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Strategies & Market Trends : REITS - Buying 1 - 2 weeks before going ex-dividend
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To: Mr. Sunshine who wrote (1597)11/23/1999 7:50:00 PM
From: Bob Rudd  Read Replies (1) of 2561
 
Steve - ETT: I added substantially to my position during recent foray into the low 5's. The catalyst for the initial selloff was probably a Merrill write-up indicating the dividend will probably be cut to 1.20 from current ~1.35. The reasoning was that concessions may have to be made to get financing done. Since then GHV finalized a deal that improved their financial condition and IMO removed a great deal of uncertainty about their ability to pay rent [which is ahead of debt in seniority of obligations] - look at GHV EBITDAR next time you get nervous about this puppy. The passage of PPS-Medicare relief may help psychology and it will also improve EBITDAR though it won't bring a wholesale change in the economics of nursing homes [For those that would argue the impact is tiny I would suggest they look at % of nursing home operating expenses taken by rent paid to outfits like ETT, it's also rather small so the increase in EBITDAR coverage is significant at the margin.
Despite the improvement in GHV's finances and Medicare releif I would still not be surprised to see a dividend cut to appease lenders and get the financing done, but the fundamental issue of GHV being able to pay rent I think is in the bag. The market is probably selling off in anticipation of the cut and ETT will probably rebound after it's announced. 1.20 is still 21% of tonights close of 5 11/16. Tax loss selling is also probably weighing it down.
Sorry to be slow responding, but I haven't been monitoring this thread regularly and your message was addressed to Richard so I didn't get an alert.
Hope this helps,
bob
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