SRZ has reported an 8K filing on Feb 25,2009
CFO salary has been increased from 257,885 to 500,000 + incentives which could be 150% of the base ie additional 750,000 USD.
There are 750,000 options alloted on Dec 23,2008 (Option Price = 1.37 Price on Dec 23,2008)
Obviously SRZ is not close to any bankruptcy as a 100% salary hike is not something you get in the middle of a squeeze.
Richard Nadeau actually came in for the SOX (Sarbanes-Oxley) Section 404 compliance and for the restatement of the accounts and now he is the CFO.
Rick is also the person who got in CEO Mark Ordan.
Also if you listen to the Q3 2008 conference call, my feeling was that Rick is the foundation stone providing all the backup support, guiding direction and steering the ship.
Finance after all is like the blood flowing through the veins.. critical for sustainance.
if you listen to Q3 2008 conference call (link) I got a feeling that operations wise the company is doing just fine .. its the one time expenses that have really brought down the company stock.. and the way the management put a negative spin on the story.
Link to 8K filing
Summary: This is a good news for all SRZ fans. if you have shorts please watch them carefully. We should see the light at the end of the tunnel. Actually its like seeing a horror movie in a movie hall where the only lights on are to the "exit" sign. Some have got scared and ran for the exit.. others have enjoyed the horror movie. The movie is about to end and we all can see the real SRZ.
"God grant me the serenity to accept the things I cannot change;
courage to change the things I can and most of all to know the difference"
Friday, February 27, 2009
Monday, February 23, 2009
Q4 and full year 2008 Confernce Call
So here it is folks, this is the first quarterly report after the stock touched 27 cents and the first quarter the new management has had a chance to implement its strategy.
It is also a quarter where the external environment and the internal dynamics of the company has been in a state of flux.
We as investors should take this opportunity to attend the Q4 conference call. The conference call details are:
Call in number: Toll Free: 877-795-3638 or International Dial in: 719-325-4841 (Not a toll free number)
Please Reference: "Sunrise Q4 Earnings call"
The audio archives will be available at this location after the conference call. Also previous audio archives are available for people to go through. Here is the link
Here are some of the questions I would like to have them answered by the company executives.
1. Since there are a lot of "one time" expenses, can the company provide the normalized earnings for SRZ for the Q4 Quarter and year end 2008 also.
2. Are all German resident communities in 7 locations (Frankfurt, Konigstein, Oberursel, Weisbaden, Bonn, Klein-Flottbek and Munchen ) operating cash flow negative?
3. In how many resident communities is SRZ the majority owner (can you also provide the resident capacity of SRZ owned resident capacity)
4. What is the gross margin level the company is trying to strive for next 1 year ? what is the current gross margin level.
Overall I would expect SRZ to improve its operations cost and also with a decline in the various one time expenses you will see better Q4 Cash flow and income statement.
Saturday, February 21, 2009
SRZ: 8K Filing: NATIXIS
SRZ has filed an SEC 8K report
1. With regards to new "Standstill Agreements" with NATIXIS.
2. Stockholder Derivative litigation settlement.
Standstill Agreements with NATIXIS:
There are 4 Players:
Player 1: Sunrise München-Thalkirchen Senior Living GmbH & Co. KG (Property Company for the German Asset under consideration for SRZ)
Player 2: Sunrise München-Thalkirchen GmbH, (Operations Company for the German assets under consideration for SRZ)
Player 3: Sunrise Senior Living Inc (Guarantor for the German assets under consideration for SRZ)
Player 4: NATIXIS London Branch (Agent on behalf of the other finance parties)
There are 2 loan agreement in place between NATIXIS and SRZ.
1. Loan Agreement for the property between Sunrise München-Thalkirchen Senior Living GmbH & Co. KG and NATIXIS
2. Loan Agreement for the Operations between Sunrise München-Thalkirchen GmbH and NATIXIS
SRZ is the guarantor of these loans as the parent company.
NATIXIS and SRZ have come to two standstill agreement till March 31,2009.
Standstill Agreement 1: "Funding Standstill Agreement"
Standstill Agreement 2: "Loan Standstill Agreement"
The following are some of the salient points for "Funding Standstill Agreement :
- NATIXIS has demanded that Euros 8,076,878 be paid for non compliance to Loan To Value (LTV) ratio. The LTV ratio is 119.8% as per evaluations done by Atrisreal.
- SRZ is of the opinion that the LTV ratio has not been violated and there are discussion going on between SRZ and NATIXIS to determine the course of action.
-NATIXIS has agreed not to commence any action to demand the Cash flow Deficit
- SRZ is not in "Default" till the "parties" agree on the amount of default
- Once Agreement is reached about the cash flow deficit amount and SRZ does not pay the same the "Funding Standstill Agreement" will automatically terminate.
- Other loans that come due during the Standstill agreement, NATIXIS will not serve request for interest payments on the demands
Interest under Loan Agreement on Feb 27,2009
Interest under Loan Agreement on March 31,2009
The following are the salient features of the "Loan Standstill Agreement"
- No request for prepayment due to LTV breach.
- NATIXIS will not enforce any claims for payment that are due as per original Loan Agreement namely:
Operating company Loan: EUR 56,981.28 (interest & principal) on Jan 29,2009
Property Company Loan: EUR 347,522.91 (interest & principal) on Jan 29,2009
- "Loan Standstill Agreement" will terminate if:
a) End date of March 31,2009.
b) Negotiations end between SRZ and NATIXIS
c) Commencement of insolvency proceedings against SRZ or its German affiliates by anyone.
d) Termination of "Funding Standstill Agreement"
e) NATIXIS has provided its agreement to selling of the Munich business.
======================================
Conclusion:
1. More breathing space for SRZ to fix itself.
2. All agreements are ending on March 31,2009 as everyone wants to be at the table during discussions, it really does not make sense to have an agreement beyond March 31,2009 for NATIXIS as SRZ would be at default with other parties on March 31,2009.
3. SRZ can sell off the Munich property and NATIXIS is in agreement
4. Companies finances are improving for the Munich property as the LTV ratio was 204.7% and the Cash flow deficit was Euro 11,224,376 in Dec 18 2008 filing. for the Feb20,2009 filing the LTV ratio is 119.8% and Cash Flow Deficit is Euro 8,076,878.
5. SRZ has resident properties in German at the following locations: Frankfurt, Konigstein, Oberursel, Weisbaden, Bonn, Klein-Flottbek and Munchen . Only Munich (Munchen) property is being mentioned so its not all german operations but some specific location.
Its an operations game and with Tiffany heading Europe, hopefully we should see better days in Europe.
==============================================
Shareholder Derivative Litigation:
- The shareholder derivatives litigation has been settled, there are no payments to be made by the company as there was liability insurance for the directors of the company.
- Paul Klaassen 700,000 stock options have been repriced from USD 8.50 to USD13.09.
Here is the link to the 8k report.
1. With regards to new "Standstill Agreements" with NATIXIS.
2. Stockholder Derivative litigation settlement.
Standstill Agreements with NATIXIS:
There are 4 Players:
Player 1: Sunrise München-Thalkirchen Senior Living GmbH & Co. KG (Property Company for the German Asset under consideration for SRZ)
Player 2: Sunrise München-Thalkirchen GmbH, (Operations Company for the German assets under consideration for SRZ)
Player 3: Sunrise Senior Living Inc (Guarantor for the German assets under consideration for SRZ)
Player 4: NATIXIS London Branch (Agent on behalf of the other finance parties)
There are 2 loan agreement in place between NATIXIS and SRZ.
1. Loan Agreement for the property between Sunrise München-Thalkirchen Senior Living GmbH & Co. KG and NATIXIS
2. Loan Agreement for the Operations between Sunrise München-Thalkirchen GmbH and NATIXIS
SRZ is the guarantor of these loans as the parent company.
NATIXIS and SRZ have come to two standstill agreement till March 31,2009.
Standstill Agreement 1: "Funding Standstill Agreement"
Standstill Agreement 2: "Loan Standstill Agreement"
The following are some of the salient points for "Funding Standstill Agreement :
- NATIXIS has demanded that Euros 8,076,878 be paid for non compliance to Loan To Value (LTV) ratio. The LTV ratio is 119.8% as per evaluations done by Atrisreal.
- SRZ is of the opinion that the LTV ratio has not been violated and there are discussion going on between SRZ and NATIXIS to determine the course of action.
-NATIXIS has agreed not to commence any action to demand the Cash flow Deficit
- SRZ is not in "Default" till the "parties" agree on the amount of default
- Once Agreement is reached about the cash flow deficit amount and SRZ does not pay the same the "Funding Standstill Agreement" will automatically terminate.
- Other loans that come due during the Standstill agreement, NATIXIS will not serve request for interest payments on the demands
Interest under Loan Agreement on Feb 27,2009
Interest under Loan Agreement on March 31,2009
The following are the salient features of the "Loan Standstill Agreement"
- No request for prepayment due to LTV breach.
- NATIXIS will not enforce any claims for payment that are due as per original Loan Agreement namely:
Operating company Loan: EUR 56,981.28 (interest & principal) on Jan 29,2009
Property Company Loan: EUR 347,522.91 (interest & principal) on Jan 29,2009
- "Loan Standstill Agreement" will terminate if:
a) End date of March 31,2009.
b) Negotiations end between SRZ and NATIXIS
c) Commencement of insolvency proceedings against SRZ or its German affiliates by anyone.
d) Termination of "Funding Standstill Agreement"
e) NATIXIS has provided its agreement to selling of the Munich business.
======================================
Conclusion:
1. More breathing space for SRZ to fix itself.
2. All agreements are ending on March 31,2009 as everyone wants to be at the table during discussions, it really does not make sense to have an agreement beyond March 31,2009 for NATIXIS as SRZ would be at default with other parties on March 31,2009.
3. SRZ can sell off the Munich property and NATIXIS is in agreement
4. Companies finances are improving for the Munich property as the LTV ratio was 204.7% and the Cash flow deficit was Euro 11,224,376 in Dec 18 2008 filing. for the Feb20,2009 filing the LTV ratio is 119.8% and Cash Flow Deficit is Euro 8,076,878.
5. SRZ has resident properties in German at the following locations: Frankfurt, Konigstein, Oberursel, Weisbaden, Bonn, Klein-Flottbek and Munchen . Only Munich (Munchen) property is being mentioned so its not all german operations but some specific location.
Its an operations game and with Tiffany heading Europe, hopefully we should see better days in Europe.
==============================================
Shareholder Derivative Litigation:
- The shareholder derivatives litigation has been settled, there are no payments to be made by the company as there was liability insurance for the directors of the company.
- Paul Klaassen 700,000 stock options have been repriced from USD 8.50 to USD13.09.
Here is the link to the 8k report.
Wednesday, February 18, 2009
Tuesday, February 17, 2009
GM Bonds: GM Bonds: Bankruptcy Filings
GM has filed as per Feb 17, 2009 deadline new plans for restructuring.
There are 3 types of bankruptcy filings in consideration.
1. Pre-Packaged Chapter 11.
2. Pre-Negotiated "Cram Down"
3. Conventional Bankruptcy
Out of the 3 Conventional Bankruptcy is a strict No-No due to the amount of time required to complete the same. The best/suggested alternative is pre-packaged chapter 11 filing.
Pre-Packaged Chapter 11 filing salient features:
1. Bond holders are to receive 1/3 30 cents to a dollar and the rest 70 cents in the form of equity interest.
2. This requires that the VEBA (Voluntary Employee Benefitiary Association) gets half their proposed funding of 10 billion in Equity
3. Current Equity shareholders will be reduced next to nothing due to large scale debt to Equity conversion.
===============================
Company Net Present Value Calculations (Current GM Enterprise valuation is around 8 Billion) here is the break down.
There are 3 types of bankruptcy filings in consideration.
1. Pre-Packaged Chapter 11.
2. Pre-Negotiated "Cram Down"
3. Conventional Bankruptcy
Out of the 3 Conventional Bankruptcy is a strict No-No due to the amount of time required to complete the same. The best/suggested alternative is pre-packaged chapter 11 filing.
Pre-Packaged Chapter 11 filing salient features:
1. Bond holders are to receive 1/3 30 cents to a dollar and the rest 70 cents in the form of equity interest.
2. This requires that the VEBA (Voluntary Employee Benefitiary Association) gets half their proposed funding of 10 billion in Equity
3. Current Equity shareholders will be reduced next to nothing due to large scale debt to Equity conversion.
===============================
Company Net Present Value Calculations (Current GM Enterprise valuation is around 8 Billion) here is the break down.
Conclusion:
- 30 cents to a dollar for 25 dollar is 7.5 USD. So current bond holders will get new bonds worth 7.5 USD.
- All current bonds are quoting at close to 3.50 USD so there is a still lot of value in the current prices.
- Also for the remaining 17.5 USD bond holders will receive equity (could be 5 to 10 shares average 8)
So all in all a 3.50 USD investment will get you 7.5 USD worth of bond (in a solvent company) and 8 shares of GM. The bond interest rates could be higher than 7.5% also the shares would also get good valuations, if quoting at 2 USD will give you a total value package of 25 USD or more thats a 614 % return by Dec 2009 on investment of 3.5 USD
I would suggest a strong buy for GM bonds at these levels and a Strong Sell for GM shares (already at 2.18 USD)
Monday, February 16, 2009
SRZ: Valuation and Earning Estimate
This is with respect to questions on Yahoo message board with regards to valuations and earnings estimate of Sunrise Senior living (SRZ). Yahoo message board is the most active board for SRZ and here are my thoughts.
====================================
PureGamble:
Basically when we buy a stock we are trying to evaluate if the company is worth the price that we are paying. Earnings can be doctored (legally) to show higher positive numbers even when the companies are not doing so well.
The question in our mind should be: If I am a business man/woman how much would I pay for a company and how do I calculate it.
The general rule of the thumb is 1 times annual sales. In case of SRZ Sales are 1.7 billion
Current market capitalization of SRZ is 40 million so thats a great value buy.
Ofcourse anything available at steep discount we need to do a deep dive and try to evaluate the networth of the company to determine the true price of SRZ as a company. (is it really cheap)
From asset prespective we know SRZ has 54,000 resident capacity and approximately 50% is owned by SRZ and the rest is under management contract (other people's Assets)
I have previously done some calculations (on Dec 22,2008) and we will use the same. The valuation comes to about 10 USD per share even considering bankruptcy levels. (here is the link)
That is, the company from an asset prespective.. throw away valuation is 10USD ie. 10 * 50 Million = 500 million market capitalization.
============================================
Valuation 1: Let us now look at the company from Operating Cash flow basis.
Operating Cash flow is a pretty stringent and standard process to determine the health of the company. We will look at SRZ annual cash flow from operations for past 4 years and determine how much is the company worth.
Cash flow analysis has also been done before (Jan12,2009) and here is the Link
As we deep dive there are a lot of numbers and numbers can drag you down.
Gist of Cash Flow is : SRZ 4 years 2004,2005,2006,2007 Annual Operating Cash flow average is 130 million. If you can buy a company for equal to operating cash flows it would be a great buy
=======================================
The question is still what is the true worth of SRZ in market capitalization terms?
Generally when a company is valued, its true/ideal market capitalization is determined by ..
considering the "Time value of money" principles.
If we apply to the operating cash flow of SRZ (130 million) the time value of money fundas the question statement would be:
How much money would I need in super safe Govt bonds to earn 130 million each year.
Current 1 year MTA rate is : 1.633%
Last year 1 Year MTA rate is :4.326%
(from Bankrate.com Link)
SRZ loan rates are right now 6.5 to 7% assuming the worst case 7% interest rate, restating the question.
How much money do I need to earn 130 million each year when interest rate is 7%
= 130million /0.07 = 1857 million ie 1.8Billion
At different inetrest rates the numbers would be:
at 7% interst rate 130 million cash flow would be valued at : 1857 million
at 8% interest rate 130 million cash flow would be valued at : 1625 million
at 9% interest rate 130 million cash flow would be valued at : 1444 million
at 10% interest rate 130 million cash flow would be valued at : 1300 million
So we get 2 important observations.
1. the valuation (1.857 billion) is pretty close to 1 times sales (1.7 Billion)
2. As the interest rate goes up the valuation of the company goes down. So interest rates rise is a no-no for stock prices..
======================================
Valuation 2: Another way to dice the valuation matrix is: how much would you need to get the company back on roll.. (pay out the debt and other issues which are depressing the company's valuations)
40 million (Current market cap) + 120 million (Current credit facility payment) + 180 million (German operations debt) = 340 million.
So if you have 340 million and if you could potentially buy SRZ for current market cap with a total investment of another 300 million the company would be as good as a new dime.
So by spending 340 million you can effectively get a company worth 1.8 billion.
PN: This is what the hedge fund/private equity players do.. invest 340 million and make 1.46Billion (1.8Billion - 340 million)
============================================
Valuation 3: Another way to slice it would be if we need 300 million to fix the company how much time would it take for the company to become as good as new? (fix itself)
300 million /130 million (annual Cash flow from operations) = 2.3 years
So 2.3 years down the line the historical data available about the company tells us we can expect SRZ to have a valuation of 1.8 billion
============================================
Earning 1: The final question that comes up is what is the earning estimate for the company.
SRZ current market cap is know 40 million.
Current interest rate is known 7%
using cash flow as equal to earnings we can determine cash flow 1 year down the line as 40 * 0.07 = 2.8 million
So my answer to PureGamble would be: SRZ earnings in Cash flow prespective is going to be +ve2.8 million cash flow within 12 months time frame.
======================================
Conclusion: Anyway you slice it or dice it current valuation (40 million market cap) is noting but rediculous. Its a screaming Buy!!! for SRZ.
============================================
====================================
PureGamble:
Basically when we buy a stock we are trying to evaluate if the company is worth the price that we are paying. Earnings can be doctored (legally) to show higher positive numbers even when the companies are not doing so well.
The question in our mind should be: If I am a business man/woman how much would I pay for a company and how do I calculate it.
The general rule of the thumb is 1 times annual sales. In case of SRZ Sales are 1.7 billion
Current market capitalization of SRZ is 40 million so thats a great value buy.
Ofcourse anything available at steep discount we need to do a deep dive and try to evaluate the networth of the company to determine the true price of SRZ as a company. (is it really cheap)
From asset prespective we know SRZ has 54,000 resident capacity and approximately 50% is owned by SRZ and the rest is under management contract (other people's Assets)
I have previously done some calculations (on Dec 22,2008) and we will use the same. The valuation comes to about 10 USD per share even considering bankruptcy levels. (here is the link)
That is, the company from an asset prespective.. throw away valuation is 10USD ie. 10 * 50 Million = 500 million market capitalization.
============================================
Valuation 1: Let us now look at the company from Operating Cash flow basis.
Operating Cash flow is a pretty stringent and standard process to determine the health of the company. We will look at SRZ annual cash flow from operations for past 4 years and determine how much is the company worth.
Cash flow analysis has also been done before (Jan12,2009) and here is the Link
As we deep dive there are a lot of numbers and numbers can drag you down.
Gist of Cash Flow is : SRZ 4 years 2004,2005,2006,2007 Annual Operating Cash flow average is 130 million. If you can buy a company for equal to operating cash flows it would be a great buy
=======================================
The question is still what is the true worth of SRZ in market capitalization terms?
Generally when a company is valued, its true/ideal market capitalization is determined by ..
considering the "Time value of money" principles.
If we apply to the operating cash flow of SRZ (130 million) the time value of money fundas the question statement would be:
How much money would I need in super safe Govt bonds to earn 130 million each year.
Current 1 year MTA rate is : 1.633%
Last year 1 Year MTA rate is :4.326%
(from Bankrate.com Link)
SRZ loan rates are right now 6.5 to 7% assuming the worst case 7% interest rate, restating the question.
How much money do I need to earn 130 million each year when interest rate is 7%
= 130million /0.07 = 1857 million ie 1.8Billion
At different inetrest rates the numbers would be:
at 7% interst rate 130 million cash flow would be valued at : 1857 million
at 8% interest rate 130 million cash flow would be valued at : 1625 million
at 9% interest rate 130 million cash flow would be valued at : 1444 million
at 10% interest rate 130 million cash flow would be valued at : 1300 million
So we get 2 important observations.
1. the valuation (1.857 billion) is pretty close to 1 times sales (1.7 Billion)
2. As the interest rate goes up the valuation of the company goes down. So interest rates rise is a no-no for stock prices..
======================================
Valuation 2: Another way to dice the valuation matrix is: how much would you need to get the company back on roll.. (pay out the debt and other issues which are depressing the company's valuations)
40 million (Current market cap) + 120 million (Current credit facility payment) + 180 million (German operations debt) = 340 million.
So if you have 340 million and if you could potentially buy SRZ for current market cap with a total investment of another 300 million the company would be as good as a new dime.
So by spending 340 million you can effectively get a company worth 1.8 billion.
PN: This is what the hedge fund/private equity players do.. invest 340 million and make 1.46Billion (1.8Billion - 340 million)
============================================
Valuation 3: Another way to slice it would be if we need 300 million to fix the company how much time would it take for the company to become as good as new? (fix itself)
300 million /130 million (annual Cash flow from operations) = 2.3 years
So 2.3 years down the line the historical data available about the company tells us we can expect SRZ to have a valuation of 1.8 billion
============================================
Earning 1: The final question that comes up is what is the earning estimate for the company.
SRZ current market cap is know 40 million.
Current interest rate is known 7%
using cash flow as equal to earnings we can determine cash flow 1 year down the line as 40 * 0.07 = 2.8 million
So my answer to PureGamble would be: SRZ earnings in Cash flow prespective is going to be +ve2.8 million cash flow within 12 months time frame.
======================================
Conclusion: Anyway you slice it or dice it current valuation (40 million market cap) is noting but rediculous. Its a screaming Buy!!! for SRZ.
============================================
Friday, February 13, 2009
SRZ: Ventas Q4 Earnings Report
Ventas has reported the Q4 results.. We are not trying to gauge Ventas but learning from it and its impact to Sunrise (SRZ) as Sunrise is one of the largest chunk of Ventas properties.
1. Dilution of shares from 123 million in 2007 to 139 million in 2008 ie 9.4% increase in equity.
(This is pretty expensive.. cause on a long term basis equity is the most expensive form of funding as dividents are given for the life of the equity)
2. Normalized FFO (Funds from Operations) has increased to 2.74 from 2.69. An increase of 2%.
Assuming FFO as Cash flows from operations it shows an increase in cash flows. One thing to keep in mind is "Normalized". There are a multiple changes that happened last year.
- sold properties.
- re-negotiated debt.
- Issued additional equity.
- etc etc..
So its not really apples to apples as you have sold properties and you have made money from the sale but the operating income from the properties is lost.. you have also issued additional equity and paid of debt at a profit..so some magical formula is used to make an apple to orange look like an apple to apple comparison. So there is some merit in the increase in normalized FFO but its not a true comparison.
A good understanding of the normalization trick is here..
Fourth quarter 2008 normalized FFO increased eight percent to $95.0 million, from $87.7 million in the fourth quarter of 2007. Normalized FFO per diluted common share was stable at $0.66 for both periods.
This basically shows that an 8% increase in revenue is equal to 0% increase in EPS.
- Normalization in FFO did not take into consideration the increase in equity.
- Equity increase has been an expensive proposition as the increase in earnings have actually diluted by 8% going forward.
Thats why Stock options are really a very good way to fleece the company of the earnings and pay the management.. (its cheaper to give bonuses in cash from the profit!!)
=====================================
NAREIT FFO for the year ended December 31, 2008 increased ten percent to $416.0 million, or $2.97 per diluted common share, from $377.7 million, or $3.07 per diluted common share, for the comparable 2007 period. So Actually National Association of Real Estate Investment Trusts standards are much tougher and according to these standards Ventas had a decrease in earnings from EPS=3.07USD (in 2007) to EPS=2.97USD( 2008)
The decrease in NAREIT FFO per diluted common share is principally due to higher weighted average diluted shares outstanding in 2008.
Interpretation: 10% increase in FFO to 416 million as compared to 377.7 million in 2007 but the earnings per share is down at USD 2.97 per share instead of USD 3.07 per share according to NAREIT earning calculation standards due to dilution of equity and other factors..
=====================================
For Sunrise portfolio:
Lower earnings due to the following:
1. Exchange rate fluctuations resulted in lower earnings (can be ignored)
2. Lower occupancy as compared to 2007
ie 300,000 less earnings from the 79 communities owned by Ventas and managed by Sunrise.
For 72 communities that were already stabilized there was a decrease in earnings by 3.2 million
29.4 million (2008) verses 32.6 million(2007) 9.8% decline in earnings or 6.4% decline in earnings (if you consider the 1.1 million exchange rate loss as an exception to the calculation)
Average Daily rates declined by 2% and Occupancy also declined by 2%
========================================
Stabilized/Lease up communities:
Average occupancy increased by 5% in 2008 from 58.2%(Q3 2007) to 63.7% (Q4 2008)
One of the communities has been reclassified as Stabilized.
But what does stabilized mean?? if average occupancy is 63.7% assuming stabilized is 80% occupancy .. then one community is at 80% occupancy and the other community is at 46% occupancy.. I guess SRZ is off the hook once the community is termed as stabilized!! (just my thought)
=====================================
Conclusions: Times are tough and Ventas is seeing that SRZ communities had 2% decrease in occupancy and 2% decrease in daily rates..
All Ventas properties are managed by Sunrise.. Its good to know that a Ventas quaterly report talks so much about SRZ cause it clearly shows the brand of SRZ in the assisted living space. I would say Hip Hip Hurray!! for SRZ.
=====================================
The link to the Q4 report is here
1. Dilution of shares from 123 million in 2007 to 139 million in 2008 ie 9.4% increase in equity.
(This is pretty expensive.. cause on a long term basis equity is the most expensive form of funding as dividents are given for the life of the equity)
2. Normalized FFO (Funds from Operations) has increased to 2.74 from 2.69. An increase of 2%.
Assuming FFO as Cash flows from operations it shows an increase in cash flows. One thing to keep in mind is "Normalized". There are a multiple changes that happened last year.
- sold properties.
- re-negotiated debt.
- Issued additional equity.
- etc etc..
So its not really apples to apples as you have sold properties and you have made money from the sale but the operating income from the properties is lost.. you have also issued additional equity and paid of debt at a profit..so some magical formula is used to make an apple to orange look like an apple to apple comparison. So there is some merit in the increase in normalized FFO but its not a true comparison.
A good understanding of the normalization trick is here..
Fourth quarter 2008 normalized FFO increased eight percent to $95.0 million, from $87.7 million in the fourth quarter of 2007. Normalized FFO per diluted common share was stable at $0.66 for both periods.
This basically shows that an 8% increase in revenue is equal to 0% increase in EPS.
- Normalization in FFO did not take into consideration the increase in equity.
- Equity increase has been an expensive proposition as the increase in earnings have actually diluted by 8% going forward.
Thats why Stock options are really a very good way to fleece the company of the earnings and pay the management.. (its cheaper to give bonuses in cash from the profit!!)
=====================================
NAREIT FFO for the year ended December 31, 2008 increased ten percent to $416.0 million, or $2.97 per diluted common share, from $377.7 million, or $3.07 per diluted common share, for the comparable 2007 period. So Actually National Association of Real Estate Investment Trusts standards are much tougher and according to these standards Ventas had a decrease in earnings from EPS=3.07USD (in 2007) to EPS=2.97USD( 2008)
The decrease in NAREIT FFO per diluted common share is principally due to higher weighted average diluted shares outstanding in 2008.
Interpretation: 10% increase in FFO to 416 million as compared to 377.7 million in 2007 but the earnings per share is down at USD 2.97 per share instead of USD 3.07 per share according to NAREIT earning calculation standards due to dilution of equity and other factors..
=====================================
For Sunrise portfolio:
Lower earnings due to the following:
1. Exchange rate fluctuations resulted in lower earnings (can be ignored)
2. Lower occupancy as compared to 2007
ie 300,000 less earnings from the 79 communities owned by Ventas and managed by Sunrise.
For 72 communities that were already stabilized there was a decrease in earnings by 3.2 million
29.4 million (2008) verses 32.6 million(2007) 9.8% decline in earnings or 6.4% decline in earnings (if you consider the 1.1 million exchange rate loss as an exception to the calculation)
Average Daily rates declined by 2% and Occupancy also declined by 2%
========================================
Stabilized/Lease up communities:
Average occupancy increased by 5% in 2008 from 58.2%(Q3 2007) to 63.7% (Q4 2008)
One of the communities has been reclassified as Stabilized.
But what does stabilized mean?? if average occupancy is 63.7% assuming stabilized is 80% occupancy .. then one community is at 80% occupancy and the other community is at 46% occupancy.. I guess SRZ is off the hook once the community is termed as stabilized!! (just my thought)
=====================================
Conclusions: Times are tough and Ventas is seeing that SRZ communities had 2% decrease in occupancy and 2% decrease in daily rates..
All Ventas properties are managed by Sunrise.. Its good to know that a Ventas quaterly report talks so much about SRZ cause it clearly shows the brand of SRZ in the assisted living space. I would say Hip Hip Hurray!! for SRZ.
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The link to the Q4 report is here
Thursday, February 12, 2009
GM Bonds for Life
General motors has close to 4.5 Billion dollar worth of bonds.
The bonds are of 25 Dollar face value and have Annual interest rates of 7.25% to 7.5%
These are long term bonds with maturity dates of 2044 to 2051
The bond are traded as stocks with the following ticker symbols, their interest rates, Actual return on investment if you buy them today(Feb 12,2009) .. and their expiration dates.
1. GMW: Interest Rate 7.25% : Interest per annum= 1.8125USD
Current Market Price=3.13USD : Yield = 57.9% per annum till 2041
2. XGM: Interest Rate 7.25% : Interest per annum= 1.8125 USD
Current Market Price=3.17 USD : Yield=57.17% per annum till 2041
3. GMS: Interest rate 7.5% Interest per annum=1.875 USD
Current Market Price=3.28USD : Yield=57.16% per annum till 2044
4. BGM: Interest Rate 7.375% Interest per annum=1.84375USD
Current Market Price=3.15USD : Yield=58.53% per annum till 2048
5. HGM: Interest Rate 7.375% Interest per Annum= 1.84375 USD
Current Market Price=3.32: Yield=55.53% per annum till 2051
6. RGM: Interest rate 7.25% : Interest per annum=1.8125 USD
Current Market Price=3.10USD : Yield=58.46% per annum till 2052
- Auto industry and GM are percieved as the most negative industries.
- The US Auto companies have been in losses from times in memorial and loosing market share to their Asian counterparts.
But here are the salient features which should be kept in mind.
1. Feb 8, 2008 these bonds were quoting at around 16 USD
2. Sept 10, 2008 these bonds were quoting at 10USD.
3. GM has never defaulted on its bonds in the history of the company (which spans 100 years)
4. Even if the company is reporting losses the interest on the bonds have to be paid.
5. The face value of the bond is USD 25 so if GM buys back the bonds it has to pay you 25 dollars ie 8 times your cost of USD 3 per bond. (this is addition to the interest of 1.8USD every year)
6. If for some reason the tide turns and GM becomes profitable these bonds could quote at USD 25 or more (june 2004 the bonds had a market price of 26USD)
7. In case of bankruptcy generally bond holders are paid 25 cents to a dollar (75% discount to face value) as per bond experts, 25 cents to a dollar for a 25USD bond is 6.25USD (which is 100% above the current market price of 3USD)
8. As per GM starting 2010 GM will save 7 billion dollars in healthcare costs for retired employees.
9. GM is going to launch Chevy Volt in 2010 which is touted to have a Fuel economy rating higher than new Toyota Prius ie 100+MPG.
10. For us to continue to receive the 50% interest every year GM has to be solvent not profitable.
11. GM has largest market share in China and is profitable in the asian market.(Future growth market)
12. These bonds are staggered ie. the record dates for dividents are different.
RGM Record dates are: Jan31, Apr31, Jul31, Oct31 (interest rates are paid quaterly)
HGM Record dates are: Dec 15, Mar 15, Jun15, Sep15 (Interest are paid quaterly)
With proper planning you can switch from one bond to the other and get twice the divident ie 1.8 x 2 = 3.6USD per annum.
Various Scenarios:
- buying 1000 Bonds at 3.19USD ie investing 3190USD you will receive 1833USD every year till 2046 ie next 37 years and at the end of tenure GM will pay 25000USD.
- if GM goes bankrupt you will receive 6250USD
- if GM buys back the bonds you will recive 1833USD every year + 25000USD when GM buys back the bonds
- if GM does well the bond will quote close to face value and you can continue to receive the interest of 1833USD every year or encash and receive 25000USD (sell at market rates)
- if you are over smart and try and time your buy and sell to get twice the interest by switching between record dates.. of different bonds you can make 3666USD every year as interest and also expect the payback at face value 25 USD.
All said and done what is the most important thing to do?.. Take that first step and buy the correct bond from the stock market (not from GM)
Here is the link to GM website where you can get the prospectus.
The bonds are of 25 Dollar face value and have Annual interest rates of 7.25% to 7.5%
These are long term bonds with maturity dates of 2044 to 2051
The bond are traded as stocks with the following ticker symbols, their interest rates, Actual return on investment if you buy them today(Feb 12,2009) .. and their expiration dates.
1. GMW: Interest Rate 7.25% : Interest per annum= 1.8125USD
Current Market Price=3.13USD : Yield = 57.9% per annum till 2041
2. XGM: Interest Rate 7.25% : Interest per annum= 1.8125 USD
Current Market Price=3.17 USD : Yield=57.17% per annum till 2041
3. GMS: Interest rate 7.5% Interest per annum=1.875 USD
Current Market Price=3.28USD : Yield=57.16% per annum till 2044
4. BGM: Interest Rate 7.375% Interest per annum=1.84375USD
Current Market Price=3.15USD : Yield=58.53% per annum till 2048
5. HGM: Interest Rate 7.375% Interest per Annum= 1.84375 USD
Current Market Price=3.32: Yield=55.53% per annum till 2051
6. RGM: Interest rate 7.25% : Interest per annum=1.8125 USD
Current Market Price=3.10USD : Yield=58.46% per annum till 2052
- Auto industry and GM are percieved as the most negative industries.
- The US Auto companies have been in losses from times in memorial and loosing market share to their Asian counterparts.
But here are the salient features which should be kept in mind.
1. Feb 8, 2008 these bonds were quoting at around 16 USD
2. Sept 10, 2008 these bonds were quoting at 10USD.
3. GM has never defaulted on its bonds in the history of the company (which spans 100 years)
4. Even if the company is reporting losses the interest on the bonds have to be paid.
5. The face value of the bond is USD 25 so if GM buys back the bonds it has to pay you 25 dollars ie 8 times your cost of USD 3 per bond. (this is addition to the interest of 1.8USD every year)
6. If for some reason the tide turns and GM becomes profitable these bonds could quote at USD 25 or more (june 2004 the bonds had a market price of 26USD)
7. In case of bankruptcy generally bond holders are paid 25 cents to a dollar (75% discount to face value) as per bond experts, 25 cents to a dollar for a 25USD bond is 6.25USD (which is 100% above the current market price of 3USD)
8. As per GM starting 2010 GM will save 7 billion dollars in healthcare costs for retired employees.
9. GM is going to launch Chevy Volt in 2010 which is touted to have a Fuel economy rating higher than new Toyota Prius ie 100+MPG.
10. For us to continue to receive the 50% interest every year GM has to be solvent not profitable.
11. GM has largest market share in China and is profitable in the asian market.(Future growth market)
12. These bonds are staggered ie. the record dates for dividents are different.
RGM Record dates are: Jan31, Apr31, Jul31, Oct31 (interest rates are paid quaterly)
HGM Record dates are: Dec 15, Mar 15, Jun15, Sep15 (Interest are paid quaterly)
With proper planning you can switch from one bond to the other and get twice the divident ie 1.8 x 2 = 3.6USD per annum.
Various Scenarios:
- buying 1000 Bonds at 3.19USD ie investing 3190USD you will receive 1833USD every year till 2046 ie next 37 years and at the end of tenure GM will pay 25000USD.
- if GM goes bankrupt you will receive 6250USD
- if GM buys back the bonds you will recive 1833USD every year + 25000USD when GM buys back the bonds
- if GM does well the bond will quote close to face value and you can continue to receive the interest of 1833USD every year or encash and receive 25000USD (sell at market rates)
- if you are over smart and try and time your buy and sell to get twice the interest by switching between record dates.. of different bonds you can make 3666USD every year as interest and also expect the payback at face value 25 USD.
All said and done what is the most important thing to do?.. Take that first step and buy the correct bond from the stock market (not from GM)
Here is the link to GM website where you can get the prospectus.
SRZ: Sunrise Senior Living
- Dec 19,2008 : SRZ Strong Value Buy
- Dec 22,2008: SRZ: Peek into 2008 Q3 Report
- Dec 22,2008: SRZ: Strip down valuation USD 10
- Dec 23,2008: SRZ Funding Interest Rates
- Dec 26,2008: SRZ: NATIXIS : Stand Still Agreement: Option Grant to CFO,CAO
- Dec 29,2008: SRZ: gastrointestinal virus outbreak
- Dec 30,2008: SRZ: 10K Ammendment for year ending Dec 2007
- Jan6,2009: SRZ: Development pipeline for next 12 months
- Jan9,2009: SRZ: Senior Care Investor Dec 2008 Report
- Jan 11,2009: SRZ: Memory Care Facility Open in Michigan Jan29,2009
- Jan 12, 2009: SRZ: Cash Flow Statement (Sept 2008)
- Jan 16,2009: SRZ: SEC 13G: Jamie Lester & Sound Post Partners 15.4% holding
- Jan 17,2009: SRZ: American Senior Housing Association (ASHA) Top 50
- Jan 17, 2009: SRZ: NAtional Investment Center - Senior Housing & Care Industry Jan 2009 Newsletter
- Jan 22, 2009 : SRZ: SEC 8K : Credit Agreement Update
- Jan 24, 2009: SRZ : Refinancing allowed but with a caveat
- Feb 2, 2009: SRZ: One on One with Paul Klaassen (Promoters - 2004 Article)
- Feb 12,2009: SRZ: SEC Schedule 13G 40% Holdings by Guardian Investor Services
- Feb 13,2009: SRZ: Ventas Q4 results & SRZ
- Feb 16,2009: SRZ: Valuation and Earning Estimate
- Feb 21,2009: SRZ: 8K NATIXIS Standstill Agreement & Stockholder Litigation settlement
- March 4,2009: SRZ: Annual Results 2008 Review.
- March 12,2009: SRZ: Greystone Asset Sale Agreement
- March 25,2009: SRZ: 11th Credit Agreement - Additional Asset sale of 12 million projected
- April 29,2009: SRZ 12 Ammendment to Credit Agreement
- May 8,2009: SRZ: Compensatory Agreement (Bonus to CEO & CIO Greg Neeb -2008)
- May 8, 2009: SRZ: Clarification regarding Foxhill Assisted Living & Condominium Project
- May 8,2009: SRZ: Sunrise Announces Overhead Cost Reduction/Downsizing Plan & German community Sale
- August 12,2009: SRZ: Q2 2009 Quaterly Report
- August 16,2009: SRZ: Senior Assisted Living Company Valuation 6.39USD
- October 17,2009: SRZ: Sale of 21 communities for 204 million
- October 20,2009: SRZ: Shareholder as of Sept 25,2009
- Nov 23,2009: SRZ: Q3 Report: Better Days Ahead
- Feb 2, 2010: SRZ: Multibagger: Ripe for Picking
Schedule 13G/A Filings in SRZ Feb 10 & Feb 12
Schedule 13G by definition means reporting holdings of more than 5% in a company.
It also means that the company/person reporting the holding is doing so only for investment and not for control of ownership/change of management.
if you are looking to control of ownership one needs to declare the same by filing Schedule 13D
Feb 10 filing has the following investors:
=============================================
This is year end Dec 31,2008 reporting by
RS Value Fund -3,712,784- shares 7.3% of equity
RS Investment Management Co. LLC -6,039,175- 11.9% of Equity
Guardian Investor Services LLC -6,039,175- 11.9% of equity
The Guardian Life Insurance Company of America -6,039,175- 11.9% of Equity
So looks like guardian Investor Services is bullish with respect to SRZ as they are holding 43% of SRZ's equity.
=============================================
This is year end Dec 31,2008 reporting by T Rowe Price
T. ROWE PRICE ASSOCIATES, INC - 29,900 - shares
T. ROWE PRICE SMALL-CAP STOCK FUND, INC. - NIL - shares
This statement is being filed to report the fact that, as of the date of this report, the reporting person(s) has (have) ceased to be the beneficial owner of more than five percent of the class of securities.
So T Rowe Price is no longer a 5% stake holder..
My Take:
- This could be because SRZ is no longer part of the NYSE Small CAP index hence the index funds will sell.
- Year end selling ot reduce the tax burden in case of profits from other investments are there to report.
Here is the Link
It also means that the company/person reporting the holding is doing so only for investment and not for control of ownership/change of management.
if you are looking to control of ownership one needs to declare the same by filing Schedule 13D
Feb 10 filing has the following investors:
=============================================
This is year end Dec 31,2008 reporting by
RS Value Fund -3,712,784- shares 7.3% of equity
RS Investment Management Co. LLC -6,039,175- 11.9% of Equity
Guardian Investor Services LLC -6,039,175- 11.9% of equity
The Guardian Life Insurance Company of America -6,039,175- 11.9% of Equity
So looks like guardian Investor Services is bullish with respect to SRZ as they are holding 43% of SRZ's equity.
=============================================
This is year end Dec 31,2008 reporting by T Rowe Price
T. ROWE PRICE ASSOCIATES, INC - 29,900 - shares
T. ROWE PRICE SMALL-CAP STOCK FUND, INC. - NIL - shares
This statement is being filed to report the fact that, as of the date of this report, the reporting person(s) has (have) ceased to be the beneficial owner of more than five percent of the class of securities.
So T Rowe Price is no longer a 5% stake holder..
My Take:
- This could be because SRZ is no longer part of the NYSE Small CAP index hence the index funds will sell.
- Year end selling ot reduce the tax burden in case of profits from other investments are there to report.
Here is the Link
Monday, February 2, 2009
One on One with Paul Klaassen
This is an old article but it will help in understanding the philosophy of Sunrise and the management.
Here is the Link
Here is the Link
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