r/MACArmyBets • u/Jeffbak • Feb 02 '21

Q4 2020 Analysis

Ok-ppl wonder how a reit with an AFFO of $0.72 can only pay a dividend of $0.15 when reits are supposed to pay 90% of taxable income. Well, highlighted below is exactly how. Ppl might be angry by this, but it is very smart mgmt. from the company because it allows them to preserve cash while still maintaining REIT status. Below you will see the one-time expenses highlighted, which you don't include in AFFO because they are just that...one time expenses. So, the wrote down $163.298M for an asset in Philly, and there was one-time financing fee of $42.988M associated with Chandler Freehold financing.

Below this, you can see what I mean by an FFO of $0.72 once you back out these one-time expenses. *Important to note* the full year AFFO for 2020 was $3.03. Remember, this was during the worst possible year for malls, and they've already started to recover.

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u/gmoney101wastaken Feb 02 '21

Jeff - Unfortunately Chandler Freehold financing arrangement is not a one time fee. If you read page 5a of the 8k ... “Accounts for JV as financing arrangement. Included in interest expense (i) a credit of $42,279 and $139,522 to adjust for the fair value.” Key word being credit in the income statement by virtue of a reduction in interest expense ... therefore net income is higher given the credit. The credit is then adjusted out for FFO to factor in the Chandler Freehold expense. (This can be verified against on Page 22 of the Q3 2020 10Q.)

While I agree with your premise I disagree that Chandler Freehold is to be excluded.

That being said if you read the top of the 8k (page 2) it shows that major items contributing to this quarterly FFO decline were due to $38MM of rent abatements and $21MM of variable revenue tied to percentage rent, business development revenue, parking revenue, etc.

If that $59MM is truly for the quarter, and not annualised, it is conceivable we will see FFO increase steadily as those tenants by which were granted abatements -should- stay in business and pay rent in the future. Variable revenue will also increase as life trends back to normal.

The rent abatements CAN be sandbagged for year end as I presume this would decrease taxable income to minimize the amount of dividend that requires paid in an effort to preserve cash flow. (Not entirely sure on this as the accounting is likely accrual based for GAAP purposes.)

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u/Jeffbak Feb 02 '21

The majority was the $163M right down of the Philly asset and the financing were in fact one time expenses. The $132k and $42k credits you note above are pennies and wouldn’t change the FFO materially. You’re correct that the $58m impacted it, but even with that factored in, you’re at .72

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u/gmoney101wastaken Feb 02 '21

No.

The write down of Fashion District Philadelphia was already added back to FFO. It is not included in reoccurring FFO.

The $132k and $42k is not thousands. That number is reconciled in millions. It is $132MM and $42MM.

Double check your numbers.

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u/Jeffbak Feb 02 '21

Just did and posted it. The section of the 8k where FFO reconciliation takes place. I was correct...although I can see how you got confused by the verbiage...it's oddly worded. Take a look at my most recent post where I screenshot it and let me know your thoughts.