unencumbered assets, page-8

I was asked my opinion on RNY and SLG a couple of posts ago. I did read a report that the prices of Manhattan office have fallen 30% in the last year. Go to finance.yahoo.com and look up SLG and read any related articles. It was compaing London to New York.

But if you read the 6 months report from RNY carefully you see no crash in the leases and lease prices. So my opinion is that since the rentals cover the mortgages two times, there is not much of a way RNY can be hurt short term.

Some other points. The debt to share conversion acceptance by the lender to the directors - over the 25% ownership not part of RNY - proves that the lender was happy to NOT HAVE HIS MONEY, BUT TO HAVE PART OF THE PIE. It is the most strenuous, inside info you can get on the properties. A lender could have asked for the mortgate money repaid, but instead traded it for stake in the company.

Also, the average price the directors paid to get 20% of RNY over two day in November (to replace the shares they gave to the lender from their 'other' 25%) was 14 cents. So, again, you have inside info, the directors saying the share is a bargain at 14 cents.

I made a couple of mistakes in buying my stake. And a couple of good moves. I sold a lot of my shares at 18 and 20 cents, expecting a 'no dividend' announcement. And when the share price went back down to about 14 cents I was happy. But when they declared a 2 cent dividend, I bought all back at 14 cents (12 cents incl the dividend).

I am so amazed this stock ever went below 10 cents on fundamentals. So, when it fell more to 10 cents I really got in more. Again, a mistake as it simply went down day after day. (Mainly from me buying bits and pieces on the way down) There were simply no other buyers for a long time.

So, my next mistake was to simply not wait longer. Mind you would someone else had bought to push the price down. I feel like I did all the hard work running the price down (a simple by 2 or 3 grand worth 4-5% below the last sale - for day after day). Each day I thought 'wow, I cannot believe I got more at 8, then 7, then 6.5, then 6... and 4.5 is a joke. I did even get some at 4.1, but not much.

So, I sold well near 20 cents, but I bought back too early. But I can believe anyone would EVER sell this stock below 10 cents. Even if they dont pay a divi, they are earning at least 4 cents a share by keeping.

Now the market cap is 12 mill. And they have unencumbered properties worth over 100 mill. The directors own 20%. Even if the market tanked complelety, they can do, as I asked in a letter to them and they never answered: hand back all the mortgaged properties, sell the unencumbered at half price and return 4 times the current share price.

But with rents covering mortgage, there is no need to do ANYTHING. Just relax and ride out the storm.

The directors of this mob are the most experienced real estate men in New York area. They own 20%, they know what they are doing, and unlike most companies where directors put themselves over the shareholders, these directors ARE the shareholders. So they will do for themselves and the other shareholders.

If they need to sell a property, thier mates are SLG. And SLG have published they are storing up money to begin buying properties around NYC. If you read the history of RNY, you see it was an offshoot from Rexson (USA) selling out to SLG. And actually Rexson sold to SLG about 20% under market. Some other big real estate guy tried to offer 20% more for the Reckson sell to SLG. But Reckson said NO. They are simply mates with SLG. So if RNY need to sell a property, they can sell to their SLG mates. But no sales will be necessary.

I also feel that the US Govt will do everyhing it can to save the mortgage markets. And they have been doing it. So there is no way the property will keep falling to destroy all REITS and mortgage lenders. The entire world is working, indirectly to save companies like RNY.

As I said they are so, so simple. There is no deep secret to suddenly bite you (like a GJT, oops we are broke because of mark to market for our hedging).

In the long term, I think the USD will tank (say in 1 - 2 years) as you simply cannot, cannot MAKE money. So, I am happy to have property - at a 95% discount to current price. (Well with gearing, say a 50% discount)

Did you notice the gearing only went up to 62% with a 10% fall in values over the last 6 months. In theory at 50% gearing, a 10% fall should hurt your gearing and NTA by 20%. But you can see even with the small divi, RNY kept money inside to not make the gearing rise too much.

Now on the refinancing this year. I think for sure they will take a mortgage on some other property when they get a good rate. Note the rates for refinancing or taking mortagages - on good properties - are very, very low right now.

I am amazed their line of credit is like 2%. Where did they find a line of credit at 2%. So, when they refinance that I think that will go up a bit. But I bet over the next six to 12 months, they will clevely refinance bit by bit to push out the big refinance need in Sept 2010.

But really, we all expect by Sept 2010, the system will more normal than it is now. I said many, many times, if the banking crisis lasts until late 2010, the entire world is knackered.

Sorry, for rambling. But I was asked my opinion. I did not give a lot of hard facts, but I always try to think what I would do as a director. I really feel I was led by Above to this share. (Sorry, odd to say, but I think true). It is like this share was hidden from all so I could buy heaps. Now when I say heaps, I am not some millionaire, I have bought many, many, many parcels of $2-4,000. But if they can pay a divi in a couple of years at only a few cents a share, then my retirement is OK. I think I will be OK.

I read somewhere that you never become rich by diversifying. So I simply found what I think is the simplest and safest share around. Some amazing bad things happened over the year with my other shares. MLI was about to start pouring gold, when the directors said 'oh we dont have money and we will sell our assets'. The directors lied and cheated. ZFX I bought because they had so, so much cash. I expected the crash of mining, so I wanted a big miner with cash to buy companies dirt cheap. The director gave all their money to Oxiana, then ran losing mines until all the money is gone, and lo and behold they are broke. Directors cheated and lied to me.

I am going to become rich buy only investing in companies where the directors ARE big time shareholders and the company is so, so simple and the directors have some brains.

Think about FMG... is it worth 10 a share or 1 a share. Who knows. It is a play share. Even RIO is a play share. Is is worth 140 or 30. At least with RNY I can measure every piece and make an informed choice. I have decided the world will not end in 2010. And owning RNY is a great and intelligent and well informed 'bet'.