claims they have no position (one way or another) at the time of writing. So, perhaps, since the short position stayed relatively flat, the SA thing was an effort to drive the share price down and establish a nice share ownership position at a lower entry point. They certainly ruffled quite a few feathers. All fun.
Davis, RAS might have had positive cash flow, but the markets weren't working. New securities for financial companies were not being issued. No new securitizations were being created. RAS was busy foreclosing on or taking back keys all over the place (while that's preferable to loan write offs, it is not really the plan).
It could have played out very differently. Someone might have bought up the convert cheap and refused to play ball. There was no clear path forward. Scott even said it in one of the conference calls....I'll paraphrase......"did you ever think we would be here just five years later talking about all the new loan production, and the properties we have bought?" It was a rhetorical question.
So, let's not call it near death, let's just agree that things might not have worked out so rosy for the original shareholders. I think Scott did a terrific job with the hand that Daniel and the overall market dealt him. He played most cards just right.
Your characterization as a near death experience I feel is accurate. I didn't buy any common until after the old convert was dealt with. Still, i think they did the debt for equity swap was 3.5 to 4 years ago now. I think this is why Scott is so conservative now. He is step by step......
Kilgore, there was tremendous dilution when shares were used to retire the original convert debt. But 250 million:-)
250 million divided by 3 is 83 million.......more than is currently outstanding. So, RAS had negative shares outstanding in the past:-)
Continue on, I enjoy the reading.
Yes, RAS is growing both top line and bottom. Yes, they have increased their dividend. Most things are going well, even if its not fully reflected in the share price.
Now that ras is getting more of its income from recurring sources it would make sense to increase the payout ratio. There are serious advantages to paying out more, provided they don't behave like RSO and pay out well beyond what is sustainable and then reduce the payout.
At some point the convertible debt folks will want the bigger payout that the common are getting. And then there is the capped call transaction that, if and when the stars are properly aligned, RAS will get a windfall of cash.
For what should be a boring company, RAS continues to be the most interesting one I own.
What do other REITs pay?
Now that RAS is "clean," I would assume they will pay out in a similar fashion to their competitors. With the losses on the books, they theoretically could retain all cash generated and remain a REIT. Yet, that has not been their strategy along the way.
In the past, their explanation for controlling the payout was that a goodly amount of income was coming from conduit loan sales, which could be a lumpy business. As they got more comfortable with their progress, they changed the payout from 65% to 75%. Why not 85% or 90% now? Perhaps they never want to be in a position where they would need to reduce the dividend.