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Richard T. Woon is a transactional attorney practicing in the Silicon Valley in the practice areas of real estate, land use and financial services. In addition to the practice of law, Richard previously maintained a real estate brokerage practice representing and advising local urban infill... More
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  • American Campus Communities: Debt Covenants & Dividends Part II

    On Friday, American Campus Communities (ACC) announced that it was maintaining its dividend at the current level. Obviously, my prediction that ACC would cut its dividend to 26 cents was wrong - there can be no excuses. I believe this is attributed to the failure of one of the assumptions that I need to make in order to predict the cut. We can use this new information to reformulate our trading strategy with respect to ACC.

    You will recall that in my last article I based my prediction on the following two assumptions:

    (i) Q1-2009 FFO will be stable (not higher than Q4-2008)
    (ii) ACC will be unable to amend the applicable debt covenant

    More »
    Tags: ACC, REITS
    Apr 27 05:23 pm | Link | Comment!
  • ACC: Debt Covenants and Dividend Cuts

    American Campus Communities (ACC) is a real estate investment trust (a “REIT”) that bills itself as “…one of the nation's largest developers, owners and managers of high-quality student housing communities.”[i] I believe ACC will be forced to reduce the dividend to 26¢ per share (or lower) in the next few weeks in order to remain in compliance with certain debt covenants.

    I am not suggesting that student housing is a bad line of business. While most investors tend to get focus on what a company does, I like to focus on how well a company executes. This analysis is focused on ACC’s financial condition and the dividend as a function of Funds From Operations ("FFO")[ii] per their debt covenants. In addition, I believe that ACC has very serious problems with its capital structure and, therefore, the common stock is severely overpriced, fundamentally weak and an excellent short opportunity. I believe this could be the greatest short opportunity of 2009.
     
    More »
    Tags: ACC, ARE, PLD, HCP, VTR, KRC, WRI, KIM, CCI, IYR, TLT, GLD, SLV, SRS, REITs
    Apr 05 06:57 pm | Link | Comment!
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