Thursday, October 11, 2007

More Piedmont
I did some analysis yesterday on the Piedmont REIT. I am travelling today and will have it up in the next few days. I calculated FFOs, yields and how much Leo Wells is going to receive in dividends. All the data is based on Piedmont's second quarter 10-Q.
I never thought that the subprime mortgage problem was isolated to just poor people. All credit types used the subprime loans for the loans' low initial interest rates and never had any thought or intention to pay the higher reset rates. Home values were going to keep increasing and the loans would be refinanced before they reset. This article from today's Wall Street Journal confirms that subprime mortgages were used by a wide range of people to participate in the housing market boom. Many of these non-subprime subprime borrowers, in my opinion, have no incentive to keep their houses when there mortgages reset. In fact, I bet the stereotypic subprime borrower - i.e. poor and bad credit - will be more likely to try to save their house than the speculators who thought they were junior Donald Trumps.

Tuesday, October 09, 2007

Should Have Seen It Coming
The Piedmont Office Realty Trust has sent proxies to investors to extend the date for it to list by up to three years. The REIT was supposed to list by the end of January 2008, and is asking investors to extend the listing date until January 2011. This is unbelievable, but totally predictable. Leo was never really going to sell. The REIT is blaming the debt market and the poor REIT sector. REITs have been in the tank all year, and the REIT just obtained a huge new line of credit in September, at the height of the credit crisis, so both arguments are thin at best. I think this will be a very interesting proxy vote.
Crazy Times
It has been a busy few weeks and the next few weeks appear similar. I was at the annual TICA meeting yesterday. Interesting. There, to me, was a sense of doom and gloom, due in large part to the credit environment and the downturn in the housing market. Most sponsors I talked to had a deal on the street and others in the works, so I don't get the pessimistic outlook. Plus, there were more reps there than ever before, which to me is a bullish sign because this conference is not required and reps who attend have to pay their own way. I know enough reps to know that if they were pessimistic they would be home saving money, not investing in the future.