RNY 0.00% 0.5¢ rny property trust

worst case: treble your money

  1. 4,239 Posts.
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    Now that I have completely tapped out my finances buying this share on the way down (again), let me share some of the facts I have come across. I spend at least one hour every day reading any and every piece of info I can on office and commerical real estate in the suburbs of NYC.

    Firstly, let me say I correctly predicted the directors would buy squillions of these RNY shares up to 20 cents. And they did.

    Now I always like to think worst case scenarios. So, I have predicted/guessed for a while that I can see the property values and the rents falling about 20% from where they are today in the NYC area. And finally, I am seeing some reports out of NY that, indeed, values are a little soft and predicted to fall up to 20%. They have not fallen that far yet, but intelligent commentators can easily see that happening.

    So, let us price a 20% fall in rent and property values. Firstly, RNY have good tennants in place at current rents, and in fact, the renewals of the last six months had INCREASES in the rents. And, if you read as much as I do, you will see the rents really have not fallen, except there are incentives being giving for new tenants. But I did read of ONE deal in NY that was closed by the rent falling 15%!

    On the property values, most 'fire sales' going on in NY are about 10 - 12% less than the peak. Mind you, I read about ONE big deal that the fire sale was down almost 25% on one building. Unfortunately, these stories mainly apply to the Manhattan goings on. So it is hard to guage the burbs to Manhattan - where all the press happens upon.

    So, I was happy to note that SL Green (kind of the big daddy to RNY) sold two properties on the same street as RNY properties in Tarrytown (Westchester) for 48 mill. I did not look to find the valuation of the properties last year - but I just note the seller said 'this shows that Class A office building in good location are still in high demand'.

    Well, RNY simply has Class A office buildings in good locations. So, again, I go with the worst case, let us assume all properties must be sold at 20% discount from NOW. Note RNY has already devalued their properties a few percent (actually 11% in Westchester), so we are not talking 20% down from peak in mid 2007, we are talking 20% down from slumped mid 2008 values.

    Now at the last valuation, the AUD value was 85 cents a share with the dollar near parity. I easily estimate the the valuation in AUD are now closer to 1.10 or let us say 1.05.

    Since we are geared 55%, a 20% fall in valuations will lose us about 45% in valuation. So, our $1.05 slumps to say 60 cents in a worst case scenario. If you want to be super pessimistic, you can say valuations fall 30%... so we end up with a valuation at say 45 cents AUD.

    Today you can buy a couple hundred thousand of these shares (I ran out of money!) at 13 cents. They are on the market right now. Lord knows where the buys of 500 and 600k of shares a 19 cents a week ago, went.

    I dont want to bore you guys too much, but there is no reason that the rent in RNY does not pay dividend of 5+ cents a unit. Or if the directors want to keep all of it in the trust to reduce gearing, I really dont care. Their rent is 1.99x mortgage. So unless their rent falls 50% they are covering the mortgages. And you can check their rental roll. I have. I dont see any Lehman or Banks or other guys that will suddenly hand back squillions of square feet of space whilst going bankrupt.

    Also, by the way, the STRONGEST suburb of NYC in terms of rental non-decrease and demand is Long Island. And the largest percentage of RNY is in the Long Island market.

    My other fav trust is GJT. But I find it hard to research Japanese shopping centers which form part of them. I do own a fair bit of GJT. But, as I have posted here for many months, my baby is RNY.

    Good luck to all of you that own it. Heck, maybe I am completely wrong, but man oh man, the directors sure bought 20% in a hurray once they had permission (Freudian typo... I meant hurry - but I am sure a HURRAY from them). We are talking T W E N T Y percent of the beast. These are the directors... my mates now... and I dont even know them. I am thankful for all the small (well Oracle and Lockheed are not small) business who call NY home... their rental payments are going to make me live through my old grey years.

    Almost enough to make you a Yankee or Mets or Knicks fan, hey!

    By the way, ask me ANYTHING about NY burbs commerical real estate. I read 1 - 2 hours a day. I would not invest my life's savings without doing that !
 
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