Alexandria Real Estate Cuts Dividend, Outlook & Announce Senior Convertible Offering
As I read the newswire this morning, I am cracking up at how Alexandria Real Estate (ARE) has royally screwed its newest investors. This morning ARE announced the following:
1) The dividend was cut to 35¢ per share from 80¢ per share last quarter. Click HERE for the article from Dow Jones Newswire.
2) ARE updated its 2009 funds from operations guidance to $5.18 to $5.22 a share down from the $6.26 a share the company projected in February (I think FFO is a BS metric). The company updated its 2009 earnings per-share guidance to $2.14 to $2.19 down from $2.73 a share it projected in February. Click HERE for the article from DJ Newswire.
3) They announced a $175M SENIOR convertible note offering. Click HERE for the article.
The writing was all on the wall. As you know, I have been saying that ARE is nothing but a big ZERO. It has become a victim of Gambler’s Ruin.
If you are a shareholder with your head in the sand, let me interpret these announcements for you: they are NEGATIVE. The dividend is NOT coming back. The outlook is only getting worse. The bond offering is nothing but polite shove to the back of the line for you to the tune of $175M (but thanks for being a sucker and giving the company some good interim operating dough and for helping them reduce their LEVERAGE RATIO).
Will the stock fall? Who knows…. there are so many idiot mutual fund managers out there that only know how to buy. They don’t know how to do anything else.
What really cracks me up is how all the suckers who bought into the secondary a few weeks ago got taken by one of the oldest trick’s in the book - the bait & switch. On March 16, ARE announced an 80¢ per share dividend to shareholders of record on April 1st. On March 19th they filed an 8k for their 7 Million share common offering. Now, only a few weeks later, they pull the rug out from under those poor suckers who trusted their brokers and cut the dividend by more than half. LOL! On top of that, the common offering was still inadequate so they had to do a bond offering. If you read me, you know that I questioned the common offering in my March 20th post as nothing more than an attempt to reduce leverage ratio under their debt covenants.
This cuts to the heart of why REITs prices have remained relatively strong in spite of their financial condition - dividend games. Investors love those yields but are too lazy to figure out whether they are sustainable. In the end, the fools will be parted from their money. Maybe they should read some Miller-Modigliani?
CAVEAT EMPTOR!
I predict that ACC will be the next REIT to screw its investors.
April 21st, 2009 at 9:07 am
[...] Richard from Striconomics has an update on ARE dividend cut. [...]
April 22nd, 2009 at 8:45 am
The strange thing is this seems to have only “minimal” impact on AREs stock price. “Minimal” given the rather wild swings everyone has become used to see recently.
I just hope we do not see the same minimal impact after whatever ACC announces on the 29th.
April 22nd, 2009 at 9:38 am
I completely agree. Although the fundamentals are weak for the reits, the technicals are strong. We might have to wait for an autumn crash. However, there is still a posibility for “Sell in May and go away”.
April 22nd, 2009 at 9:52 am
Gentlemen,
don’t companies typically disclose their most recent forecasts to potential investors when offerings take place, which would have included the dividend cut, as well as the debt offering. that is why you are not seeing a large impact on the stock price, it has already been priced in. not too mention I would guess that many folks already invested in ARE before this most recent news had already thought the dividend would get cut, and had priced that in. the problem is that the liquidity risk is bringing REIT stocks down below their value (ie-the price is already impacted by almost worst case scenario assumptions). so any news that helps with liquidity concerns will actually help the stock, however dilutive and negative that news would be in a normal operating environment.
April 22nd, 2009 at 3:18 pm
Scott-
You wrote that before the close so you probably know how vicious the selloff was at the end of the day. The disclosure was made in a filing so only someone with inside information would be able to know for certain about a cut. If investors already “priced it in” before knowing about it, they should have sold knowing that other investors did not price it in.
I think investors make-up all kinds of reasons to hold on to losing stocks. It’s usually because they can’t admit to themselves that they are wrong. I’m a trader. I don’t care about feelings. I know that ARE is getting worse so I’m playing that. If people are trying to delude themselves into thinking that the recent news is “priced-in” or “good” they are the dumb money. All that matters is price and it is going down after the news and we have not even had an earnings call yet.
This is my new hot target. The chart looks like shit and I’m looking for this thing to tank real soon. Now, I know the news is bad and I think the market is going to turn in general. There are people going long on this stock that are trying to justify to themselves why they should hold on. What they don’t understand is that they are really just letting greed and emotion delude them. If this thing goes sub-30 there is NO SUPPORT whatsoever. It can only be manipulated for so long. It should have crashed a few weeks ago.
Are you shorting it too?
April 24th, 2009 at 1:08 pm
well ACC dividend was not cut.