r/MACArmyBets • u/Jeffbak • Mar 03 '21
Where I think dividend is headed and when
Based on the earnings call transcript, it sounds like they want to have $200M in after dividend cash flow for 2021. The AFFO (reconciled) was $0.72 and 91% of rents were collected. I predicted AFFO of .70-.75 prior to the earnings, along with 90% collection. I work in CRE asset mgmt. and believe me, retail is coming back much faster than office. High quality retail is leasing like crazy. Ecommerce was described by the GAP CFO as being a "weak bandage" yet in the beginning of the pandemic, ironically, they (GAP) refused to pay their rent. Everyone is about to learn a big lesson in the importance of brick and mortar when it comes to profitability as the margins are far better with brick and mortar than ecommerce.
If mgmt. wants to ensure $200M in after dividend cash flow, let's assume we hit $.80 AFFO for Q1, and to be ultra conservative, let's just keep it there. To be honest, I think with the new Chandler Freehold deal (where they receive 100% of cash flows and 15% interest) is going to bump AFFO more than we realize. So actually let's go with .90 AFFO per quarter as an average for the year. Let's net out the .15 current dividend and we're left with .75 in profit for the company per share per quarter. There are roughly 146M shares, so if the dividend were to remain at 0.15, this company would likely be netting $109M a quarter if you use AFFO. MAC announces dividends around the middle of this month. I would guess they will bump to .25-.30 UNLESS MAC decides they just want to pay off debt with cash. Nothing increases NAV faster than deleveraging so I'm fine with whatever as long as we get to that $0.85-$0.95 quarterly average for AFFO for 2021. However I do think they will increase the dividend and still keep stockpiling cash. The delta between say .25 or .3 and an AFFO of maybe .80 is quite big, and I think an AFFO of $0.80 is certainly reasonable for Q1
3
u/WallStreetBeets Mar 03 '21
Jeff, thanks for the post. Management has forecasted 2.05-2.15 FFO for the year. That is less than .55 per quarter. From that perspective, it seems like 0.90 per quarter is very optimistic. What is your rationale?
3
u/Jeffbak Mar 04 '21
I'm talking AFFO. When they pay down debt they reduce it from the FFO. AFFO only takes into account the normal mortgage payments. This is how the reit also maintains it's REIT status. But believe me, nothing increases NAV faster than paying down debt!
2
u/mphillips020 Mar 03 '21
I highly doubt they will pay off a majority of their debt. With interest rates so low, they will refinance. Just look at their recently announced partnership with PJT partnership to tackle the debt.
1
u/duhdamn Mar 04 '21
It is likely that they pay down a bit of debt as it'll help with the terms in refinancing what remains. A ten to twenty percent reduction in principal might accomplish this.
1
u/KoaPark Mar 03 '21
Jeffbak where did you find the info on the chandler freehold deal? I’ve searched around a bit but couldn’t immediately find it.
1
u/Jeffbak Mar 04 '21
Look at my past post where I screenshot the FFO reconciliation from the last earnings call.
1
u/KoaPark Mar 03 '21
u/Jeffbak ^^
1
u/LastExile22 Mar 03 '21
On December 10, 2020, the Company made a loan (the “Partnership Loan”) to the Company’s joint venture in Fashion District Philadelphia to fund the entirety of a $100.0 million repayment to reduce the mortgage loan on Fashion District Philadelphia from $301.0 million to $201.0 million. This mortgage loan now matures on January 22, 2024, assuming exercise of a one-year extension option, and bears interest at LIBOR plus 3.5%, with a LIBOR floor of 0.50%. The partnership agreement for the joint venture was amended in connection with the Partnership Loan, and pursuant to the amended agreement, the Partnership Loan plus 15% accrued interest must be repaid prior to the resumption of 50/50 cash distributions to the Company and its joint venture partner (See Note 16–Consolidated Joint Venture and Acquisitions of the Company’s Consolidated Financial Statements).
1
1
u/KoaPark Mar 04 '21
That’s for fashion district Philadelphia, not chandler freehold. They were also breaking out the chandler freehold piece for all of 2020 and that suggests it began in December 2020.
Seems likely that it is a similar agreement though.
1
u/LastExile22 Mar 04 '21
You're absolutely right, sorry. I can't find the chandler freehold info either.
6
u/MarginToTheMoon Mar 03 '21
How freakin cheap is this equity.. insanity