DB has committed $500 million to IRT so it can buy TSRE. Why so much? They need about $100 million for the cash portion of the deal. They need $70 million or so to pay off the TSRE line of credit. That's $330 million extra. Wow. I wonder if they can use the extra to buy more properties from the open market.
I had predicted IRT would use debt to grow, but I totally missed the mark as I never dreamt of a merger and I thought they would raise $100 million from bonds. Boy did I underestimate and think too small.
Nothing wrong with honest short sellers. Nothing wrong with honest hedge funds. I've heard that both exist.
I don't think the short position is huge, and presumably some is a hedge of some sort.
It's hard to tell how much of the average daily trading volume is real. If one buys that it really trades 500,000 shares per day, a bit of bad news would let the million share guy out. Davis keeps hoping for great upside news that will "trap" the shorts. I don't think RAS has an Ace up its sleeve that will surpriseto the upside. RAS can hope to recover by delivering slow and steady as promised on improving the real estate they own and continue to lend with new securitizations and find new interested institutional investor interest for when they do need to raise capital. Really that is what they have been doing for five years now, while hiding behind the book equity created by the Tabernas.
I wonder how successful he or she is at getting the timing right. I imagine there is some money to be made if one gets it right. There is enough float to get in and out of a million shares without too much trouble.
True, the story was muddled and convoluted with Tabernas, constant markups and markdowns that flowed through the income statement. Also, the SEC settlement doesn't look so nice even though the indiscretions were years ago.
RAS story is cleaner and easier going forward. Just like IRT story is easy to understand.
I'm not certain that Rait 1&2 are providing below market financing to rait's properties. When looking at IRT, they charged themselves full interest. LTV at the time might have been attractive, however.
I think that just freed up $40 million of cash as the warehouse line for bridge loans provides only a 60% advance rate.
Davis, if you don't mind, can you ask:
1. Are all $500 million of rait 1 & 2 bonds owned by RAS eliminated in consolidation? If Rait 1&2 were deconsolidated, would RAS show them as assets owned, and have $500 million more of equity (except some was bought at discounts, so those would be at cost, I assume)?
2. How will Rait raise additional capital this year, if they decide to?
3. Why are they only upgrading only on of their retail malls at this time?
4. Do they still plan to buy more retail properties?
I remember you posting before the last meeting. I hope our mb can come up with 20-30 good questions. And, yes asking them and posting answers to them is a real service.
My post was made with a smile & a wink;-)
All the more reason the sale must go through. RAS only lost two employees to the sec. If they find a few gems that are willing to move to Philly and Chicago that would be good for all. There probably should be a few keepers among the bunch.
IRT has no employees. IRT has a management contract with RAS. Also, the properties themselves are managed by Rait Residntial (Jupiter Properties) under contract, not by IRT employees, since there are no IRT employees. There is only an IRT board of directors.