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8.17.2001 fresh off of the bust up of the tech boom, now we may have an overly rich housing market to contend with. if so, look for housing related shares to drop faster than subscriptions to the gilder report. then, after the bust-born dust has settled, let's start picking through the carcasses for hidden gems of value.

8.1.2001 fund manager andrew jones was mentioned in this week's barron's as liking ventas VTR, a stock TB has been eyeing ever since major tenant kindred healthcare came out of bankruptcy with a sounder structure and a new balance sheet, where their coverages are good and their ability to make the lease payments are good. under the terms between the operator and the REIT, there are rent escalators built in that guarantee ventas cash flow growth of nine to 10 cents a share on a base of about $1.10 a share in cash flow, this year. thus, VTR will have growth in cash flow merely from the terms of the contracts in place. they also have opportunity to improve their cash flow from getting their own cost of debt down (current average cost of their debt is 10.2%)..if they lower the interest rates by 100 basis points it creates 12 cents extra in FFO for VTR.

company guidance is for FFO of $1.10 a share this year. the fund manager expects $1.30 a year in 2002 and $1.40 in 2003. In addition, as part of the bankruptcy reorganization, they own almost 10% of the equity of kindred. kindred is trading on the BB but it has an implied market value of $675 million - that equates to about $1 per share of ventas. so you are looking at a company with $1 in assets that the fund manager) expects to pay out to shareholders in a dividend by yearend. If you have a 12 month time horizon, the fund manager expects ventas will trade at 10 times cash flow or $13 per share. you also will get 88 cents in dividends that the company will pay out of the next year. add all of this together and you get to $15 per share of value which is a 35% upside from the current price. the risk level is low because the contracts are set, the leases are set, the terms are all set. any variance in the results are much more likely to be on the upside than the downside for both companies.