Things are looking a bit brighter.
Jobless claims are down a little. China exports a little more. Putin pulls his troops back from the Ukraine border. Putin needs Ukraine a lot more than Ukraine needs Putin. Putin needs Ukraine for his oil and nat gas movement and sales, and also for armaments and military stuff made in the factories in eastern Ukraine — deliveries of which allegedly stopped after Putin took Crimea. But will he invade? Unlikely, for now.
The big news is that my commercial office syndicators are still finding neat properties that should offer us investors a conservative 8-10% dividend and perhaps 15% IRR when they’re sold, or refinanced. Buildings are still selling for way below what they sold for 10 years ago and replacement cost. Which is great, since it keeps the builders at bay.
Remember the six charts I mentioned yesterday from the New York Times? Here’s one of them:
This chart sucks if you’re looking to earn interest on your savings. But it’s great if you’re borrowing to buy. A friend just got a 15 year loan on his new New York apartment at — wait for this — 2 1/8th percent. It’s got an LTV (loan to value) of around 60%. He’s a good customer of his bank. I would be most surprised if the value of his apartment didn’t appreciate at least 4% to 5% a year in the next 15 years. It’s an extraordinary good deal.
TSAPre will speed your air travels. You go through a special fast lane. You don’t have to remove your shoes and clothes. You don’t have to take your laptop or iPad out of your bag, and lose it, or have it stolen. Uncle Sam has done something great, for once. I kid you not. For more information, click here.
Need a temporary one-day New York office? Try Grind. A friend pays $35 a day, gets a desk, WiFi, coffee, company of others, nice atmosphere, bookable conference area, etc. She loves it. Grind describes itself:
Grind isn’t an office, it’s the antidote to offices. A members-only shared workspace and coworking community dedicated to taking all of the frustrations of working the old way and pulverizing them to a dust so fine it actually oils the wheels of the machine. A space that caters to free radicals like you.
For more, click here.
Deutsche Bank on Ladder. Stephen Laws is one of the better analysts around. Ladder Capital is one of the stocks I recommend. This morning Laws wrote:
Ladder Capital {Ticker: LADR.N, Closing Price: 17.71 USD, Target Price: 21.75 USD, Recommendation: Buy}
Solid 1Q results; Adjusting target to $21.75 per share
LADR reported strong 1Q results, as core earnings beat our estimate by 3c and gain on sale margins in the conduit loan business were 50bps above our 425bps estimate. We expect leverage to increase in 2Q as LARD originates on-balance sheet investments, which we expect to drive net interest income growth. Given 3/31 BV was below our estimate, we are trimming our price target by 50c to $21.75 per share. Given our expectation of portfolio growth, the attractive margins in the mortgage conduit business and the valuation relative to our target, we rate shares a Buy.
1Q core EPS of 37c beats estimate by 3c; BV of $14.42 per share
LADR’s 1Q core EPS were 3c above our estimate mainly due to the lower average share count (after-tax core earnings were $33.5m slightly above our $33.2m estimate). During 1Q, LADR originated new loans totaling $611m and securitized $772m in loans in two transactions. At 3/31, the company had $1.92 billion of committed financing available for additional investments. Leverage ended the quarter at 1.37x, down from 1.88x at 12/31. We estimate 3/31 BVPS of $14.42, which is lower than our post-IPO estimate of $14.83.
Decreasing price target to $21.75 per share from $22.25 per share
With 3/31 BV being below our estimate, we are trimming our target by 50c. Our target is based on shares trading at a 50% premium to our 3/31 book value estimate of $14.42 per share. We believe our 1.5x multiple is appropriate given 1) the internal management and C-Corp structure, 2) the diversified portfolio, which includes origination and securitization businesses, CMBS investing, and owned real estate and 3) the improving operating environment for CRE debt investors. Our target implies a 14.6x and 13.6x multiple on our 2014 and 2015 core earnings estimates, respectively.
Risk factors
Investment illiquidity, changing rates, falling market values, declining real estate values, and poor credit results may negatively impact LADR’s business. An economic downturn could have a negative impact on the CRE finance industry, given its reliance on general economic conditions. LADR’s access to and use of leverage and securitization may adversely affect results. Many investments are illiquid, which could impact how quickly the company can position its portfolio in response to changes in the operating environment.
The New York Frieze Art Fair is on. It runs tomorrow through Monday. But the privileged are going today. Most of the
“important” sales take place early on. The fun way to get there is with a ferry up the East River — where the striped bass run.
I’m told the Fair is huge, featuring mostly contemporary art. For more, click here. Frieze is New York’s equivalent of Art Basel, which runs in Basel, Miami Beach and Hong Kong.You can read more of Art Basel on Wikipedia. Click here.
With the stockmarket less buoyant than last year, the market for art may be less hot. This morning the New York Times has a piece headlined, “Mediocre Night at Sotheby’s, as One-Third of the Art Does Not Sell.” The article began:
It was another bumpy night at the spring auctions, the second of the week’s evening sales of Impressionist and modern art. On Wednesday, many in the art world converged upon Sotheby’s, where nearly a third of the art went unsold. Paintings and sculptures by masters like Degas, Renoir and Picasso were either overpriced or were just not good enough to tempt buyers.
Asian buyers were by far the most active shoppers, bidding consistently by telephone through the auction house’s representatives throughout the evening. According to officials there, Asian bidders managed to snap up $63.9 million worth of art, or roughly one-third of the evening’s $219 million total. Sotheby’s had estimated the sale would bring in $218.1 million to $317.9 million. The auction house offered 71 works, and of those, 21 failed to sell.
The mediocre results followed an unexciting night at Christie’s on Tuesday. That auction house managed to sell $285.9 million, above its low estimate of $244.5 million but not close to its high of $360.4 million.
For Sotheby’s, the auction was yet another difficult moment. The company has been battling the activist hedge fund manager Daniel Loeb, who earlier this week pushed his way onto the board along with two of his allies, after a bitter, seven-month challenge that included fierce attacks about the company’s performance and its management.
For Sotheby’s, there were a few bright spots on Wednesday. Four bidders fought over Picasso’s “Le Sauvetage,” or Rescue, a colorful 1932 scene of bathers on the beach, painted one summer at Boisgeloup, France. It had been estimated to sell for $14 million to $18 million. Charles Moffett, a vice chairman of Sotheby’s in New York, took the winning bid on behalf of an unidentified American telephone bidder who paid $31.5 million. Before the sale, dealers said the painting belonged to Jerome Fisher, a collector and a founder of the footwear company Nine West, who had bought the painting at Sotheby’s in 2004 for $14.8 million.
(Final prices include the buyer’s premium: 25 percent of the first $100,000; 20 percent from $100,000 to $2 million; and 12 percent of the rest. Estimates do not reflect commissions.)
You can read the full New York Times piece here.
One delicious aspect of our infamous tax code is a 1031 Exchange. Sell a building. Identify its replacement within 45 days with another “like” one or two and you don’t pay taxes on the profit on selling the first building. You’ll pay the taxes when you sell the building/s — which you may never do. The IRS says “Real property and personal property can both qualify as exchange properties under Section 1031.” This loose definition seems to include art. For more, here are words from the IRS. Click here.
Everyone is having twins. In 2009 Roger Federer had twins, girls. Now he’s just had twins, boys. Twins seem to run in his family. A friend has also just had twins. He said to his wife he wanted more. She said she was “done” and he could have more children with his next wife. Which I thought was funny.
Double strollers are common in our neighborhood — New York’s upper west side. I’ve seen one stroller with three babies.
Recently I saw one with four babies. They wouldn’t let me photograph it. Old men with gray hair and a camera ogling babies are considered nuts here — at least according to Susan. Now I have a granddaughter, I’m pretty obsessed with babies.
Harry Newton who picked up some WFM at $38.50 yesterday. It closed last night at $38.93. Some imbecile writing on Seeking Alpha said it’s not done falling yet. Click here. We’ll see.
I sold the remains of my BX. It has just kept falling and falling. It benefits when the IPO market is hot, which it isn’t at present.
One of the problems I face as an investor is buying companies whose products I dislike. To wit: Yahoo. Here’s today’s lead Yahoo Tech story:
I mean.. seriously. This is the best you can do in technology? Even I do better, and I’m not being paid.
Here’s my favorite Yahoo Tech story… Does anyone really care? I bet there are no Australians in the upcoming life simulation game, either. Now that’s something I really care about.
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