# Never mind: Pub Bus Pks PSB-X, -Y, -Z "orphan preferreds"

**URL:** <https://discussion.fool.com/t/never-mind-pub-bus-pks-psb-x-y-z-orphan-preferreds/86598>\
**Category:** Real Estate Inv. Trusts: REITs\
**Created:** [January 16, 2023, 2:50am UTC](https://discussion.fool.com/t/never-mind-pub-bus-pks-psb-x-y-z-orphan-preferreds/86598 "2023-01-16T02:50:34Z")\
**Posts on this page:** 1\
**Showing post:** 2

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**Author:** ![aj485](https://g.foolcdn.com/misc-assets/discourse-member-avatar_120px_bronze600.png) [@aj485](https://discussion.fool.com/u/aj485)\
**Post date:** [January 16, 2023, 9:12am UTC](https://discussion.fool.com/t/never-mind-pub-bus-pks-psb-x-y-z-orphan-preferreds/86598/2 "2023-01-16T09:12:37Z")

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> [@FlyingCircus](#):
>
> So, the price of these preferreds has crashed. That 10% yield is enticing, and the price represents a nearly 100% CG opportunity if BX redeems them at even 20. I don’t think they have to retire them at the $25 original call due to the acquisition

There already was a tender offer [PS Business Parks, Inc. Commences Tender Offers to Purchase for Cash Any and All of its Outstanding Preferred Securities Described Below - PS Business Parks, Inc. (PSB)](https://ir.psbusinessparks.com/news/press-releases/detail/273/ps-business-parks-inc-commences-tender-offers-to-purchase) in the $15 range (depending on the specific issue), so you probably need to think more in that range than in the $20 range. If they call them, they do need to be called at $25.

> [@FlyingCircus](#):
>
> I’m thinking of a opening a 1 to 2% position in one of these. Opinions?

As I said in November in this post [PSB Preferreds getting screwed by BX - #3 by aj485](https://discussion.fool.com/t/psb-preferreds-getting-screwed-by-bx/81757/3) what you need to worry about is the preferreds being Waldenized. The entity legally responsible for the dividend payments is Sequoia, not Blackstone. That said, if BX is to get any dividends from Sequoia, the preferred dividends would be in line ahead of those payments. If you presume that BX wants to extract value from Sequoia, that would make you feel that it’s less likely that the preferreds will be Waldenized.

However, the elephant in the room is that BX already extracted a big chunk of value from Sequoia by obligating Sequoia on a mortgage secured by the PSB property. The mortgage, being senior secured debt, takes precedence over the preferreds. Considering that many commercial mortgages are variable rate, that means in the current environment, the payment obligation on that mortgage is going up, so there is less money available to service the preferred debt.

Since Sequoia is a private entity, you’re going to have to do a lot of digging to find specifics of the cash flow from the property to see if it’s going to be able to support both the mortgage obligation and the preferred dividends.

AJ

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