Monday, January 29, 2007

EOP Update
I received this email:
"I went looking for an FFO estimate for EOP. Its website had the 06Q3 10-Q, which includes guidance of $1.59 to $1.74 per diluted share (see p. 10(d)). Elsewhere it says that the FFO figures quoted are net of the effect of some impairment and severance charges. I didn’t spend a lot of time searching for a full year estimate of these charges, but p. 10(b) notes that they amounted to $0.54 per share in Q3.

Midpoint FFO multiple: 32.3

Multiple based on midpoint adjusted for Q3 charges: 24.4

Seems Sam is selling pretty dear!"

I am not an expert on EOP, but I think it recently cut its dividend and has been a disappointment to Wall Street due to lackluster growth and lack of synergies or economies from recent acquisitions. Whether EOP's multiple is 32 or 24 times FFO it is much higher than the typical REIT FFO multiple of 8 to 14 times earnings. EOP's anemic performance makes the multiple that much more impressive. Sall Zell's new nickname will be Snake Charmer, not Grave Dancer.

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