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Colony Capital: A View From The Perspective Of A Preferred Investor


All newbies should click on the "Basics" link to fully understand my investment philosophy.

When considering preferreds, I view them as a separate entity from their common cousins.

I utilize Quantum Online to thoroughly research each preferred prospectus.

I like to compare the performance of the stock I want to invest in with the S&P and others in its sector.

In conclusion, I consider Colony Capital Preferreds a good buy sporting a nice yield at minimal risk.

For those of you unfamiliar with my preferred Investment philosophy, The Basics Underlying Investments Viewed Through the Eyes Of A Preferred Investor will explain how and why I became a preferred investor. More important, it will provide you the information necessary to fully appreciate and understand the process I utilize to research and determine whether or not I will invest in a particular company's preferred equities. What follows is that process.

When considering the acquisition of Colony Capital (NYSE:CLNY) preferred shares, CLNY-A, B, & C, it's necessary that we view that company through a different set of eyes than we would were we interested in acquiring its common shares.

Consequently, unlike its common cousins, it's necessary that we first study the offering prospectus of the preferred shares we are interested in acquiring. To accomplish this, let's visit my favorite preferred search site, Quantum Online, which I set to open to Colony. Below is a snapshot of a slice of that page:

A quick review informs us that Colony, listed as a diversified REIT, is a real estate investment trust that invests in company sponsored private equity funds, real estate equity, and real estate and real estate relate debt.

Let's click on the Find Related Securities to examine any preferreds this company has to offer:

Here we learn that CLNY offers the preferreds, CLNY-A, B, & C, which were initially offered at the respective interest rates of 8.50%, 7.50%, & 7.125%. I find it encouraging that the initial interest rate offered was higher than the succeeding two, with the last lowest of all.

Now let's click on CLNY-C itself. Below is a screenshot of a summary of its prospectus.

  • I like that this preferred is cumulative, meaning that in an event that payments are suspended, they accumulate and are owed to the shareholder, and will be repaid in full if and when the payments are restored. And they must be completely repaid before the common shareholder will be allowed to receive any further dividend payments. Additionally, there are probably more sanctions and restrictions placed on the company, and will remain so until the missed payments are repaid in full. As a rule, I only invest in cumulative preferreds. Although bank preferred dividends are usually secure, they are almost always non-cumulative, and consequently, I don't buy them.
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