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Msg  14147 of 14247  at  3/1/2021 2:37:24 PM  by

Zver1

The following message was updated on 3/1/2021 2:39:01 PM.

 In response to msg 14145 by  lumpygravy
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Re: PLYM-industrial REIT

Note that both of these recommendations ignore two key points:
1) Very high leverage with significant maturities coming up(including preferred structured to put pressure forcing redemption). While these often are refinanced, they can sink a company if there is a disruption in financial markets(see oil related investments last spring as an example)
2) They cite FFO and ignore the effects of the preferred structure that make the FFO calculation deviate from reality. The A&B preferred stocks have built in real dollar costs that are never recorded in the FFO calculation. An adjusted calculation taking into account preferred obligation accrual would destroy coverage of the existing dividend which looks fantastic if you do not look too deep. Correcting the FFO calculation also makes clear the reason for the dividend cut earlier while the published numbers looked great.

I think the company has good prospects but the market discount is NOT due to it being a small company. It is due to the inherent risks of a large growth by acquisition campaign and, more importantly, the financing risks of high leverage, upcoming maturities and the preferred structure. On the flip side, I expect valuation discounts to disappear if the company passes these hurdles in the next few years without a major problem. A small probability of a major hit still matters for valuation purposes.


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