Artis Real Estate Investment Pref Shs Series E T.AX.PR.E

Seeking ALpha headline

[Possibleidiot01]

 

Artis: Retail Asset Sales Reduce Risk Further For This 10.9% Yielder 

Artis has felt the issues with rising interest expense married to a short debt maturity profile. Retail asset sales of $222 million were done just bef...

[rad10]

TV produces good articles.  

[Catchtherally]

10.9% yield is referring to the preferred units 

[rad10]

Common dividend is at risk IMHO. Take a little pain now and further fix the balance sheet.  2024 maturities suck. Long common and E's

[Frankie10]

I disagree that the common distribution is at risk. Current normalized free cash flow (AFFO) is give or take equal to total distributions paid (common + pref; or ~100% AFFO payout). At the margin, as Artis sells assets, Artis loses the NOI return ( or capitalization rate) ranging from 5%-7%. The proceeds from asset sales can then be deployed to: 1) debt reduction (7%+ interest rate); 2) buyback

[Catchtherally]

I think management will do their best not to cut the dividend(and I hope they do not). I agree with Frankie and their available options to reduce the pay out ratio. However, these initiatives will take a bit of time and  the CAD dollar has been recovering against the USD which is a negative for AFFO. It is likely we see affo payout tick above 100% but then come back down quickly if and when

[Frankie10]

Very fair point regarding the USD. This would bring down AFFO and increase the AFFO payout ratio. Needless to say, there are MANY moving parts. Considering the entire picture, I personally don't believe the distribution is at risk.

[Catchtherally]

I hope you are right and I side with you that it is safe but with Affo payout ratio likely above 100% there is always a risk. 

[jmkOttawa]

All important points Frankie. Agree that the unit distributions are not currently at risk, and with any reduction in interest rates and with continued asset sales, the possibility of distribution cut reduces further. 

[Catchtherally]

If assets are sold at 7% cap rate then debt has to be canceled at higher interest rate than 7% to be affo accretive. This also doesn't happen simultaneously. Most likely income from assets will before the proceeds can be recycled into affo accretive initiatives 

[Catchtherally]

Locking in some longer term Mortgages at lower rates will also be helpful

[rad10]

Hope you are correct re: common distribution Frankie.  Lots of moving parts on this.  I still think we have the right team aligned with unit holders (for the time being). if I listen to my inner conspiracy theorist - making unpopular but fiscally justifiable moves makes sense.  If the end goal is for Artis is be taken private by Sandpiper, the unpopular decision to cut the dividend

[Frankie10]

I appreciate the responses. The replies signal to me that there is still apprehensiveness in the market regarding the financial stability of Artis despite the fact that we have now entered into unconditional agreements to sell ~$330M worth of assets since Q3 reporting date. Q4 may not look pretty if these sales don't close before year-end. Therefore, I still don't feel a sense of

[Toweringmars]

Funny. We modeled dividend liability Did the geese not tell you this?

[Frankie10]

Lol be nice. i feel bad, people are looking at the financials perplexed by the shrinking numbers, when in reality all they have to do is convert the financials to a per unit basis using the ending units for balance sheet and average outstanding during the period for income statement periods... on a per unit basis, financials look clean considering the imminent dispositions that will flow

[rad10]

  frankie - the arithmetic is not challenging.  There are what? Approximately 5.5 million fewer units outstanding than this time last year (109 million units now outstanding previously 116).  Current debt levels are known, and clear guidance re asset sales has been given. The unknown variables are currency fluctuations and interest rate changes in the coming months.  The

[jmkOttawa]

Innit the truth Frankie.

[AdHocCommittee]

This post has been removed in accordance with Community Policy

[DZtrader]

Not going to be any rate cuts. I haven't read ahead yet but I'm sure someone else will have posted same. I am in Sodam and Gamorrah........ Pattaya, OMG........... insanity! Help!