Davis, I have ready your thoughts on this board for close to three years. I haven't been posting as actively as I have in the past, but I continue to read actively.
In the past your have stated the common stockholders are the owners and the management's interests should be more aligned with the common shareholder than with any other stakeholder. Further you have argued that if the common shareholder does well, the management deserves to do well too. Bravo. I agree.
This week, the company has decided to announce a CASH compensation plan that, while based on some actual financially based metrics, will almost certainly guarantee management bonuses even if the common shareholder does not make out well. Davis, you talk out of both sides of your mouth. No two ways about it. You need to decide if you are going to defend the company as a common shareholder, or as a management lackey. Your decision.
Management of public companies are paid relatively fat salaries for doing they jobs, which includes improving revenues and all possible metrics. Usually management is provided further incentives in the form of stock options in order to strongly hitch their wagon to the common shareholders.
It seems outrageous that they should further be bribed to deliver good numbers by being given enormous Cash bonuses. Isn't it their job to strive to get those numbers as part of the regular job? Don't the options drive the greed enough to work the extra hours?
Shouldn't teachers be given bonuses for doing their jobs? Shouldn't garbage men get cash bonuses for cleaning up the nyc streets?
The write offs of the Tabernas have generated tax losses that would appear to permit roc for quite some time going forward.
However, the cc brought up some interesting information that could change that picture. RAS will sell 3 apartment properties and book profits. RAS also owns 8 pieces of land in FL that they took over at the lows of the market. We were told 12-18 months ago that those properties would go on the market in 24 months (soon).
RAS has hidden profits in the $500 million in Rait 1 & 2 bonds that they own. As the loans that are held as the collateral for this securitizations pay off, RAS will be forced to recognize the profits.
Further, Scott indicated RAS will sell other properties after the 3 they sellin the second quarter. More gains.
Joel wondered in a different thread if RAS owned some losers......undoubtedly, yes. But they own a boat load of properties and many are likely very solid winners.
Lets play monopoly. $25 million gain from the first three property sales. $50 million gain on land sales.. Another $30 million from later property sales. $250 million in gains from the Rait bonds being repaid. Wow, no losses left to give me roc.......
Just fun. All this will play out over very long periods of time:-)
1. Properties can not be marked up to market. GAAP will not permit it. I can show you oh so many example of companies that own real property at yesturyear's prices. Book value can be very misleading. If any company wanted to, they could spend money and get appraisals and disclose the appraised values.......better just to generate cash flow.......that says it all.
2. Of the three properties on the selling block, management says there is only a bit of mez debt owed to Rait 1 & or 2. The rest of the debt on thes properties is owed to third parties.
4. That would not improve book value, which was the question.
I think the better answer is don't be deceived by book value. It is often not a meaningful measure of ture value for so many reasons. For fun reading on this topic, I would direct readers to the annual letter witten by Warren Buffet to Berkshire shareholders. He devotes considerable energy to explaining valuation and puts no credence in book value.
To generate positive cash in disposal, RAS must sell the Daytona properties for more than $25 million since there are mortgages against them, presumably held by a securitization created by RAS (maybe Tabernas, maybe others). The St. Pete, FL property has no debt on it.
It would be lovely to redeploy the money tied up in these non-cash generating properties. There is no pressure. It will happen.
You make it sound like the party's over. I doubt it. We are at the beginning of currency wars. The $ is too strong and we will have trouble if we intentionally raise rates.
Yes, the fear of rising rates will cause a rush to lock in some good long term rates. Huge $ of CMBS are coming due in the next two years that will require refinancing. I wouldn't be surprised if RAS did record numbers in conduit business in Q4.
For doing nothing as the hedges disappear.
That's 10 cents per share more for sitting back and kicking their feet up on the desk.
They didn't disclose at what point(s) in the year the $8 million would come to them. Could be lumpy :-). Could be late.
IRT third party debt.
You are correct that toward the end of the 10K there is some detail regarding the debt on individual properties. Property. By property the 10K spells if it was owed to Rait 1 &or 2 or Tabernas or some third party.......
1. It not only not trivial, it's not really possible. Other REITs don't do it, I wouldn't expect RAS to either. And it certainly can't be done on the audited numbers.
2. "Sell some properties at a profit"...........it would appear that you were talking about "some properties" but I will take your word for it that you meant "all properties" as you now say.
4. So what you meant was the loss carry forward permits the nonpayment of dividends on profits generated, which would Add to equity. Essentially retaking earnings, which is not normally possible for REITs.
Are you having a rough day Davis? You are very argumentative and disagreeable.
Wow. A very even handed, level headed post.
RAS continues to transform from the company that it once was into the company it will become.
Adding to some of your thoughts.
Scott seems to have the confidence of many/most of the people that matter. Institutional investors, lenders, investment bankers. Hundreds of millions of new debt issued, both unsecured and secured in 2014. They don't seem to hold him, or his remaining team accountable for Danny's sins and greed. Good for Scott, good for all RAS stakeholders.
Despite the elimination of the Tabernas,, RAS continues to require much more explanation than many/most companies. It's sitting on valuable land in FL that doesn't fit with forward strategy. It's buying retail properties in MI, while selling multi family in ????, while buying other multi family via IRT. It holds a large number of mez loans, while it is currently unwilling to originate any new mez.
Issuing equity, debt, convertible debt, Preferred shares, buying back debt, creating new securitizations.
Nothing nefarious here, just an ongoing fixing of the old while "opportunistically" attacking the marketplace.
She mislead you. While the leverage was high as well as the interest rates, thus generating returns larger than the equity Traunche, what she neglected to tell you was that RAS / Tabernas also owned the very worst debt traunches which they were unable to sell. The company quickly recovered its investment in the slim equity Traunche, but not the thick debt ones. Merrill Lynch had the same problem.
I found page 6 a bit comforting. In the past RAS implied (in it's marketing) it would lend up to 85% LTV on bridge loans, but the ones made in Q4 averaged 73% LTV and once properties are "stabilized" LTV goes down to 65%. I guess the 85% talk was a tease to bring property owners in to get the conversation going. Comforting.
Did Scott build RAS out of the goodness in his heart? Did he do it for you and me?
Scott got paid well all along the way. Just as "no dividend was ever missed" no paycheck was ever missed. When Scott took over at the downturn, did he get awarded options at low prices.
I work long and hard, perhaps harder than Scott. I do great things for the company I run. Trust me when I tell you, Scott is handsomely compensated for his efforts. I want to work for any company you own stock in.......because you want to pay executive excessively.
They are buying in Indiana, not selling there. My guess is they are selling in places like Miami or Phoenix. In any case, I'm not disagreeing that 4% is an optimistic number. I think they are selling because they think they can get an adequate price and because some markets are overheated and will be a disappointment in the long run.
The $200 million+ in cash is most interesting because RAS is not under any pressure to issue new securities of any type. Inevidibly they will raise more cash, but only when the time is right, and only using the most cost effective securities.