Note I received from an Investor in NOVC.
What does this mean?
“because a REIT does not need NOLs”
REIT real estate investment trust operates as tax exempt under IRS/IRCode. The key requirement is that the REIT distributes 90% of their taxable income in dividends and thus is tax free. FYI NFI aka NOVC distributed 100% of their TI in dividends from founding 1997 to Dec 2006. I was CFO of the oldest REIT on NASDAQ * CPA at PwC. Next to BDC business development corp it is one of the most attractive and tax efficient ways to function.
Sr Debt Holders: Wesley Edens, COB at Fortress & Peter Briger Head of Credit at Fortress now thanks to NOVC Board also Common Shareholders: Barry Igdaloff, Howard Amster, Thomas Akin (IMH Board Member, ex DX COB and largest outside shareholder in NOVC) are all EXPERTS in this MREIT structure. Check IMH chart over the last two weeks. Listen to IMH public shareholder calls.
2nd bite of apple aka triggering Call Rights is a standard operating practice of MREITs which these folks know all too well, although Mr. Igdaloff was adamant NOVC did not hold the Call Rights. This allows NOVC to call back valuable collateral assets (profitable and seasoned) that they can resecuritize. Yes, this requires capital but Bill Wallis told me NIMs net interest margins of 200 Bpts make this economical for NOVC. See NOVC press release mid 2018 average coupons are 6% while the 10 yr is 160 Bpts and going down. NOVC 26 deals they have in $3B portfolio trigger call rights when current balance of the bonds hit 10% of original face value of the bonds.
These investors are to experience NOT to have known about SRTA sec 5.04 since Lance Anderson NOVC CEO signed the doc 10/21/2007, Carolyn Campbell CFO has known of it for a long time and IMHO it is how BI Nov 2014 attracted Mr. Gillman and Mr. Eberwein to invest and join NOVC Board 2015. BI and CG/JE were able to remove two tough customers from NOVC Board Lance Anderson and Gregory Barmore because of this truth IMHO.
Fortress spun NRZ New Residential https://www.newresi.com/about off from NCT - both NRZ and NCT Newcastle operate as MREIT tax exempt under REIT IRC regs. Fortress then converted NCT into DS Drive Shack (TopGolf knock off) which kept all NOLs from Newcastle. Listen to the first public conference call when NCT changed into Drive Shack. Then NCT COB Wesley Edens also COB of Fortress spoke to NCT aka DS shareholders with passion about how important NCT's NOLs were to DS future, yet NOVC Sr Debt Holder Fortress works with NOVC Board to create the conditions that drive NOVC pps to zero using the facade of Sr Debt as justification while awarding themselves millions in RSU aka Common with NO STRIKE.
DX shareholders BI 9.3M, TA 5M, TE 5M, HA 4M all related own at least 24% of all NOVC and add Fortress/FBR aka Sr Debt Holders now own 31.3M Common (9M common +22.3M warrants at 1 ct strike) add in Mass Mutual Barings 19.3M and Gillman, Eberwein and their appointees to NOVC Board and all in these investors own or control together 88.9M of NOVC common est fully diluted shares outstanding 125m that is est 72% of the entire equity ownership in NOVC. These investors are powerful very experienced and based on the evidence related investors. IMHO this is not a coincidence but planned and well executed. They all know each other and have a plan but they have disadvantaged all shareholders to enrich themselves beyond belief.
Do I believe they have been careful to cover their tracks I do with some of the best advisers money - NOVC money can buy. NOVC board includes 2 DX investors that are all connected by Chuck Gillman and Barry Igdaloff.
Fact two of NOVC Board members are major shareholders in DX. Per their own voice have worked with Edens at DX 2000-2003 when Fortress owned 100% of Capstead Mortgage CMO which owned DX. Igdaloff spent 3 hrs in Columbus OH meeting with Edens on how to oust then DX CEO Tom Potts which they did. I know because both Barry Igdaloff and his close friend Todd Emoff who owns a ton of NOVC told me so in different phone calls. Jan 2014 Todd Emoff runs HF Freedom Asset Management told me he wanted NOVC to remain low in price so he and his brother could buy more shares with their fathers’ inheritance (he passed away April 2014). I was shocked at the time but now I realize he understood the truth.’
In fact, 2010 when BI and HA joined NOVC Board BI told me his vision NOVC will one day control a portfolio $5B with NIMs of 500 Bpts (coupons of 600 Bpts less cost of capital 100 Bpts). BI was NOT talking about NOVC residuals or OC Bonds (some sold recently for $13M Note they booked a $12.9M gain because they did not disclose the real value and GAAP did not require NOVC to disclose the real value, just like I am sure GAAP does not require proper disclosure on the call rights or Boulay Group the outside auditor would have tremendous liability. BI I am 100% certain was referencing Cleanup Call Rights per Sec 5.04 of SRTA.
I will not be able to review IV for some time, so I wish all common shareholders the best of luck with NOVC. May transparency and the truth finally rule for ALL NOVC shareholders not just a handful in control.