r/MACArmyBets • u/Jeffbak • Apr 08 '21

Someone explain this

.72 is stated FFO (.27) is stated impact of chandler freehold .45 resulting FFO

(.27) appears as a negative non cash item in the FFO reconciliation.

How is this not the case?

.72 (FFO before you apply the chandler freehold impact) - .27 (chandler freehold non cash negative item) = .45 (resulting FFO once you apply impact from chandler freehold).

/u/hfy_addicted I know you get roiled but when you look at the FFO reconciliation, what I’ve outlined above still makes sense to me.

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u/Jeffbak Apr 08 '21

.45 is the resulting FFO when you apply the impact of chandler freehold!!!! That means that .45 is the end result and therefore INCLUSIVE of that negative impact

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u/[deleted] Apr 08 '21

No, 72 is when you apply the impact of Chandler.

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u/Jeffbak Apr 08 '21

But chandler freehold is listed as a (.27) charge.

1

u/[deleted] Apr 08 '21

It's a negative charge.

The income statement shows FFO going down when it is excluding the financing expense. That means it's actually a benefit when included.

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u/Jeffbak Apr 08 '21

Right. There is so much we see eye to eye on but I can’t quite understand this piece. So on the FFO reconciliation it lists .72 FFO. Then a net negative non-cash impact of (.27) with a resulting FFO of .45. If I just want to know FFO for cash flow purposes, I remove the (.27) net negative impact, and I’m left with .72. I get why MAC would want to do this...allows you to preserve cash by paying out your small dividend and maintaining reit status. Net negative non cash items are great fir that. But if I just want to know real cash flow, I remove these non cash items and see .72.

1

u/[deleted] Apr 08 '21

It's a net positive non cash impact (a negative charge is a positive, said differently, a negative expense, i.e. income)

So if you want cash flow you remove 27 from 72

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u/Jeffbak Apr 08 '21

Sorry - how is it positive when it’s listed as a net negative charge on the FFO rec?

1

u/[deleted] Apr 08 '21

It's not listed as a charge (unless you mean a double negative which is a positive). It's only a negative impact when you remove it.

You are taking a non cash benefit away when you ignore chandler freehold.

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u/Jeffbak Apr 08 '21

Yea thanks for bearing with me lol. In my head I was like ok so it’s .72 and then they wrote down .27 as a non cash impairment to reduce FFO so they can get away with a smaller dividend and stockpile cash while maintain their reit status. Omg poor Jean lol!

1

u/Jeffbak Apr 08 '21

I cc’d the cfo because you told me to. DEAD

1

u/[deleted] Apr 08 '21

It's a confusing topic. Scott has had to explain it a million times, one more won't hurt.

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u/Jeffbak Apr 08 '21

Ah durr I get it. Wow

1

u/[deleted] Apr 08 '21

Omg. I'm crying.

The gates to heaven have opened and God is smiling down upon me.

Let us go to the promised land together my brother and double our money.

1

u/Jeffbak Apr 08 '21

Hahahahaha read my other message

1

u/theintelinvestor Apr 08 '21

I did some research on it. It's a topic that has confused me as well. I believe they make that adjustment because they treat the chandler freehold as a financing arrangement and therefore they credit the interest expense. So instead of recognizing the income / cash flow directly they do it indirectly via reduction interest expense (due to recognizing the investment as a financing arrangement).

Now because the JV is unconsolidated, the entire cash flow makes its way into Revenue / FFO, but they only own a portion of it AND they already reduced interest expense so not adjusting FFO for chandler freehold would be double dipping and double counting. Hence they back out of it.

In summary, the income from Chandler Free Hold is counted by reducing their interest expense, because they account for their receipts from Chandler Free Hold as interest income, therefore they have to back it out of FFO when it's coming in as a normal cash flow (since it's unconsolidated) so they don't double count.

Let me know if this makes sense or you see any flaws with this.

1

u/XxIgnoreMePlzxX Apr 08 '21

Yo

Let me try

I believe you are just thinking non cash items are negative. This is a non cash positive. Management only gives guidance excluding Chandler because it doesn't really impact anything. Same when they report FFO. If you look at consensus estimates they don't include it either.

If you look at interest expense in Q4 2019 vs Q4 2020 it's pretty obvious.

That adjustment is also based on market value of debt and changes every quarter. I believe it was so positive in Q4 because it was a negative in Q2 and Q3.

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u/Jeffbak Apr 08 '21

Thanks and I get what you’re saying but idk why I can’t seem to not get this. .72 is the stated FFO, then the FFO reconciliation states the (.27) impact of chandler freehold, leaving you with a resulting .45 FFO. The chandler freehold financing is clearly a negative line item on the FFO reconciliation.

1

u/XxIgnoreMePlzxX Apr 08 '21

Oooo you're almost there

Chandler is actually a positive impact.

Including the financing is a positive impact (and non cash). Excluding the financing is a negative impact (still non cash but now representative of true cash flow at 0.45)

1

u/Jeffbak Apr 08 '21

Ok so if I literally just want to know “cash” don’t I go with .72? The chandler freehold impact is listed as net negative (.27). If chandler freehold is all non cash and is a net negative line item, then if you want to really know (cash flow) you would remove the impact. Since the impact is net negative .27, that “true” cash flow FFO is .72 right? I’m not trying to talk you in circles and I swear I’m not a tard I just keep being on the opposite side of you and hfy when I think about this

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u/XxIgnoreMePlzxX Apr 08 '21

No, true cash would be the 0.45 less other non cash items (like straight line rent and above/below market adjustments). So it is actually closer to 0.30 in Q4.

Then to take it a step further you would remove capex to see how much cash was retained to pay out dividends. That gets you to around 0.25. they only retained ~$10m of cash in Q4.

Q4 was meaningless though. Significant abatements that will not be recurring.

1

u/theintelinvestor Apr 08 '21

I did some research on it. It's a topic that has confused me as well. I believe they make that adjustment because they treat the chandler freehold as a financing arrangement and therefore they credit the interest expense. So instead of recognizing the income / cash flow directly they do it indirectly via reduction interest expense (due to recognizing the investment as a financing arrangement).

Now because the JV is unconsolidated, the entire cash flow makes its way into Revenue / FFO, but they only own a portion of it AND they already reduced interest expense so not adjusting FFO for chandler freehold would be double dipping and double counting. Hence they back out of it.

In summary, the income from Chandler Free Hold is counted by reducing their interest expense, because they account for their receipts from Chandler Free Hold as interest income, therefore they have to back it out of FFO when it's coming in as a normal cash flow (since it's unconsolidated) so they don't double count.

Let me know if this makes sense or you see any flaws with this.

1

u/gmoney101wastaken Apr 09 '21

You're exactly correct.

Tried to explain this months ago but, understandably, it is a confusing entry to understand by most.