tscm interview excerpt:
"Marc Perkins: I still play around. I like a stock right now that nobody wants to own. I mean nobody.
Brett D. Fromson: What's it called?
Marc Perkins: Meditrust(MT:NYSE).
Brett D. Fromson: What is Meditrust?
Marc Perkins: Meditrust is a is a paired share REIT, a health care REIT that also owns 300 La Quinta hotels and a bunch of retirement homes and assisted living facilities and medical office buildings. Paired share status is where you actually have two different sets of shares within the REIT. You have a REIT, and you have an operating company, and you can put 'em together, and they still have REIT status."
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"Is it chocolate or is it peanut butter? The real trick is to be able to understand when a growth stock becomes a value stock."
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Brett D. Fromson: What's the advantage of a paired share REIT?
Marc Perkins: No taxes to the company. As long as you pay through 90% of your net income, there are taxes only within the distribution to the holder. So they amassed a multibillion-dollar portfolio of health care and hotel properties. And mostly long-term care facilities. So the hotels go to crapper.
Brett D. Fromson: This is when?
Marc Perkins: Now. The midrange hotel, the midpriced hotel business that La Quinta is in gets soft. But I can see rates are down a little bit, but the company is still making lots and lots of money, but the hotel business is soft, so nobody wants to invest in it. And nobody wants to invest in the health care business, the long-term care business because of Medicaid problems, fraud problems, political pressure. So here you have a stock that has gone from the low-to-mid 30s to $3. But here you've got a company in the latest quarter, with a market cap of about $300 million that in the last quarter generated $59 million in cash.
Brett D. Fromson: That's the bottom line?
Marc Perkins: It's FFO. Funds For Operations.
Brett D. Fromson: Why is the stock at $3?
Marc Perkins: Well, because it's in two industries everybody hates. They have asset-quality problems. They have some loans on some properties they own that are leased to companies in trouble.
Brett D. Fromson: The fear is that they might not get the interest income?
Marc Perkins: That's correct. But if you add all of that up, you still end up with La Quinta, which will have over $200 million in EBITDA this year. Probably a lot more than that. It has earned $300 million in EBITDA before. Lakita has $2.6 billion book value. You have $2 billion of health care properties, and $1.6 billion in total debt. They're generating a couple hundred million a year in cash, with a market cap of $300 million. You can't give it away.
Brett D. Fromson: What does that tell you about this stock market?
Marc Perkins: Nobody does their homework. This company has a big loan coming due next year. Now, I'm not an expert in the hotel business. I'm not an expert in the health care business. But I am an expert in the banking business, and I can tell you this much: No bank has ever foreclosed, and no judge has ever allowed anybody to foreclose in this kind of financial situation. They still have $400 million left to draw on their credit lines. They just replaced management, just brought in a bunch of guys from Red Roof Inns. And they're liquidating all the health care properties. The stock is selling at about 10%-15% of book |
