Partner's REIT building up secretly
On August 11 Partners' REIT reported it's quarterly results.This is an example of a press release that doesn't tell the whole story.Partner's is a small tier REIT that almost made a big purchase by trading almost 20% of its shares.The purchase was considered expensive and the deal was rescinded. It appeared as if this deal cost Partner's a lot of money and they took considerable asset write-offs.In addition,they sold off three Canadian Tire outlets so as to pay off some debt.But after making their second quarter report the stock fell originally to about $3.00 per share and now has risen to almost $3.40 per share.This means that investors see something that is not in the report.
Operational Statistics
Partners' is a fairly small REIT as it's assets are now only $542 million and it's shareholder's equity is only $150 million.So total revenues were only $14 million for the quarter
for a decrease of 9% while net operational income (NOI) decreased by $8 million or 11%.The funds from operations or FFO and adjusted funds from operations or AFFO were $.09 per share in Q2 2014 and now in 2015 have fallen to $.08 and $.07 per share respectively.However on the positive side the AFFO payout ratio fell from 145% to 85%.This means that now only 85% of their distribuable income is paid out as a dividend. This is a big improvement and means that the dividend is safer.
Partner's has undergone changes recently but it's occupancy rate has remained constant.However as a result of these changes their total assets fell from $542 million to $538 million.On the other hand their leverage is better managed as the debt to gross book value fell from 70% to 67%.This is a result of their recent dispositions of Canadian Tire stores and paying down debt.
Why is the stock price higher after the report?
There are a number of surprises that arise from the last quarterly report.First the lack of increases in operational revenues and net operating income should act as a damper on the stock price.As should the reduction in the AFFO per share and the slight reduction in total assets.There are a few offsets here such as the reduction in the AFFO payout ratio and the debt to gross book value.These statistics show a well managed company but declining revenues.
The second surprise helps to explain a little more the support for Partners' shares.There have been net losses since the"big deal" fell through.In total the net losses amounted to $15 million.But in this quarter there was a net income of $800,000.This (some investors feel) will be the start of more and bigger gains in net income.Perhaps they are right as the net losses have been caused by asset writedowns.There have been asset writedowns each quarter since the "big deal" including this quarter.Total asset writedowns come to $27million since the second quarter of 2014.In the second quarter of 2014 the asset writedown was almost $15 million.These asset writedowns were taken when total assets have been reduced by almost $60 million.These asset writedowns could be included in a special reserve fund to buy another beneficial asset.Whether it is or is not,the size of the asset writedowns have decreased and this will increase net income and earnings per share.Investors may not know what the asset writedowns will be used for but they do know that net income is positive this quarter and will likely grow for the next few quarters.It is also likely that there is some excess cash in some kind of reserve fund.This blog predicts that net income will grow over the rest of 2015.One thing special about Partner's REIT is that it has a lot of offsets from operating income that reduce net income.Partner's will probably take less offsets in the future.And that is the reason that Partner's is now at $3.65 and likely to hit $3.80 to $3.90 in the next quarter.That will be no surprise.
Operational Statistics
Partners' is a fairly small REIT as it's assets are now only $542 million and it's shareholder's equity is only $150 million.So total revenues were only $14 million for the quarter
for a decrease of 9% while net operational income (NOI) decreased by $8 million or 11%.The funds from operations or FFO and adjusted funds from operations or AFFO were $.09 per share in Q2 2014 and now in 2015 have fallen to $.08 and $.07 per share respectively.However on the positive side the AFFO payout ratio fell from 145% to 85%.This means that now only 85% of their distribuable income is paid out as a dividend. This is a big improvement and means that the dividend is safer.
Partner's has undergone changes recently but it's occupancy rate has remained constant.However as a result of these changes their total assets fell from $542 million to $538 million.On the other hand their leverage is better managed as the debt to gross book value fell from 70% to 67%.This is a result of their recent dispositions of Canadian Tire stores and paying down debt.
Why is the stock price higher after the report?
There are a number of surprises that arise from the last quarterly report.First the lack of increases in operational revenues and net operating income should act as a damper on the stock price.As should the reduction in the AFFO per share and the slight reduction in total assets.There are a few offsets here such as the reduction in the AFFO payout ratio and the debt to gross book value.These statistics show a well managed company but declining revenues.
The second surprise helps to explain a little more the support for Partners' shares.There have been net losses since the"big deal" fell through.In total the net losses amounted to $15 million.But in this quarter there was a net income of $800,000.This (some investors feel) will be the start of more and bigger gains in net income.Perhaps they are right as the net losses have been caused by asset writedowns.There have been asset writedowns each quarter since the "big deal" including this quarter.Total asset writedowns come to $27million since the second quarter of 2014.In the second quarter of 2014 the asset writedown was almost $15 million.These asset writedowns were taken when total assets have been reduced by almost $60 million.These asset writedowns could be included in a special reserve fund to buy another beneficial asset.Whether it is or is not,the size of the asset writedowns have decreased and this will increase net income and earnings per share.Investors may not know what the asset writedowns will be used for but they do know that net income is positive this quarter and will likely grow for the next few quarters.It is also likely that there is some excess cash in some kind of reserve fund.This blog predicts that net income will grow over the rest of 2015.One thing special about Partner's REIT is that it has a lot of offsets from operating income that reduce net income.Partner's will probably take less offsets in the future.And that is the reason that Partner's is now at $3.65 and likely to hit $3.80 to $3.90 in the next quarter.That will be no surprise.
Comments
Post a Comment