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MOB and NWH combinationThe MergeCo presentation has (far right column) some good accretion and an even better improvement in the POR versus either standalone company - both of which have a crappy track record for AFFOPU accretion and POR. Where does this wonderfulness come from? The latest MOB presentation doesn't suggest much from that end: Looking at the Contracted Run Rate column (far right), there are significant projected gains in NOI, FFO and AFFO versus 2014 but they amount to nothing on a per unit basis. When an analyst from Dundee Capital Markets asked the CEO about this on the cc, he attributed it to de-levering with the equity issue from November ( it was kind of funny to hear "I think I can...Let me just consider this and get back to you in a second...Sorry, just collecting my thoughts..." before the actual answer) NWH is a perpetual underperformer and their last quarter results don't suggest any turning point, so between NWH and MOB where is this stellar AFFOPU accretion and payout ratio coming from....? We'll all have to wait for more info from the two REITs to get exact details, but here's one way to get to that MergeCo $0.94 AFFOPU and 85.4% POR that's pretty simple: Start with the 0.208 exchange ratio, NWH (MergeCo) units per MOB unit. The impact on distributions to MOB holders is about a ~24% cut to the existing distribution once you hold the NWH units (i.e. your current $0.22/unit distribution changes to $0.80/unit x 0.208 = $0.1664). That 37.5% increase in distributions in Jan 2014 just got undone as you're back at almost $0.16/unit once the merger goes through. Now look at the savings that "divy cut" produces. MOB units, class B units and class D units total 178.982 M. Current pre-merger distributions would be $39.37 M. Post merger the MergeCo units imply $29.782 M in distributions. So a savings of about $10 M. Now what about the other half of the MergeCo? NWH units and class B units total 46.334 M. NWH units held by MOB to be cancelled as part of the combination: 11.9 M. So 34.434 M after cancellation. Total MergeCo units is 71.662 M. (178.982 M x 0.208 = 37.228 M added to cancellation adjusted 34.434 M) So the $10 M "divy cut" will create $0.1395/unit ($10 M savings from cut divided by new MergeCo units o/s of 71.662M) of accretion to AFFOPU. Add $0.1395/unit of "divy cut" savings to the current $0.80/unit distribution on NWH units (about to become MergeCo units) and presto there's the $0.94/unit of AFFO and 85.3% POR. Both REITs are pretty close to 100% AFFO PORs +/- 5% so I doubt this is off by a huge amount. Pretty easy way to make two REITs with crappy AFFO metrics become one "good" (not so sure about that) one: reverse a 37.5% distribution increase. I'm sure when the info circular comes out it'll be a completely different story, but as a sort of half serious Occam's Razor approach to Northwest's disclosure, why not, the numbers work out nicely. |
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Msg # | Subject | Author | Recs | Date Posted |
4594 | Re: MOB and NWH combination | beararn | 1 | 3/17/2015 4:50:58 PM |
4595 | Re: MOB and NWH combination | investoretaliations | 3 | 3/17/2015 8:55:38 PM |