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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Wallace Rivers who wrote (7031)	5/3/1999 5:44:00 PM
From: LauA	Respond to of 78953

Jump Ball: A broken REIT - FUR This company has been totally trashed over the past last year. It was one of four stapled stock entities with the special tax status until Congress closed the loophole. Management had run it as an old boys club lurching from real estate class to real estate class, overpaying often. Most recently it had decided to specialize in parking lots. Gotham Partners, and others took a large positions with the stated intent of exploiting the paired-share status. Management fought back using lawsuits and delay. Finally Gotham prevailed, in time for the tax status to be rescinded. Management declared a 'change of control', bailing out under golden parachutes. Huge charges from both sides of the fight have been extracted from the company. Everything has had to be reconstructed: new management, new bank loans, new strategy. Stock has cratered from $16 to $4. Dividends eliminated. A rights offering is about to commence. A loss for 1998 of $2.81/share. In other words: a disaster. Can they turn around? I believe it was Buffett who said that 'turnarounds don't'. However I ask you to get the current annual report and read the shareholder letters - one from the principal at Gotham, and the other from the CEO. A property by property reassessment is currently underway. On Yahoo a poster claims that management has publicly stated that NAV is currently $8/share. The rights offering of 1 share (at $4) for every 2.5 shares held is intended to pay down short term bridge loan debt to buy time to realize that value via liquidation or operation. (The rights offer in and of itself will tend to hold down current share price.) Gotham has stated a willingness to purchase all unsubscribed rights. How out of favor are they? Value Line dropped them from their universe of followed companies April 30, 1999. I'm cruising the AR and haven't found the weevil yet. (I see that someone else named ninekids_09 has posted similarly today on Yahoo.) Lau

To: Wallace Rivers who wrote (7031)	5/3/1999 6:20:00 PM
From: John Stichnoth	Read Replies (1) \| Respond to of 78953

Wallace and Mike. CMO might be a reasonable play, with more upside than most reits--but also with more risk. They invest in CMO's. The risk, as noted in their 10K is to changes in the yield curve. (I'm writing from memory, here, so watch out!) They have a mismatch in their funding. Assets are long term. Liabs are short. So, any flattening in the yield curve can have a strong detrimental effect on their results. Of course, vice-versa for a steeper curve. Added risk is that a general falling of the yield curve will lead to accelerated prepayments, and leave them sucking air. They will do very well with stable long term rates and falling short-term. It's pretty well laid out in their Annual Report.