Those of you who don’t know Davis Foulger should be advised that he is a Community College teacher who pretends to be a real estate analyst.

He invested a substantial amount of his money in RAS, which he said was a "value investment" at $29, at $11, at 10, at $9, at $8, at $6, at $5, at $4, at $3, at $2, at $1 and below.

He has posted over a million words in 10,000 posts telling the board about how RAS was the greatest investment in history while it lost 98.5% of its value.

Here is how to translate his “Better than expected results”


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Better than expected results 4-Nov-09 11:23 am

Several things stand out as really important in this quarters release:

Translation: I don’t have any idea what they mean, but I think I’ll try to put a positive spin on them:

1 - Taxable earnings jumped back to the levels one would have expected from RAS before the Taberna acquisition. 69 cents a share is blow out. It is much better than I expected.

Translation: The 69 cents “of REIT taxable income resulted from CAPITAL LOSSES. Foulger doesn’t understand what that number represents, but it looks like it is a tax credit resulting from huge losses taken in the continuing write off of non performing loans. If RAS reported like a real company, it would have reported a GAP loss of 24 million dollars, a loss of 38 cents per share.

2 - As expected, interest margin is up substantially. This reflects the jettison of the residential portfolio, which had very low margins. Interest income is a little over half, but interest expense is down by more than half. RAS is keeping about 38 cents of every dollar of interest it collects on its loan portfolios.

Translation: RAS is no longer paying interest on the Taberna fiasco, which cost it several hundred million dollars after being liquidated for a tenth of a penny on the dollar.

3 - RAS appears to have extinguished as much debt this quarter as it did last quarter. Another $47M of debt disappeared at what appears to be a substantial discount.

Translation: RAS is buying its bonds because nobody else thinks they’re worth a plug nickel.

4 - Assets under management remain in excess of $10M. Given the sale of the residential portfolios, that makes a lot of sense. What is surprising is that the decline wasn't larger.

Translation: I’m surprised as hell that the rest of the residential loan portfolio didn’t go into default like Taberna did.

5 - RAS added four more properties to its equity portfolio, raising the fair value of its owned assets to $645M. RAS has roughly $10M under management now, so that brings the equity portion of RAS portfolio up to roughly 7% of its overall portfolio.

Translation: Four more properties defaulted on their loans and RAS had to foreclose on them. 7% of its portfolio is operating foreclosed properties that it can’t sell for any amount of money.

6 - Both rental income and fee income grew, and should grow more.

Translation: The rental income on foreclosed properties grew because there are more of them every quarter. RAS is not a property management company. It would sell these properties in a heartbeat if anybody wanted to buy them.

There is obviously a lot more to say. The reporting in this press release deviates substantially from RAS' normal press release. I think this reflects that substantial changes in RAS portfolio in the wake of RAS sale of residential and its Taberna deconsolidations. The bashers will focus on the overall loss for the quarter, but that appears to reflect nothing but one time contingencies. Of more concern is the decline in book value. I thought there might be some decline in book value based on the sale of residential. This quarters decline was larger than I expected. More later.

Translation: There is obviously a lot more say, and you can count on me to say it, even if I don’t have the first idea of what I am talking about.