Bought 1,000 shares OHI today. I had sold 1.000 OHI shares earlier this month and bought them back $5 cheaper.
Are any of you seeing anything interesting out there.
I really like OHI, WHR, HPQ and LNC, but a 10% holding is as high as I will go.
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I like KRC.
https://www.bloomberg.com/quote/KRC:US
KRC does high end flexibly designed multi-use and class A office buildings mostly for high tech corporations in major tech centers on the Pacific coast from San Diego up to Seattle with significant concentrations in Silicon Valley, Los Angeles (Hollywood, Orange County, Silicon Beach), and Seattle, all areas with strong demand for office space by growing high tech corporations that are solidly profitable.
My extended family has lived precisely those areas for 170 years, and in visiting weddings and funerals I have taken the chance to see what gets built and fully rented. I like KRC’s choice of buildings and their steady dividends. Their rental income had barely a burp during the pandemic meltdown.
david fb
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W. E. Buffett bought STOR instead of O:
https://seekingalpha.com/article/4503169-store-capital-vs-re…
{article on the free/public part of Seeking Alpha}
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Recently a long time favorite of some oldtimers here PSB was bought out by Blackstone. The price valued PSB at around $187 well up from its recent pre announcement price of around $160. Holders of PSA should know that they owned over 40% of PSB and will receive a giant windfall from the deal while losing the future FFO income stream that PSB provided.
Anyway, as interesting as all that is, my questions are about the PSB preferreds. I sold a position I had in PSB-X in March for around $25.20. I figured the price above par would not last as interest rates rise and it had been good to me for my holding period. I had no idea of the pending deal. What has happened to both the PSB-X and PSB-Y is that they have dropped like a lead balloon since the deal was announced. They have both are now below $20. Both issues came out in late 2017 so they will reach the 5 year callable stage later this year. I would doubt that either would be called as they would have to be replaced with an issue that likely would have a higher coupon rate.
If they would be cashed out at par when the deal closes, the price behavior is the exact opposite of what one would expect. The trading volumes have been significantly higher than usual. I feel I am missing something here. Is this a great value? Are there some very large holders who may have to liquidate their positions as part of the deal that is driving the price down? Is there something in the deal that makes this something to stay away from?
There was a time way back in the past when there would have been many long and lively discussions on the topic of your thread. I don’t drop by very often anymore as I became spoiled during the days of Ralph Block, Yoda and a number of other great regular contributors. Things change in most phases of our lives, sometimes for the better, sometimes not. In any case, I saw your post and was motivated to jump in with my question.
Any insights or observations on the subject from anyone will be appreciated. If some don’t have something to add on this specific REIT, maybe some can post their views on the prospect of REIT preferreds in general. They were a staple of my portfolio starting in the 1990’s. There were some screaming buys to be had in the 2009-10 time frame. Of course one had to confront the reason they became screaming buys in the first place and whether the field was ripe for recovery.
Thanks for your post.
BG
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They have both are now below $20
here is what they merger press release said about preferred.
PSB’s three outstanding series of preferred stock, and associated depositary shares, will remain outstanding in accordance with their terms following the closing. We currently intend to continue to have the depositary shares representing our preferred stock listed on the NYSE with public reporting so long as there is at least $75 million aggregate liquidation value of preferred stock outstanding.
They didn’t talk about continuing to pay, instead we will file financials with SEC until there is $75m liquidation value. However, the key is PSB preferred are cumulative.
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BG
Nice to see you. I was a newbie here when you were about to leave. Ralph Block gave me the advice (actually told me the exact right questions to ask) that led me to take my happy position in KRC.
Your interesting post regarding the prfs after merger gave me a fine long hmmmmmmm…!?
david fb
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<Your interesting post regarding the prfs after merger gave me a fine long hmmmmmmm…!?>
I still have a hmmmmmm in trying to understand this.
The PSB common went up about 17% since the announcement (aprox $160 to today’s $187.50).
The preferreds have all gone lower since my first post. X and Y have hit around 18.50 today and the Z has hit $17.50.
Just some basic information on each of them:
X: 5.25% face rate, callable in Sept. The 52 week high was $26.96 last fall. There are 9.2M shares issued which would be about $230M at par.
Y: 5.2% face rate, callable in Dec. the 52 week high was $27.13 last fall. There are 8M shares issued which equals $200M at par.
Z: 4.875% face rate, callable in 2024. The 52 week high was amazingly $28.22. There were 13M shares issued which equals $295M at par.
To put some perspective on this, anyone who bought the Z shares at the top is now sitting on a $10.50 loss per share. Put another way they need 9 years of dividends to cover their shortfall. I didn’t realize there were preferreds with such low face rates selling at large premiums to par. One of the things many on this board used to talk about was how many buyers of preferreds had little or no idea how they work. That is why there were many opportunities for those who were paying close attention to this niche category.
Each one of these issues is still well over the $75M target that was mentioned earlier in this thread.
I again come back to my original point of being confused at the price action. There should be no problem with there being sufficient funds to pay all the dividends. In a rising rate environment, there should be no good reason to call the shares as these coupon rates are historically low for a REIT preferred. Other REITs issuing new shares at higher rates would drag down lower existing issues. Yet it would not be so dramatic as this is. I do recall some previous very low prices were driven by sellers who had oversized positions and were not able to dispose of them in bulk via a private sale. The low volumes would make it difficult to liquidate a position without driving the price down.
This is where 10+ years ago we probably would have had a lively debated and developed a consensus on whether this represented a unique buying opportunity or was worthy of a “keep this beyond the reach or your 10 foot pole” moment. I used to keep a close eye on the REIT preferred marketplace, but have generally been far removed from it for a while now. I did have a long term position in MNR-C that was cashed out in March when Monmouth was bought out. Interestingly MNR was started and run by an original poster here called ECRNIP if I correctly remember his handle. He used to give the board an interesting perspective from someone who was very experienced in the field.
Anyway, I am staying clear of this one unless or until I get a much clearer picture of why this situation is taking place.
BG
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I again come back to my original point of being confused at the price action.
Having funds is very different from whether they will pay and the credit profile of the buyer vs PSB are different.
This is where 10+ years ago we probably would have had a lively debated
Probably Ralph would not touch these things. I remember my exchange outside of these boards with him on Sunstone hotel REIT. He didn’t want to touch it, there was cash on the balance sheet, and the management explicitly told they want to redeem and yet Ralph didn’t want to touch it.
So…
7% yield at current price sounds interesting, but one has to accept that these preferred’s would not be redeemed and dearly hope blackstone will continue to pay the dividends.
there is no clarity on the status of these preferred and also many funds that own these preferred’s are forced sellers.
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