Greg Weston

Why Maguire Properties is Going Down

tquill: glad to help.

I note that an analyst recently estimated that Maguire's NAV was below $5 as of 6/30/08. And of course the CRE market has just gotten worse in the months since then.

Here is the relevant portion from the Dow Jones article on MPG:

"This is not going to change my opinion of the stock," said Dave Rodgers, an analyst at RBC Capital Markets, noting that Maguire is over 80% levered and cash-flow negative.

Rodgers noted that, among publicly traded REITs, Maguire has the second-largest exposure after SL Green Realty Corp. (SLG) to financial services, which they estimate is about 36% of revenue.

"The broader concern is there is too much debt, not enough cash and not enough credit available," he said. RBC Capital's net asset value estimates for Maguire as of June 30 was just under $5 a share.

Why Maguire Properties is Going Down

MPG is down more than 40% since I made my short call 7 weeks ago.

A Short Update on My Four Short Ideas

Bogey: thanks for the update from NY

Matt: Bear market rallies are to be expected.

As for the reason why, I am no good at explaining short term market movements, which is why all of my articles deal with fundimentals.

That said, FED is one of the most heavily shorted stocks on the market, so short squeezes can always happen. I think current prices are a great opportunity to short FED.

A Short Update on My Four Short Ideas

Thank you Groty for the response. I typically give up responding to someone after more than one post that seems to show either gross or willful ignorance of a topic, or that asks me to do research for others.

A Short Update on My Four Short Ideas

tquill: I am a lawyer, not a financial adviser, so I can't talk to you via e-mail about investments (unless you have a real estate investment issue or financial fraud case).

Probably the best thing you can do to learn about options is open up a "practice account" using Yahoo or Google's "portfolio" option (other sites have this too) and see how you do.

Or perhaps open an options account with just a few thousand of real money.

A Short Update on My Four Short Ideas

Tquill: If you've got the stomach for FED's volatility, yes I do think today's run-up presents a good time to short FED calls.

Steve: My financial short calls have fallen a lot more than the average financial stock. You are wrong, my number is correct, and comes right from the mouth of the company:

"This loss includes $60 million (negative $1.84 per share) of net negative market valuation adjustments."

A Short Update on My Four Short Ideas

SRS asks:

Isn't it more accurate to say that CRZ "breached loan covenants" rather than saying that CRZ [was] "in default"?
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No, it would not. *In default* is more precise, because a breach may be minor or immaterial. There is no such thing as a *immaterial default.*

You don't have to be a lawyer to know this, I would expect these terms to be familier to anyone in finance.

A Short Update on My Four Short Ideas

Matt C: DSL/FED/BKUNA/CRZ/RWT puts are expensive for a reason of course, and I have not done much of this lately.

Shorting the calls on the stocks when they have their random bear market rallies, however, has worked quite well for me.

A Short Update on My Four Short Ideas

Portfolio Manager: By paying a premium as you did, or else in the options market.

Or you can short some of the larger financials, But profits may be lower since they are pretty well covered by independent sources, and there is always the hard to value premium they may have from potential too big to fail bailouts.

The smaller near-dead financials are a great way, however, to make a large profit just if current trends continue, and even bigger if they get worse.

A Short Update on My Four Short Ideas

Value Dope: predicting a trend in the PPS of a stock will continue is no more or less valuable than predicting the trend will reverse.

Shorting a stock that goes down is no more or less profitable whether the stock had been going up or down before you made your trade. So I don't understand what point you are trying to make. My articles are not attempts at expose, they are attempts to analytically value companies and make informed near-term and long-term estimates of their future value using the best available data.

A Short Update on My Four Short Ideas

General Update: CRZ was able to get its loan covenants reduced to a minimum equity of $40 million.

It will probably violate this new covenant by the end of the current quarter. CMBX junior tranches have fallen to new record lows lately, and suffer from much higher spreads than in the close of Q2.

SBG: I made a variety of estimates based on different accounting assumptions. This estimate you reference was of -reported book value ex income from continuing operations-. And this makes sense, because I did not attempt to estimate earnings from operations.


User: Some of these stocks it is mostly too late for anyone to ever go short because of transaction costs. So some of my article was intended for those in my situation of considering when to cover.

For current shorts with higher entry points (like me), there is no reason to cover, because the stock will almost certainly go lower.

What's New at Korn Ferry & Maguire Properties?

Good article! I would be interested in your thoughts on my recent article about MPG, which references and updates your NAV estimates.

Why Maguire Properties is Going Down

User133274:

MPG only owns office buildings AFAIK, however considering that some of these have big vacancy rates, and retail in general is in the dumps, this could hurt occupancy and rental rates at ground-level retail sections of MPG's buildings.

As an anecdote on this topic, my employer in San Diego was the first and anchor tenant at a new class-A building downtown. It took over two years after we moved for the building's owners to rent out any of the ground-level retail, even though the area had good foot traffic.

MPG, outside of LA, mostly has "campus" style buildings with no foot traffic, so the situation may be even worse.