Big K

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

I was looking at the April Value Line report on WRI. It is
shocking to see how this once very successful business has been run
into the ground. While WRI's properties are performing adequately,
unfortunately, the management has trashed the business over the last
decade. They allowed the debt to balloon to $36/share. How does a
fairly small company like this allow their debt to grow to $3.2
billion? The good news is that they have solved the problem by adding
more shares, reducing the debt to somewhere between $20- $26/share.
The bad news is the debt is now $20-$26/share. If they kept all the
dividends to pay off the debt, at the now lofty new dividend rate of
$1/year, it would take 20 years to pay off this debt.

This is what killed the REIT industry. Borrow, borrow and borrow some
more, and don't pay down any debt, just roll it over. Oops, credit is
cut off to the debt junkies. The drinking party is over.
Accordingly, WRI will stagger in a stuporous hangover for years, and
that is if the retail situation doesn't get any worse. Now that
rolling the debt over may no longer be an option, WRI is a potential
bankruptcy candidate, despite a fairly robust business. It's time to
remove the fools in the executive suite and replace with people who
know how to balance a checkbook.

Commercial Real Estate Implosion Is Imminent

This seems to be a common argument I've seen recently. Because there was massive defaulting in residential real estate, there will be massive defaulting on the commercial side. And by analogy, there will be massive defaulting on everything else. The only answer as to why it will happen, given in the article, is that it hasn't happened yet.