malach hamovess

Mack-Cali Late to the (Follow-On) Party

CLI's wait of a few weeks after the others sold additional equity was quite fortuitous. It sold at a much more favorable price with either a greater amount of proceeds or far less dilution than had it sold 2-3 weeks ago.

Now we know where all that money "sitting on the sidelines" is going; it's recapitalizing the REITs.

Bullish on REITs Equity Sales

the other thing to look for is REITs tendering for their own debt at discount. this too is beneficial to preferreds as it increases their position by removing pressure from the top.

thus, preferreds of the REITs can be helped from both the bottom (more common) and the top (debt reduced at discounts)

finance.yahoo.com/news...

Bullish on REITs Equity Sales

How to play the reit equity sale:

The real beneficiaries of REIT equity sales are the preferred shares and junior or unsecured debt of these entities. While the common is most often heavily diluted when money is raised at distressed price levels, the preferred shares get a lot more cushion under them; similarly, junior securities benefit as liquidity issues are erased.

Consider AMB - its preferred rose 20 percent last week as the common was bulked up. Simon's preferred also took a nice pop, and its bonds also rose a bit (although not as much as it also raised more unsecured debt.)

Many of the REIT preferred shares are trading at such distressed levels that they can recover 30-50 percent on any stabilization of the common. They thus become a true equity play, with possibly a bit less upside but some (not that much) safety on the downside.