madamswer, your relentless negative comments have me wondering if you are a shorter in disguise. "
Just because I am relaying the facts as presented, by none less than the company itself, in the audited financial statements, that makes me a shorter.
"It is lazy thinking to claim "RAD’s are a whole lot of future DAP’s paid up front". RAD’s are interest free loans repaid in total when a resident departs. "
It's not lazy at all. It's 100% accurate.
DAPs are calculated as a function of the prevailing level of RADs at any given point in time. Meaning that, by definition, RADs are in essence DAPs that are capitalised at a certain cap rate. As such RADs are, essentially the equivalent of the stream of future DAPs, discounted at a certain discount rate, such as CPI, in order to arrive at a capital value in present value terms.
If you can't understand that very rudimentary tenet of finance theory then you should probably should give your capital over to a professional to manage.
I am sure you know residents have a choice of paying with a RAD or DAP or combination.
That's my entire point. It's not EHE management who gets to decide when, and at what rate, the $650 of RADs sitting as liabilities in their balance sheet, get redeemed.
It's completely out of their control and they had bettter hope like hell that their incoming residents don't want to pay via DAPs while their outgoing ones are calling in their RADs.
Put this whole situation this way:
If your stockbroker came to you, offering you an investment opportunity in a business in which the company's Total Liabilities exceeeded its Asset Backing, and that, specifically, that company in question owed creditors an aggregate quantum that materially exceeded its market value. Not just that, but that company had zero control over the tenor of those liabilities
... if that sort of situation was presented to you, where would you tell your stockbroker to stuff his investment opportunity?
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