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SevenCostanza

SevenCostanza
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  • Broken ATM Machines: Gramercy Capital, Part III [View article]
    Good of you to follow up and save your readers, who may happen to own preferreds, a tax surprise!
    Aug 2, 2013. 02:37 PM | 1 Like Like |Link to Comment
  • Mortgage REITs Can Morph Into More Valuable Equity REITs [View article]
    Nice article. A similar one to watch is NCT: it is not there yet but it is slowly morphing into a senior housing REIT as its CDOs unwind.
    Jul 23, 2013. 09:47 PM | 1 Like Like |Link to Comment
  • New Residential Investment: Significant Upside Ahead For This Recent Spin-Off [View article]
    To your first question, yes, conflicts of interest always present themselves in these externally-managed REIT. The most obvious conflict would be the incentive Fortress has to grow AUM sub-optimally. In my experience though, Fortress has managed to strike a balance between growing AUM and raising equity for investments that end up being accretive to shareholders. Also, look at the insider ownership. Edens and Nardone own a pile of NRZ. This helps.
    Jul 1, 2013. 01:52 PM | Likes Like |Link to Comment
  • New Residential Investment: Significant Upside Ahead For This Recent Spin-Off [View article]
    Yes I saw what you are doing, and it's valid. I am not sure why using their RoR guidance yields a discrepancy with their dividend guidance. Longer-term, as new investments roll in to replace ones rolling off, one would think the two approaches would converge. I see your numbers as good 2H 2014, 2015 estimates.

    Great read! Thanks for getting the story out there.
    Jun 14, 2013. 10:50 AM | 1 Like Like |Link to Comment
  • New Residential Investment: Significant Upside Ahead For This Recent Spin-Off [View article]
    I see how you got there, but re: your 2013 gains for distribution of .76 in 2013 - isn't this a bit aggressive considering management guided for .14-.15 per quarter on the last call? How does your model differ? Think Edens was low-balling?
    Jun 13, 2013. 01:06 AM | 1 Like Like |Link to Comment
  • Gramercy Property Trust (GPT) puts more money to work, closing on the purchase of a build-to-suit of about a 120K square foot industrial facility in southern Florida and a 62,230 square foot industrial property in Bellmawr, NJ. Construction costs for the FL property are expected to be $25M and generate GAAP operating income of about $2.3M next year. The NJ property cost about $4.2M. The company also sheds more noncore assets, selling a mortgage loan defeasance pool acquired as part of the BofA portfolio last year. (PR[View news story]
    Yeah I was a little unclear on the purchase price as well. The PR just mentions construction costs. A little ambiguous.
    Jun 5, 2013. 12:58 PM | Likes Like |Link to Comment
  • Creating Recurring, Durable Cash Flows  [View instapost]
    I agree, I'm quite pleased with management's execution.
    Jun 1, 2013. 11:40 AM | Likes Like |Link to Comment
  • Creating Recurring, Durable Cash Flows  [View instapost]
    I've been corrected by others for capitalizing asset management revenue when calculating an FFO multiple, since it is seen as being in runoff. My initial expectation, too, was that the asset management revenue was only going to last as long as the deal struck with KBS (two years, if I recall, with some incentive income if KBS could sell properties at a good price). This was back when GKK defaulted on its Realty portfolio and subsequently turned over the real estate to KBS. Since then my thinking has definitely changed. And management has been talking about it differently. In slide 22 of the business plan update you can see how they are thinking about the asset management platform: to offset G&A, generate fees from managing the halves of JVs that GPT doesn't own (e.g., the BofA portfolio), and to source new acquisitions. That's value creation where everyone expected only runoff revenue. This team is good.

    I hope to see, and would expect to see Gramercy enter into more JVs - it's a chance to generate some incremental management fees on the side, resulting in an overall higher ROI than owning 100% of a property portfolio.

    Check out slide 22 of the most-recent business plan update:

    http://bit.ly/16xFUmK

    And some highlights from the conference call:

    "The most substantive part of our asset management business today remains the management agreement with KBS which positively contributes to cash flow.

    ...The utilization of our platform to manage additional assets results in incremental asset management fees without substantial increases in operating costs.

    We’re also entitled to asset management fees from our joint venture. We expect our joint venture will contribute approximately 1 million of base asset management fees annually."

    "We had the benefit of an enormous platform when we joined. Gramercy had a team that had been constructed as the original AFR business. So we have in house property management acquisitions, asset management capabilities well beyond the size of our portfolio. So we are able to execute on both large and small transactions. We can move very quickly. I would put our acquisitions capabilities up against almost anyone in our space. So we are really looking to use that as an advantage as we construct the portfolio."

    http://bit.ly/19v86Wd
    Jun 1, 2013. 12:17 AM | 1 Like Like |Link to Comment
  • The Hard Money Has Been Made In Imperial Holdings [View article]
    Great article!

    Interesting to see the involvement of Indaba here given your choice of GKK/GPT as an analogy in the introduction. They bought a pile of GKK preferreds.
    May 17, 2013. 05:13 PM | Likes Like |Link to Comment
  • Broken ATM Machines: Gramercy Capital, Part III [View article]
    There may also be cash from a capital raise that we all know is coming at some point, plus a line of credit that management was talking about on the last call. The capital raise would be best after a dividend was declared, so preferreds may have to get current first. Perhaps a scenario would be:
    1) secure line of credit
    2) use the line of credit to pay arrears
    3) declare common dividend
    4) sell common shares
    5) invest proceeds, perhaps repay line of credit

    I wonder if they can raise capital concurrently with paying preferred arrears. That is, declare a common dividend (but not pay it) before paying arrears, use the dividend to anchor the share price in a secondary, then use some of the proceeds to pay preferreds before any common dividend was actually payed. I'd have to review the language in the preferreds prospectus, but if I still held preferreds, I probably wouldn't object to such a plan.
    Mar 26, 2013. 02:51 PM | 1 Like Like |Link to Comment
  • Gramercy Capital Management Discusses Q4 2012 Results - Earnings Call Transcript [View article]
    Can only guess that some fast money was in it for quick pop from a dividend-declaration.
    Mar 20, 2013. 10:19 AM | Likes Like |Link to Comment
  • Event Driven Q&A Forum [View instapost]
    My 5 minute glance:

    There's probably seasonality in the business, but as a shortcut let's take the 9 months of 2012 out to a full year. Using their pro-forma numbers (i.e. adding back in that interest expense) you get $.25/share in net income. They record about $5m/yr depreciation. Ignoring maintenance for now, that gets you to ~$.45/share in FCF. PE of ~35, P/FCF ~19. Doesn't really get me too excited. Incidentally - this trades about the same valuation of TSRRY - so it seems the market is at least consistent in valuing these wine growers.
    Feb 22, 2013. 09:36 AM | Likes Like |Link to Comment
  • Event Driven Q&A Forum [View instapost]
    It's hard for me to buy because it is up so much already, but I think NCT could appreciate 20-30% over the next couple months as it splits itself into two parts (expected in March), and those parts are valued on a standalone basis.

    -New Residential will be to NSM as HLSS is to OCN. It will own MSRs initially, and may branch into other residential-focused investments. It will pay a $.56 a year dividend. If it gets priced to a 7% yield like HLSS, that's an $8 share price.

    -Newcastle will own the CDOs and senior housing portfolio. It will pay a $.50/year dividend. Its assets are ~90% CDO-related and 10% senior housing-related. The senior housing portion deserves a ~5% yield based on comps, the CDO part probably deserves a 8-10% yield. A weighted average would be somewhere in the 7.7%-9.5% range. This gets you to a price range between $5.25-$6.50. (On an asset basis, I get to just under $5/share - $800m in recoverable CDO principle, $76m in the senior housing, $112m debt, and $30m cash versus 172.5m shares.)

    -The sum of the two upon the spinoff and subsequent repricing would be $13.25-$14.50, versus a most recent share price of $11.20.

    This analysis was mostly spoon-fed to me by the company here:

    http://bit.ly/VFkpM1

    The options look quite cheap...
    Feb 19, 2013. 12:00 PM | 1 Like Like |Link to Comment
  • Our Best Investment Idea For 2013: Gramercy Capital, Part II [View article]
    Great suggestion, DeepValue. Let's take a break from beating up Chris about the upside he sketches out in this article and focus on the downside for a bit:

    Someone sketch out a path to losing significant money buying GKK today. I believe that it is a challenge to do so. If you don't lose money, all other alternatives are pretty decent.

    Mike, I don't understand your math here: "The preferreds have a current ask price on Schwab of $32.44 (there is zero volume, by the way). If purchased at ask and a cumulative dividend was collected in fourth quarter, there would be an 32.87% return on investment from dividends alone. If the stock were called that would be a return of 109.94% by fourth quarter this year."

    The preferreds are at $32.44 (above par) in anticipation of getting arrears payed. This is a strong vote of confidence by preferred shareholders in the company's financial strength. When dividends are payed, the preferreds will drop back down to around par. Factoring that in, you wouldn't get a 33% return. The preferreds are far from distressed.
    Feb 13, 2013. 05:34 PM | 2 Likes Like |Link to Comment
  • Our Best Investment Idea For 2013: Gramercy Capital, Part II [View article]
    Nice article, Chris. My only word of caution is that comparable REITs are trading at historically high valuations due to ZIRP and hunger for yield. GKK could become similarly overvalued - but the price targets here could come down if the sector as a whole returns to more normal levels. Still, at $3.60, there's a good margin of safety either way.
    Feb 12, 2013. 09:17 PM | 1 Like Like |Link to Comment
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