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Author: annedonc Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 77728  
Subject: BFS-C Date: 2/2/2013 6:36 AM
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new issue, should be trading next week. 6.875%. To me, looking for a reasonably good income and dependable stream for 5 years from a stable/steady company in business a long time, is an acceptable coupon rate. Might consider the partially called BFS-A 8% if drifts closer to par value
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Author: JimLuckett Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 73568 of 77728
Subject: Re: BFS-C Date: 2/2/2013 8:31 AM
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Looks like about 5:1 ratio of FFO to preferred dividends http://www.saulcenters.com/invest/pdf/3Q2012EarningsRelease.... (top of last page).

Proceeds will be used to redeem the B series with remaining going toward redeeming more of the A. So don't pay over par + accrued dividend for the A!

Since all proceeds are going to redeem old preferreds, and since the dividend is lower on the new issue, the dividend coverage ratio will be improved (all else equal).

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Author: JimLuckett Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 73572 of 77728
Subject: Re: BFS-C Date: 2/2/2013 3:06 PM
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Any consistent pattern that would suggest when to buy new preferred stock issues (at issuance? In the pink sheets? Or as soon as it's listed on an exchange?)

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Author: bear9 Three stars, 500 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 73574 of 77728
Subject: Re: BFS-C Date: 2/2/2013 8:20 PM
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I've been playing this game successfully for a while. Generally, if you can get it at issuance, that is best. Otherwise, pounce on it as soon as it is generally traded, whether on the pink sheets or the big board. I have found that new preferreds take a while to hit public consciousness, at the same time that some of the folks who got a placement want to lock in some gains. Hence, if you can buy it the very morning it starts trading, you can get great prices.

For example, I watched LSE-C like a hawk (as did a couple of other posters), checking every day with Fidelity to see if it had started trading. (Usually, Fidelity shows a symbol on "symbol search" the day before it trades.) At 9:30 the morning it started trading, I was watching the price. It traded high for a few minutes, and then dropped like a stone. I got a bunch at 24.20 to 24.40, after it went public at (IIRC) 23.50. It now trades over 25 (the call price). I now have a good yielder (7.25% coupon, 7.5% on my basis and YTC) with a 2-3 percent capital gain pretty much locked in.

You have to be watching for new issuances, though. You can just put a slug of REITs on the Yahoo portfolio and then you get the press releases. A lot of folks kindly post new preferred announcements on this board; that's how I have found out about several.

This kind of tactic doesn't make you rich. But it seems like the kind of area where an individual investor has an edge, and its sorta fun to make a modest score.

Respectfully,

bear9

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Author: bear9 Three stars, 500 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 73575 of 77728
Subject: Re: BFS-C Date: 2/2/2013 8:26 PM
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I look at the redemption of the preferred C with mixed feelings. I've owned it for a while at a premium to call - altogether, I made 7.5% annually on a security with a 9% coupon, which is not too bad.

Obviously, I don't like to see a 9% coupon called away. It is clearly the right thing to do for the company and for the common shareholders. But the preferred had a really high insider ownership when I bought it, and I sorta hoped that the insiders would be slow to give up such a juicy income stream and let me hold it a bit longer. But it looks like integrity (and high insider ownership of the common) reared its ugly head. :)

bear9

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Author: annedonc Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 73577 of 77728
Subject: Re: BFS-C Date: 2/3/2013 9:06 AM
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I believe Bear has it right re: buying early, if you can. Many of these new prefereds will trade initially on the OTC mkt for several days under a tempory symbol, oftentimes can buy at a lower entry price under par than one can once on the big board and exposed to more buyers. LSE-C came directely to the NYSE without going first to the otc market and was difficult to buy <$25 unless one was on their toes-a hats off to those who got in well under par. The below OTCBB daily list is the place to troll for the temp symbol-trades the day after you see it listed. Hopefully, BFS-C will go firt to the OTC

http://www.otcbb.com/dailylist/index_2013.htm

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Author: CHARLESAREED One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 73590 of 77728
Subject: Re: BFS-C Date: 2/4/2013 4:11 PM
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I think 6.875% is to low a return for a reit with the quality
of assets as Saul Centers and with the quantity of debt they carry

Tony

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Author: bear9 Three stars, 500 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 73592 of 77728
Subject: Re: BFS-C Date: 2/4/2013 5:48 PM
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I tend to agree with Tony.

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Author: JimLuckett Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 73595 of 77728
Subject: Re: BFS-C Date: 2/4/2013 8:09 PM
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Do you base that on comparing it to other preferreds? Which would you think were the closest comps?

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Author: JimLuckett Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 73596 of 77728
Subject: Re: BFS-C Date: 2/4/2013 8:24 PM
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Ralph doesn't follow BFS. Suggests DDR J in that sector (similar yield and call protection but better known and in process of deleveraging).

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Author: bear9 Three stars, 500 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 73597 of 77728
Subject: Re: BFS-C Date: 2/4/2013 9:54 PM
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I live in the area and am not all that impressed with their properties. Clarendon Center is a blockbuster though.

I think they're OK, I just would look for a little more yield.

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Author: JimLuckett Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 73599 of 77728
Subject: Re: BFS-C Date: 2/4/2013 10:38 PM
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Market may give us a little more yield once it starts trading.

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Author: Reitnut Big red star, 1000 posts Top Favorite Fools Feste Award Nominee! Feste Award Winner! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 73662 of 77728
Subject: Re: BFS-C Date: 2/10/2013 7:52 PM
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I haven't provided an opinion on the new BFS pfd for two reasons: (a) I haven't been to our Board for two weeks (except for a quick post or two) - blame the SuperBowl, and (b) I really haven't followed BFS for a long time.

There is nothing of value that I can add to the discussion regarding the merits of BFSpC. Just looking at a BFS chart, the stock doesn’t seem to have done as well as its peers, e.g., RPT, REG, KIM or WRI – but that doesn’t tell us very much. Most importantly, I don’t know the properties or the management, which are really important.

Other metrics: Debt looks to be about 50% of total market cap, which seems about right for a 6.85% yield – so I don’t think the pricing is terribly rich or terribly cheap, on that basis.

But, I kinda like the new GGPpA (trading in the pinks as GGPYP). I was able to buy a few thousand shares on Friday, all at prices below par. It’s got more debt leverage than I would like, at about 55%, and a debt/ebitda ratio of 9x. However, mall owners, particularly those owning high quality malls such as GGP, have very stable cash flows; the new management team is getting good grades from dedicated REIT investors.

I think their new pfd is pretty safe. They have free cash flow of close to $850MM, and their annual pfd dividends will be only about $16MM ($250MM at 6.375%). That is really good coverage. And their dividend payout ratio is only 54% of estimated AFFO.

I have wondered about why these new pfds are often available in the pinks at less than par, as has been the case with GGPpA. In thinking about this, I realized that the underwriters are paying well below par; for example, if there is a 3% underwriting discount, they are buying the stock from the company at $24.25. Thus they can flip the stock to longer-term investors like us at, say, $24.80 and still make quite a few bucks.

Ralph

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Author: gracepeace Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 73673 of 77728
Subject: Re: BFS-C Date: 2/11/2013 8:10 AM
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Ralph:

For you to buy a number of shares of the new GGP-A, you must think that there as virtually no chance that GGP would re-enter bankruptcy again the way they did a few years ago. I assume that this is probably your current thinking. Is it?

You did state in a prior post that the leverage they have is one of the major negatives. Doesn't this worry you more than a little?

I do think that the company is on much more solid footing than it was back in 2008-2009, but that is partly based on improved market and credit conditions, which could change and deteriorate once again.

Wondering what you think about this?

Gracepeace

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Author: Reitnut Big red star, 1000 posts Top Favorite Fools Feste Award Nominee! Feste Award Winner! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 73697 of 77728
Subject: Re: BFS-C Date: 2/18/2013 7:34 PM
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Ralph: For you to buy a number of shares of the new GGP-A, you must think that there as virtually no chance that GGP would re-enter bankruptcy again the way they did a few years ago. I assume that this is probably your current thinking. Is it?

Yes, this is indeed the case. There is entirely new management, there are very strong and disciplined controlling shareholders, and the balance sheet, while still a bit too levered, is much, much better. Remember that what drove the old GGP into bankruptcy was a lot of maturing near-term debt during a Credit Crisis and rapidly falling commercial real estate prices.

None of these conditions are present today. Total debt is $18.9B, but 92.6% is fixed rate. Debt maturities are well-staggered, with the largest (through 2017) coming due in 2016, and that is only $2.2 B. There is no credit crunch (although there's no guarantee one won't occur again, which would affect ALl borrowers), and I like to think that a 40% decline in CRE values is quite an odd event.

As for overall debt leverage, I do get concerned with leverage ratios of over 50%, as is the case with GGP. However, tenant cash flows from highly-productive malls have been among the most stable of any property type. And the percentage of free cash flows dedicated to holders of the pfds is quite low. So it would take a major and very serious recession to slash GGP's free cash flows and imperil the pfd dividend.

Gracepeace, your point about a possible future deterioration of market and credit conditions is well-taken. But this is a potential problem for all creditors and holders of pfd stocks, and not so much a specific worry for GGP's pfd holders. Of course, the credit standing of GGP isn't as strong as it is for some other REITs that use lower debt leverage. But much of this risk is offset by GGP's property type and its cash flow stability. YTFCs for the better credits are in the high 4% to high 5% range. The new GGPpA offers a yield of 6.4%, which seems about right to me given the modestly higher credit risk.

Ralph

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