Never Ceased to be Amazed
I am reading Behringer Harvard Multifamily REIT I's 2009 10-K, which was released today. In 2009, it had Funds From Operations of -$700K. That's right, a negative FFO. Its operating cash flow was a measly $244K, which was at least positive. These robust cash returns allowed the REIT declare distributions of $22.7 million. Well, at least this REIT's mortgage debt was only $51 million on $525 million of total assets. Ahh, but not so fast. You need to read those pesky footnotes. The actual amount of debt is higher, much higher. This additional debt, of which $247 million is the REIT's portion, is off-balance sheet financing and attributable to a joint venture and property-level operating entities that the REIT owns or has ownership in. I will leave my findings at these gems, because I need to eat dinner soon and for some reason have lost my appetite.
In all seriousness, and the above snarky post is serious, I encourage you to download and read this 10-K. I only read snippets of this massive document to pull out the teasers above, so I am sure a wider, more comprehensive reading will reveal more material passages.
2 comments:
I read the 10Q when it came out.....what is even more nefarious is how the Broker Dealers are reacting; to scared of new products and are not approving any new products only because they are NEW...yet they continue to allow such potential "blowups" to be sold by their advisors....the good 'ol boy network is very much in tact......
Broker / dealers find it easier to say NO to new products than exisitng products, plus overworked staff will have extra work explaining and justifying why they are pulling a product that is selling. The b/d economics is that they get considerable extra money and support from alternative investment sponsors that are selling. It makes sense to add quality new sponsors and ramp up sales while weaning off programs like this. This REIT is paying a 7% distribution, which accounts for its sales success. I would guess, most b/ds don't understand the risk of this deal, which I should address in another post.
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