Thursday, November 26, 2009

iStar on Independent Researcher's "Most Dangerous" List

MarketWatch's Chuck Jaffe included iStar, trading as SFI, in his worst stock picks of 2008 list, in December of last year. It's not any better now, closing Wednesday at $2.41/share (with a high for the day of $2.55) down 70% from its 52-week high.
New Constructs, an independent research firm, had SFI on its "Most Dangerous Stock" list before moving it up to just "Dangerous".
Jaffe also quoted Investor's Business Daily, which attributed the plunge to a pull out by institutional investors. That's your pension funds and other large investors. "There's a thin line between a stock that's beaten down into a bargain and one that has been knocked out," concluded Jaffe in March, 08. "While iStar Financial will live to fight another day, it's not getting up off the canvas right now, not without some more heartbreak first."
iStar rallied after the column until late June, 08.
Why should we in Asbury Park care? Well let's look at how much SFI has loaned its partners on the waterfront here (see last post) as a portion of their own market cap. The loan money it's looking to get back is $70 million. SFI's current market cap is only $234.86M. So compared to the value of the REIT's total shares, the $70M is a huge chunk. And its trading volume, at a little more than a million shares a day on average, is very shallow. Generally, large investors shy away from stocks that trade at such low volumes, because they worry about not being able to sell the shares quickly in a down market.
No wonder SRI is in a hurry to liquidate our waterfront. There should be Danger Use Caution Ahead signs all over City Hall. Contrary to the APP's report today (Thanksgiving) -- that SFI's appearance just means a shift from one master developer to the other -- we're dealing with a desperate investor who wants out in a hurry. And this City shouldn't be the one left holding the short end again.
What are our lawyers telling our leaders -- and why weren't they quoted in the APP report, instead of some uninvolved commercial property lawyer from Freehold? Why wasn't Metro Homes -- remember Esperanza, "Hope" in Spanish -- mentioned in the story, as was North Beach? What is the status of that failed development?
This is when the transparency that City Manager Terry Reidy vowed to engage, two meetings ago, should be visibly shining through, all the way through this process. Residents have complained for years that they weren't being informed, as promised, whenever the make up of the Partners changed. In fact, the City was supposed to vet all new investors, because this is a public/private partnership. If we had been vetting, we would have known of SFI's involvement, and maybe someone would have been following the news on SFI more than a year ago and been able to send up the alarm. Seeking knowledge isn't picky, it's the path to power. Instead we're all sitting on the edge of our seats again, powerless.


Anonymous said...

What does the market cap have to do with anything? SFI has around $13 BILLION dollars in assets and at least $2BILLION in tangible equity. It is conservatively leveraged for a finance company.

Maureen Nevin said...

Thanks for your comment:
What's the significance of market cap? I guess you want to ask that question of the financial analysts who have downgraded the stock for the past year and some. Better question is if SFI doesn't need the money, why is it choosing to sell its assets; i.e., Asbury Partners' collateral in the midsts of the worst real estate market in decades? Also, it is choosing to do so when the commercial property bubble is only now beginning to be really felt.
Maybe it fears the Partners won't pay their year end taxes, allowing the City to sell the properties itself in a tax sale? Or perhaps SFI has paid the taxes on the properties. Recent listings in The Coaster show the Partners owe on the City property taxes.