I'll second CAT, and Jim's Huttig (which comes courtesy of Jim's Crane). I've bought both. Can't bring myself to second WPO, though maybe twister or Warren Buffett can.
But the purpose of this post is Senior Housing, a stock that I proposed and was discussed not so long ago. Today they did something very significant. They sold Brookfield. That's their best property holding, with the best tenants and best lease terms (for SNH). My initial reaction was "Oh crap." But it looks like FFO by my calculations will only dip about 1.5-2 mill thanks to saved interest expense, and the dividend is still well-covered by the only slightly-less rock solid Marriot leases.
But this telegraphed some other positives. One, management is not simply inflating assets. A worry was that they would not sell assets when prudent to pay down debt, as they get paid based on a % of assets. Here we have a loss of assets. That tells me management is doing right by shareholders to a large degree, and makes me more comfortable.
Second, the properties were sold for about 20% more than the price paid by SNH. The Marriott properties sit up at $325 million paid by SNH, or thereabouts. The market cap of SNH now is $217.8 million plus what will be only a little over $55M in debt. There are also a few other properties but I don't need a calculator to find the margin of safety here. It's big. And the dividend still seems safe.
Third, Senior Housing may actually be able to realize some value for shareholders. If management is willing to sell assets - as I said, not necessarily an expected attitude - then Senior Housing may realize more gains, keeping the Marriott properties to pay the dividend.
Good Investing,
Mike |
