RAT 0.00% 0.9¢ rubicon america trust

value of real estate assets

  1. 2 Posts.

    Just one more point - because of the US credit crisis - market capitalisation rates have gone up and as a result real estate values have dropped. This means from a current valuation perpective office buildings in the US may have a lower current market value. BUT their true value should have gone up. The correct way to value a rental producing asset is to discount its cashflow to present value. Now aggresive FED rate cuts have reduced the discount rate we should apply to those future cash flows so the true value of the real estate assets should have gone up.

    Now even if RAT writes down its real estate and loan portfolio say 5% across the board and the NTA value drops from $1 to $.8 (5%x4 the leverage factor) then we still have to focus on the rental and interest stream which should not be affected unless RAT becomes a forced seller of its property and loan books. They have recently sold one of their properties (one riverview square miami) at a profit. This they will use to fund their share buyback. Note they were buying their shares back at 75c not too long ago. The latest property sale just needs to settle so they can start buying their stock back again. The correct market price should be at least 70c - putting RAT on a div yield of 16.57% - a higher yield because of the risky enviroment. AGAIN assumption no MASSIVE FRAUD.
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