sr9web

Are the 'Sharks' Waking Up?

What other sub-$1 CMBS REITS do you like?


On Mar 12 05:55 PM User 375446 wrote:

> Let's take a look at AHR (Anthracite Capital), an REIT containing
> primarily CMBS. I am a senior executive in the structured finance
> area of a large investment bank, and I can tell you that CMBS spreads
> are so wide right now that every securitized commercial real estate
> loan would have to default, followed by a 50% average principal loss,
> in order to support bond pricing as it stands today. In reality,
> less than 1% of securitized commercial real estate loans are currently
> over 60 days delinquent, and only a fraction of those will sustain
> a loss. Yes, things could get a little worse before they get better,
> but what is the absolute worst-case loss scenario? Our experts say
> 3.5%. So why do CMBS bond prices reflect 50%? Because, in the absence
> of tangible information, people run to safety no matter how invalid
> the underlying fundamentals may be, and prices eventually just don't
> make any sense anymore.
>
> The same thing is true for AHR. This is not a business that may have
> to "close its doors" because sales have fallen. This is an REIT with
> a portfolio of income-producing assets that are simply impossible
> to value at this time, so in the absence of tangible information,
> people have sold the stock to absurd levels. However, once the credit
> markets free-up and the values of commercial real estate stabilize
> - whenever and at whatever levels that may be - it will once again
> be possible to peg values of CMBS, including those in AHR's portfolio,
> and the stock will rise substantially. It is inevitable. The only
> question is when.
>
> If purchased at the current price of roughly $0.50 per share, it
> is hard to imagine a return of less than 10x within the next 18 to
> 24 months. Just be patient. The value and income are there. It just
> needs to be re-discovered.
>
> For those who don't buy AHR today, put a reminder on your calendar
> exactly one year from now and see what happened. We have never seen
> a market like this in our lifetime, and it is presenting us with
> some unprecedented opportunities.