I would appreciate an update on your views about the residential arm of Dream. They seem to be doing well, but I was hoping you might help me spot any red flags here, or point out where I am not seeing the data correctly. My cursory review noted the following:
1) Debt to assets only 31.9%
2) Stock price at 50% NAV
3) Paid $10.5 distributions, out of $.18 FFO, which implies a payout ratio of only 58%, which seems low and I would think adds to some margin of safety for a small firm.
4) Actually are buying back stock, although minimally.
5) Dividend seems very good at almost 7%.
Thanks!
Paul
The debt ratio 31.9% is correct; this is very low by REIT standards. The stock is 60% of stated NAV, but we would be cautious with this metric. NAV includes many assumptions, and if any are wrong (ie market value) NAV can change dramatically. Book value is probably a better metric, but even then can be inaccurate and not correlated with market value at times. Certainly the payout ratio is low vs the sector. But note it has only paid two distributions in its existence and we would of course not see this as a long term record yet. DRR did buy back 7,132 units, which is fine but any buyback will reduce market cap and liquidity, so as a tiny REIT this may not result in a valuation change. The yield seems appropriate for the size and sector risk.