Our site runs on donations to keep it running for free. Please consider donating if you enjoy your experience here!

Added a GTC Lowball Order

I added a low ball Good Until Cancelled order this morning for the XAI Octagon 6.50% term preferred (XFLT-A). I currently hold a full position, but at the right price I am not against adding another 100 shares (for now). This has a mandatory redemption in 3/2026 and at my $24.00 order price will meet my current hurdle of 8% yield to maturity. The odds of this order executing seem pretty remote, but one never knows.

This is an unrated issue with a coverage ratio of 234% (200% is required) – not the highest quality term trust, but one which I have owned for a long time and feel comfortable holding.

Note that XFLT directors have voted (just today or yesterday) to make this CEF perpetual, as they previously had a term trust agreement which would have had the trust liquidate in 2029. This should have no effect whatsoever on this issue.

22 thoughts on “Added a GTC Lowball Order”

  1. To me, I like the risk / reward aspect of the ADC common better than the preferred. Only about 1% different in yield but a lot more upside cap gain potential in the common

  2. Market is really odd today, had GTC sells on way above call getting hit. Kind of feels like a sin actually. I can only guess flight to safety with the volume. Or else I’m just really being stupid

    1. Dufus–you are right–a very weird market–super strong economic news and rates fall–but tech continues to get hammered.

    2. Dufus, I know what you mean. I had what I thought was a low ball bid on BFS-PE hit and later I had buyers remorse. Kinda like the time I bought my first house and had my first ever mortgage.
      I have been doing like Tim and setting GTC bids based on the yield on what I would like to get. In this case 8% so of course yesterday’s low of 18.70 was my buy in. Now the question is how low can a second tier REIT go?

      1. It can always go lower for longer than you thought. As long as you’re happy with the yield. MDRRP had buyers up to 28.49 and it’s getting called a little over a year, no way to make that back up even with the back dividend. I wasn’t the lucky high point but wasn’t far off.

        1. What’s the story on MDRRP? I see they suspended the dividend payments “temporarily” for 6 months in July and it’s not a call date but a mandatory redemption date of 2/19/25. How comfortable are you that they can make that redemption date payment in this environment? I have not followed MDRR.

          1. They actually just re-instated the pfd div. they have a double coming up. But you’d only know that if you went to their own site last I checked no one else had the news out. Basically someone who is aligned with shareholders and has skin in the game is now in control instead of external “advisors”. He was buying in the $22 ish I think. I still have a fair chunk that I plan to hold till the end but do have them on GTC sells in case someone really wants in. Insiders now own a lot of common too. They can either issue more common or float a new pref. I’ve been in it since 2020 when I noticed an insider buying it. Just a very small company.

            1. Thnx D…. It looks as though you had to buy today in order to get those 2 divs, right? Holders of record = Oct 30….. good for you….. will look further but sorry I didn’t look into it during the day.. at first glimpse this Kavanaugh guy seems to be a regular straight shooter kind of a guy.. Seems like a good thing that he’s now permanent not interim CEO

              1. Correct on the date. I’m not a big fan of common shares of reits but when the insiders are buying a lot I take notice. The only thing I don’t like because I don’t grasp the concept of is I think there’s a filing they put in place that limits ownership to 5% instead of the regular 9.9%, and that was after he upped his allowable limit to like 15%. I’m not smart enough to figure out why they would do that unless based on the 5/50 rule unless he wants to get up to 30? or wants another 15% holder? Just something I never saw before.

                1. I’m not seeing that document so far, Dufus…. It sounds like something the Corporate Governance Police would be all over as and anti-activist tactic that makes a hostile takeover attempt far more difficult to happen…..I’ll look further but as described it would not be a positive action in my eyes..

                  1. https://finance.yahoo.com/news/medalist-diversified-reit-inc-grants-201500458.html It’s a press release dated August 9th. My memory was wrong, it’s 20% for him and 3.6% for anyone they don’t approve of if I’m reading it correctly.

                    “granted a waiver of the ownership limitations in Article VI of the Company’s Articles of Incorporation as amended (the “Charter”) to permit Francis P. Kavanaugh and certain of his affiliates (“Kavanaugh”) to own up to 20.0% in the aggregate of the outstanding shares of capital stock of the Company. Concurrent with this waiver, the Board in accordance with authority vested in it under the Charter: (a) decreased the Aggregate Share Ownership Limit (as defined in the Charter) from 9.8% in value of the aggregate of the outstanding Shares (as defined in the Charter) to 3.6% in value of the aggregate of the outstanding Shares for all persons and entities other than for any Excepted Holder (as defined in the Charter) and other than for any person or entity as to whom the decrease shall not be effective pursuant to, and on the terms and conditions specified in, Section 6.1.8 and (b) decreased the Common Share Ownership Limit (as defined in the Charter) from 9.8% (in value or in number of Common Shares, whichever is more restrictive) of the aggregate of the outstanding Common Shares to 3.6% (in value or in number of Common Shares, whichever is more restrictive) of the aggregate of the outstanding Common Shares for all persons and entities other than any Excepted Holder and other than for any person or entity as to whom the decrease shall not be effective pursuant to, and on the terms and conditions specified in, Section 6.1.8 of the Charter.”

                    1. Thanks, Dufus. I see that in EDGAR filing as https://www.sec.gov/Archives/edgar/data/1654595/000155837023014280/mdrr-20230630xex4d4.htm. To me it is a large negative which is saying, “look everybody, we’re ensconcing whom we want in management and you better like it because we’re changing the rules to make it even more difficult to challenge him or us by lowering the allowed percentage of ownership anybody else is allowed to have.” Not only is that a corporate governance negative, but I’m surprised they get away with it unchallenged.. https://www.sec.gov/Archives/edgar/data/1654595/000110465923093698/tm2322683-1_def14a.htm#tSOOC , a 14A Proxy statement issued after that announcement dated Aug 23, p 16 shows a guy named Alfred Lee Finley as owning 14.9% shares and Wells Fargo @ 5.80%. Are they going to be forced to reduce their ownership? And what if an activist wants to get involved in the company? This severely limits their ability… I’ve still not spent much time on this, but this amendment plus how difficult their past has been is most likely enough for me to fuhgettaboutit. Opinion? Am I misinterpreting the intent of this move?

                    2. Certainly the ownership restrictions on the common are problematic and as 2W points is a textbook example of bad governance. The investment thesis is not in the common; it is in the term preferred.

                      If you take a look at the recent Sch 4 at this point Kavanaugh owns 45,000 shares of the preferred. This represents 45,000/200,000 22.5% of the MDRRP issues outstanding.

                      CEO ownership of a significant amount of term preferred stock is quite rare in my experience.

                      While there are multiple factors making the common a no go, one might make the argument that CEO ownership of the preferred at this level more than offsets these factors as far as the preferred is concerned.

                      They have also moved from external to internal management which I find fundamentally important for a REIT. Brining in a new CFO is also potentially a positive move from a governance perspective.

                      I am not ready pull the trigger, but I am not totally allergic to it either.

                2. Dufus,

                  Thanks for bringing this issue up. The preferreds are interesting due to the mandatory call at $25 in 2025. Re-establishment of the dividends is obviously a good thing and once again we see the benefit of the cumulative feature or REIT preferred stock. If it were non cumulative bank preferred those skipped dividends would be permanently lost.

                  They have done the reverse splits in the common and brought in new management. It it looks like a certain amount of house cleaning has been accomplished in terms of management.

                  They also fixed the “externally managed problem”. For me an externally managed REIT is a no go, but earlier in the year they terminated external management agreement.

                  Near in debt maturity is about ~$2M is 2023 and 2024. When they redeem the 8% of Feb 2025 that will be about $5M cash outflow.

                  I don’t love the assets or the size of the REIT, but there are certainly positive offsetting factors to consider.

                  I sold a my position in HES on the acquisition news and did some general house cleaning last week, so I have some cash to put to work after the Fed mtg. I am looking at 6.5% agency MBS, 10 year agency term debt and adding a small amount of an issue such as this might work out well to good the yield and lower duration.

                  You have given me something to do tomorrow as it’s worth spending time on this one.

  3. Boy does that sound like a rotten deal for XFLT shareholders.. Although I suppose it will close the very small gap presently between NAV and share price turning what was to be a 2029 “maturity” issue into a perpetual sure would change my interest in owning it.. I do own XFLT-A along with you, though, Tim.

    1. 2wr–the deal still has to be approved by the shareholders–maybe they will reject like they did with Highland Income Fund a few years ago when they tried to go from a CEF to an open end fund.

      1. Tim,
        Just a request, to add to your lists that you have broken down into different sectors. Would be nice to have just a list of preferred for REITS. I know you have a separate list for mortgage and hotels because they have offered some tasty yields for years but now we have the reits that hold actual real estate that are starting to show good returns. Yes, there is a lot of trouble in the real estate world caused by past low rates and interest only loans but there is a lot of babies getting thrown out with the bathwater.

        1. Charles, Do you have a favorite REIT pref?
          From an absolute basis, there are tons of great opps now, as you said.
          But relative to debt, I am struggling to find any compelling opps?

          RPT-D at 49.5 is probably my fav, but I can get the KIMCO debt and only give up about 40 bps.
          SITC-A at 20 also isn’t bad but a similar story.
          I do like GOODO around $17 as I think their industrial will provide enough cushion to absorb losses from their office.
          The Saul center names are so so.

          Most of the REIT prefs are illiquid, hence the opps are keeping an eye on them for dumps.

          1. Maine I am only in the preferreds but I have been eyeing BXP bonds thinking they are pretty safe. I mentioned before I am in REXR, REG, KIM and currently have bids in on a couple more. One industrial I am in not happy with I am underwater but I will just hold. There are others but I don’t want to get overweight in this sector. For example I am staying away from anything medical. The consolation in this sector is hurting the small operators and they are in turn hurting the landlords

            1. Charles, I was looking at BXP notes earlier in the year and walked away with the mindset that the spreads were not there to justify downgrade risk. However, I do have an allotment of Goldman Sachs term debt maturing in December and have been considering Office CRE REIT preferred & term debt as a use of these funds. VNO, SLG, ARE, HPP and BXP are on the list for consideration. The first 4 listed are more preferred opportunities IMO but BXP term debt is interesting to me if the spreads are there.

          2. I like ADC-A (Baa3 Moody’s), not only is debt less than 29% it is also a monthly payer too., unfortunately Tim forgot to highlight this one grey.

            ADC beat estimates again and raised the monthly dividend 2.9%.
            Balance sheet well positioned at 4.5 times net debt to recurring EBITDA.

            1. Scott what I like on your example is you have a company whose stock price is more than their preferred. I have trouble understanding how you can have a sub $10 stock with a preferred worth more than the company stock.

Leave a Reply

Your email address will not be published. Required fields are marked *