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PEI Fire Sale? Unlikely... Why? Because There's So Little Worth Selling - Yes, It's That Bad!!!
This is part seven and the last (I think) of my forensic rant on what I believe to be the CRE Short of the Year and the dead REIT walking known as PEI. In this installment, I will show that PEI can't even sell off it's portfolio due to a lack of value add to its rather dire situation - nearly all of the properties are either underwater, negative cash flowing or fully leveraged. As concluded in my previous analyses, the company's assets are, in essence, of null or negative value to the shareholder. If you haven't yet read parts one or two or three or four orfiveorsix, please do for there is a wealth of data and analysis behind them that will bring the new reader up to speed. Please refer toPEI Cashflows and Debt Preliminary Analysis,PEI Sample Property Valuation and PEI Foreclosure Scenario Analysisfor the background to this document which is the 3rdof 3 scenario analyses that detail the likely bankruptcy of PEI.
Scenario III : Sale of properties to fund debt repayment
The “fire sale” or distressed asset disposition scenario seems like the least possible, least likely and the least practical scenario. The reason is that the Company’s portfolio has either properties (1) which have negative valuation after considering debt due on them or (2) have properties that don’t have specific debt against them but are mortgaged under the revolving credit facility.
Please see the details on valuation of 27 properties we have valued…
PEI Underwater Overly Encumbered Properties
The properties that we didn't specifically value had similar characteristics. Those properties that are highlighted in blue do not have a mortgage, but are used to collateralize credit facilities that are being actively used and are expected to be maxxed out.
PEI Properties Not Valued By BoomBustBlog
As illustrated above, almost all properties with a positive valuation (see Column L) lack property-specific debt against them. But all of these properties have been encumbered under the revolving credit facility. The properties not covered under the revolving credit facility and having positive valuation after deduction of debt due on them are (1) Exton Mall (2) Moorestown Mall (3) Patrick Henry Mall. The total positive value of these three properties is around USD 36 mn which is insufficient to meet net refinancing requirement of USD 295 mn (as of Nov. 2011) as detailed below:
|
Amount (USD million) – 2012 |
|
|
Cash at the beginning – Jan 2012 |
93.94 |
|
Cash flows from operations |
77.34 |
|
Unused credit lines |
155.00 |
|
Debt due for repayment |
621.08 |
|
Shortfall (before proceeds from sale of properties) |
294.80 |
Paid subscribers are welcome to downloadthe corporate level valuation of PEIas well as all of the summary stats of our findings on its various properties. The spreadsheet can be found here - 
Results of Properties Analysis, Valuation of PEI with Lenders' Names
The complete REIT analysis referred to in the chart can be found here for subscribers (the property by property valuations are for Professional/Institutional subscribers only):
Fire Sale Scenario Analysis- advertisements -
I'm pretty sure those earring and cell phone kiosks are going to pull them out of the red.
Reggie, this is a rational call, and normally I would agree with punishing this short-pig. But, your timing is wrong.
With FRAUD-ZIRP, there is literally ZERO risk of depreciation to these assets of destruction, and as long as rates are presto'd to fuck savers, these pigs will float while the money-faggots with beards print.
In ZIRP, no risk, no problem, no short = fuck the prudent and win.
Frankly, quite the opposite is true and this beacon of fraud-insanity may actually appreciate!
Your example only illustrates how badly the markets are broken and how incorporated fraud and systemic collusion by government distorts rational calls and a functional market.
Tell that to the banks who will refinances this underwater debt. The game only works so long as the players don't lose money.
ZIRP a NIRP, what happens when those banks go NIRP on us? Shit, the debt will start paying itself and the shareholders will be happy. Sorry had to say something cynical.
The game has worked for almost 5 years of bullshit where PEI has done nothing but float on dividends.
I'll give it another 5.
ZIRP has all but eliminated downside risk in real estate.
Banks -- what banks? The same ones with iron cores financing losses on your dime -- still floating?
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God damn. Thought he meant Prince Edward Island. Phew.
Spain has said they'll buy all of it!!!
I thought Germany said that?
You're both wrong, it was Compton.
Short sale ban in Spain I see. You didn't actually expect that money did you? Shouldn't be a problem to short the euro of course.
Now that's just mean. Can't you leave the poor land speculators alone in their misery????
Oh, wait, this is Fight Club. Hit 'em again, mate!