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Strategies & Market Trends : Value Investing

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To: Robert Hoefer who wrote (8814)	10/29/1999 8:59:00 PM
From: Bob Rudd	Read Replies (1) of 78627

Robert Hoefer: re HRP The whole idea of the split was to get HRP seen as an office REIT and to trade at or near office REIT yield. Hasn't worked out that way, partially because HRP still retains 50% of SNH but the net FFO/income exposure is pretty small. If HRP were to trade at same yield as average office REIT [based on 9/30 NAREIT data] it would have to jump about 75% in price. There are some negatives like the SNH exposure, some conflicts of interest, and management structure that weigh against that, but a solid jump from here is certainly due. I noticed in your profile you sometimes look at bankruptcies. What's your take on the issue of whether rent seniority becomes a ball in the air if [when] one of the SNH operators goes BK. I know it's supposed to work that way, but I'm seeking experienced perspective. With SNH it looks like EBITDAR coverage is solid on all but the Mariner [11% of assets] and there the rent is 5% of pre-lease operating expenses so it would seem they could cut costs enough keep payin rent on most of the properties. SNH should be able to release a small number, IMO. bob

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