Gregmal

As expected, death by a thousand paper cuts as the air continues to slowly leak out of the balloon heading into lockup. Where does she end up settling? A lot lower!

Look at what the cat dragged in! All jokes aside, I think you touch on what really needs to be the main area management focuses on clarifying, if they are serious about getting a better valuation... the market is at 5 cap, they're implied value is an 8, AND they are out there looking to be buyers. So it's twofold. One, That they are doing what most managers look to do, grow the size of the company via more acquisitions(not good or bad, thats not the nature of my comment here and a debate for later maybe), and two, making a macro call on these assets. Either one of those items goes against them, it could be problematic. I'd rather they take the approach and hedging one and two, while at the same time doing something that gives investors a little more reassurance; IE selling some of the assets. Essentially, what's the best way to maximize value creation? a) borrowing money/issuing shares to buy/build more warehouses b) selling a few slivers of company assets at markets rates A) is still at best a longer term build in a competitive market(I'm not sure I love competing in Orlando for industrial....) B) likely brings in some capital on the asset sale, highlights the discount to the rest of the assets, and also probably removes some of the management discount the market is assigning. Then if you want to issue shares, you can do so at $60 rather than $40.

Yeah, I think that some people care a fair amount about integrity and other people don't at all and will do what they can get away with. What's more, I think it's hard for both types of people to believe in their hearts that the other side truly exists. (You can see this in the comments here: "I don't believe that the shrewdest investor of all time would pass up on an opportunity for such a stupid reason." Similarly, I have a hard time believing anyone would even consider selling their integrity when they have literally no need for the money.) As for the argument "who cares what people think--it doesn't have anything to do with responsibilities to people and shareholders", I find the argument pretty weak. First, Buffett isn't Berkshire shareholders' bitch. He has no responsibility to destroy his own reputation--or compromise his integrity--to make money for shareholders. To me, this point is sufficient to refute the argument. Second, displaying a lack of integrity could hurt his business. One reason people sell private companies to Buffett is because they believe he'll act with integrity in his dealings. Not everyone's trying to maximize their own profit, particularly when they're thinking more about their own legacy and the outcome for their company and it's employees. If Buffett were viewed as someone lacking integrity, some people might decide not to sell to him the company they've spent decades building. That would hurt Berkshire. (Chrispy, the difference with Microsoft is that Buffett is good friends with Gates, but not good friends with Bezos or Dimon.) +1 I share your thoughts re: integrity. But, this message board is literally filled with folks who have trounced the index, Buffett and virtually stand alone by way of performance. Based on reported performance here over the past decade. Give it another decade and the world should stop listening to Buffett’s words. Who knows if I will do so myself but for now, Buffett and Munger are on top of my reading list. And the hyperbole is great and all, but, it completely avoids addressing the real issue. The integrity argument doesn't really add up for somebody who has used it as their main crux for not making an investment. Is the public perception that, let me get this straight, he is trading off inside info from Gates, really any more reality based than the negative perception of helping to bail out the horrible big banks that robbed hard working everyday Americans during the housing crisis? Or you know, disagreeing with Muhtar Kent and that horrendous Coke compensation plan, but letting them go ahead with it anyway? Or the nepotism argument he makes while having Howard on his board? I'm not saying he doesnt have a right to do these things or even that I think he shouldn't, but its just a bs argument that of all things, two of the wealthiest and (as far as we know) most philanthropic people the world has ever seen, would collude to trade Microsoft stock! LOL, GTFO. Not to mention, Buffett rarely even trades! I'm calling bs here and I think most objective folks are too. But... Lets stretch the logical interrogation a little further. Buffett has said, numerous times that stock are fairly valued here, and actually very, very cheap if indeed these rate levels are permanent. I remember him, perhaps using some hyperbole but nonetheless making the claim that the Dow should be at 100,000 if 2% rates were permanent. Yet for years we've been rates stay around there, and now on the horizon are FURTHER RATE CUTS! And yet, Warren hasn't bought a stock in ages and his largest position, by far, is CASH! My objective is not trashing Buffett; I'm looking to be an honest investor and not just make excuses for nonsense I would not tolerate from other portfolio companies. I dont know why this is so hard for people. Buffett's decision making prowess has not exacxtly been up to par the past half decade or so, maybe longer. I dont know why people would rather hear glowing things about their investments than get cold, hard, pushback from opposing viewpoints....

Are people really OK with writing off Warren missing super obvious investments simply because "he didn't want people to think" this or that? Who cares what people think? People can correctly or incorrectly think whatever they want that has zero to do with his responsibility and duties to shareholders.... Frankly I dont even think it is that, regardless of what he says. I mean what about Costco?? His best bud has long owned it and its something that at his sharpest, was right in the wheelhouse. Whats the excuse there? I mean, I've been reading these threads for a while and the degree to which people are giving passes here is outrageous. Even back with the "oh he's not being more aggressive with the buybacks because he wants to give every single last shareholder a perfect warning and doesn't want to take advantage of anybody..blah, blah, blah" nonsense. Where does it end? How is it not completely unacceptable for somebody with a fiduciary responsibility to continuously make excuses for crossing off more and more investment opportunities when by both his own admission, and the observations of any rational person, he's already significantly limited by size in terms of what he can invest in, in the first place? I dont think I'd have a single investor if I said, I'm automatically not really able to buy 90% of companies out there, and oh guess what, because of my moral perception cross off 2% more, and then because I am worried about what people think of me I'll eliminate another 5%.

I find the entire universe here to be enlightening and one of the best(if not the best) place to stay engaged. Each member provides valuable input to me in ways they and I am probably both aware and unaware. There isn't really a place where you have the entire investing spectrum covered, from great high level thinkers, to kind of know nothing follow ons... I dont mean that as condescending, but there is a very good variance/distribution here. On that note, I've grown to find Tesla shareholders and BRK shareholders have significantly more in common than I'd ever imagined, and I'll just leave it at that... Sanjeev is the best. The way he lets things flow works, whereas many other places Ive seen get restricted and become echo chambers and fiefdoms. I love the rare occasion when he will jump into stock analysis with the rest of us, although I can understand why he doesn't do it very often. I am a bigger picture investor. I think SharperDinegaan by leaps and bounds is the best at really sizing up and summing up any given situation from politics to Bitcoin Ive seen him just nail it. To me thats the hardest thing to do. Anyone can look at the same income statement numbers and draw conclusions(although Schwab711 does it better than most) and anyone can simply buy or sell a stock, but finding where things fit into the universe Ive found is the most crucial element in the "producing returns" equation, and Mr. SharperDinegaan does that extremely well. Once you figure out where things are going, the rest is easy.

I think it's wise to look at what he is saying rather than what his track record is. The things he mentioned about Berkshire are true. And I also find it interesting, not really on what Warren has missed, but rather when we look at it in the context of everything else, such as his statements about rates staying low and stocks being cheap, combined with having exorbitant amounts of cash on hand, and delegating to Todd and Ted. Is it possible he just isn't really looking to make investments anymore?

I should clarify, CTO vs GRIF. Short term for me its definitely CTO(as my position sizing expresses), however I think GRIF has higher absolute upside longer term from $36. The million dollar question, which changes everything, is would GRIF management sell? If they will, or give any indication, IE an FRP type transaction, then the potential for a high IRR is huge. If not, I think it runs the risk of lagging around and just being a turd, kind of like CTO has for the past few years, maybe squeaking out a 5-10% IRR which aint bad, but isn't worthy of a large concentration IMO. Read the Footnotes you make good points as well.

You're not wrong. I definitely would not call them a developer. I can count maybe on a few fingers the number of properties they've ever been involved in any developmental aspect of. All of them have been in Volusia/Orange Counties. I've even been somewhat outspoken to encourage them to do a little bit more of this as simply buying and holding 5% cap rate properties isn't totally my preferred capital allocation strategy. But the response is always that by doing the 1031 they save lets say 25-30% of the proceeds(again, very low basis land), and that 5 years after a REIT conversion the 1031 deferred taxes are forgiven so that is your margin of safety. So maybe I am portraying it wrong in terms of them developing. That said, they do consider development options quite often when making acquisitions. So maybe not developer, but NNN preference with a risk/speculation appetite is a better description. A failed deal would be Westcliffe Shopping Center. They bought it 2 years away from some major tenant expirations, looking to then flip to a developer interested in doing a senior center and the deal fell through. Now they're holding it with 1/3 of the potential NOI absent and can either look to find a new developer(the area seems ripe for student housing) or try to lease it back up. They've already said they're not touching any development there themselves. We'll see what the overall return profile on that situation looks like probably next year, but that's most likely where the downside sits. You are buying at a reasonable discount acquiring something with big renewal risk less than 3-5 years out...so I get your point from the perspective of an outside investor or an acquirer. My pushback would be that the same is true for CTO who is also quite often buying these properties with that lingering on the horizon. My thesis at this point is that if they convert the remaining acreage anywhere near the market values, you're looking at another $150-$200M in proceeds. If those get thrown into more properties at the same targeted cap of 6-8%, tack that on to the existing portfolio and two years out, even with discounts and whatever, the figure is much higher than $64. I haven't seen any reason not to expect 6-8% annualized NAV growth as well. Maybe I'm more comfortable because I've spent the past while watching and studying these acquisitions one by one as they happen, but provided things they've been buying for market rates between 5-8% cap rates don't massively blow up, you'd think one should do fine. The threats again are that this occurs with a few of the bigger ones. Thanks for the different view and pushback though.(and yes, some of the metrics are bs, such as book value and EPS growth when you're flipping 100 year old land...)

Re Packer: Yes I agree, and that's a valid concern. As a shareholder however, the question was, would you rather have 11,000 illiquid acres of raw land in Daytona Beach, a mixture of that land and some income properties, or a full blown portfolio of NNN properties and little to no land? I fall somewhere in the middle; management clearly wants the last option. As a potential shareholder, the question is, would you rather pay 20-30% premiums to NAV owning NNN, O, STOR, etc, or pay 65% of NAV for something like this? I dont think it's totally an apples to oranges comp; maybe a tangerine or a clementine, or maybe a marzipan orange to oranges comp. Given CTO's size, I dont think they'll ever really compete with the bigger guys, rather the company has been built IMO to eventually be sold to one of them. The CEO is a mercenary and came to Florida from Texas, with the intention to eventually move back there. Despite the already massive discount to NAV, an acquirer has plenty of juice to squeeze as they'd more likely have a lower cost of capital and would likely immediately chop the $8M in G&A. The geographic diversification has been intentional, which is cool provided they stay in areas of decent demand, but my concern would be the ability to get things done should there be a need for major Capex or repositioning. The lower duration leases are not entirely by accident. A number of properties fall into the "covered land play" category. The best example is probably the BofA in Monterey with I believe about a year and change left on the lease. You have a tenant option to extend for(iirc) 10 years which would more than double the NOI from the property(as you mentioned, there was no escalator in the original lease they bought, just the options to extend), OR have them leave, which would be my preferred option as the location has greatly changed from when the building was originally established, in which you've got an entire block in Monterey, not to far from the beach, with approved uses also including residential and the ability to built up another 2 stories. https://www.google.com/search?client=safari&source=hp&ei=xlqiXeiFMrK0ggfOp4fwDQ&q=200+e+franklin+st+monterey+ca+aerial+view&oq=200+e+franklin+st+monterey+ca+aerial+&gs_l=psy-ab.3.1.33i299l2.176.10573..11820...0.0..0.223.3169.32j4j2......0....1..gws-wiz.......0j0i131j0i22i30j38j33i160.qeffXpWXJSE The Century Theatre in Reno was also bought specifically to repurpose once the lease expired, although Century chose to renew a couple quarters ago. The 24 Hour Fitness is Virginia is another example, right next to a big Brookfield project and square in the middle of the area Amazon will be building their second headquarters, or the CVS in Dallas right next to the American Airlines Center which is approved for like 40 stories of residential. Thats at least how these are pitched. Personally I don't think they have much interest in developing, at best, they'll JV it, or more likely just flip it to a developer once the old tenant is out. The locations I'm concerned about are the two Wells Fargos, and maybe stuff like the Cliffside Shopping Center or the 99 year lease on the boutique hotel in Austin. Wells is like 20% or so of NOI, and those massive compounds should the tenant leave, basically become shitbox multi tenant office space requiring a lot of time, Capex, and despite all that, often having massive tenant churn. But all in all they seem to buy pretty good dirt, which is my preference. which leads me to Cardboard's statement... Re Cardboard: I really dont like REITs at all. The have a lot of fat and fees are everywhere with real estate, and specific to REITs you also seem to have this extra layer of yield chasing shareholders which imbeds a premium into most of the valuations but also a further level of idiot in the base that allows nefarious managers to get away with things they shouldn't be allowed to. It boggles my mind the implied cap rates people are paying for stuff like O and NNN. Ive flirted with shorting them because it just seems insane to me to be giving this much value to what are largely retail operations. I'd much rather have a shitty tenant on a well located piece of dirt than vice versa. I only own one REIT and its a tiny micro cap that has very little characteristics with the big ones. Whereas many of these types of companies, are kind of riddled with the inverse of what I dislike about REITs. CTO, JOE, GRIF, FRPH, etc(want to get real whacky check out CKX Lands), illiquid, no real or natural shareholder base, the all screen poorly, and have inefficient corporate structures and more often then not, questionable management arrangements or shareholder bases. So they trade at big discounts but what is nice there is that you dont really need a whole lot to go right for that discount to narrow slightly. Usually they're just dead money but if you get increased transparency, or a few favorable deals, or god forbid, management wakes up and decides they want to let Wall Street know they care about shareholders, you see some nice upside. So if you get confortable with what they own, and find ones that dont really make a lot of money but also dont burn through money or destroy value, its an interesting place to hang out. If you can observe how they trade, its real easy to keep tabs and then take advantage of the lack of liquidity during market sell offs, and then load up and be the beneficiary of the predictable V shaped recoveries once things normalize.

Next 12 months, CTO without a question. The plan all along was to monetize the company by taking 11,000 illiquid acres and selling them then 1031 the proceeds into income properties, go REIT, and then if necessary sell to a larger NNN reit. They’ve got 5,000 acres left with a big chunk scheduled to close this quarter. What’s left is mainly 1600 commercial/residential lot and some scattered parcels along I-95. But the main thing is you have catalysts, and in March the convertible note due, which IMO has been a poison pill of sorts. Further, as I alluded to before, you have reputations at stake. These guys are not crazy rich. Sure I was utterly disgusted by some of the behavior during the proxy fights with Winters, but in the context of the corporate world, they were in a fight to the death and while unfair to shareholders, you can at least see where they were coming from. Going forward I believe they want to redeem themselves and deliver for things that, by their own admission, maybe weren’t ideal. Either way, I think we see fairly soon how this plays out. With a $95+ NAV, it shouldn’t be hard to get some upside. I haven’t always liked or agreed with everything, but it would take a really special type of piece of shit, like a Sardar Biglari type, to do what they did with Winters and then just screw everyone else and do nothing. It’s always possible, but I don’t think they are those types of bad people. GRIF I like, the same as JOE, but it needs either a catalyst or a clear plan. You could say value there will explode once shareholders and outside investors get comfortable with management and determine them to be adequately aligned with all shareholders, but the same is true at CTO and CTO happens to be further along with the transformation. That said I’m a buyer of GRIF anytime it hits $35, the same way I’d be a buyer of CTO below $60 or JOE under $16. If nothing else those prices get you a good pop back to normal levels once whatever hysteria currently occurring subsides.

Start at 1:05:00; and deduce what you will...

Appreciate the thoughts and(at least I assume) first impressions(unless you're previously familiar with this). Its good hearing outside observations. I've been with this prior to the "basically dark" days, which iirc probably changed sometime in 2015. Prior, there were no calls, no confirmed earnings dates, nothing. You'd just randomly see a brief release dropped at like 1:30 in the afternoon. So to me, disclosure has improved greatly, although it is inconsistent at times. In 2016 it seems to have peaked, with everything down to the 3rd digit of a cap rate often disclosed. Since then it's been a little less so. The cynic in me always rushes to find a link to something that's being hidden or indicative of something devious, however it really just appears to be random. I do not think the cap rate used in the presentation if that is what you are referring to is including land values. Those are broken out separately on the NAV sheet. A few points. Pre-2014 this was basically just 10,000 acres of land with a few income properties in Florida. So almost all of the portfolio has been acquired in the past 5 years, meaning if you like it or dislike it, or whatever, you at least have a general idea of a recent market value. The income properties are acquired more or less to skirt taxes on the land sales, which have a basis in many cases dating back to the early 1900's. The tax implications of a REIT conversion have been communication to be around $45M, so figure ~$9 per share needs to be shat out for the conversion. Not awful and better than original thought which many believed included all the 1031 deferred taxes which apparently dont need to be purged. They do not develop...at all. So there is no risk there. Every so often they'll take on something in their back yard, such as the Winter Park project or the beach front parcel, but these are generally sub $10M developments. To date those have been some of the better investments made. Daytona IMO is very much a good ole boys club and if you are on the "in" you can do well where others cant. They are very much on the inside there. I can't tell you how many times I've grown frustrated seeing them sell a parcel to a developer for say, $3M. Then seeing the developer put in $10-$15M, lease it up and flip it for like $30M. I call it lazy, they call it conservative, but thats the deal. Sell the raw Daytona acreage and 1031 to an income property. The CEO has a background there and is reasonable competent. I have not always agreed with the capital allocation(among other things), and while I think they've been boneheads sometimes, cant say they've ever destroyed value. They(management) own a lot of stock relative to their net worths. That they don't use traditional REIT metrics(AFFO, etc) I think is just a result of the fact that they still report the same way they always have as a land company. The transition is still occurring but agree that moving to those metrics with REIT conversion on the horizon makes sense. I do agree with what you allude to about the bigger properties. I hate gargantuan single tenant office space. Fidelity is not a concern but the two Wells Fargo's have always bothered me. Those to me are value traps. But generally speaking I think one is fairly compensated at these prices. I think they've got a lot to prove and they kind of made fools out of themselves blaming everything on Wintergreen(a whole separate story not really worth getting into) and claimed a Wintergreen Discount was the reason the stock trades at such a discount to NAV, at $65 share price/ ~$365M market cap and now 6 months after Wintergreen is gone have a $64 share price and ~$320M market cap. The incentives to me are there for this to do well and at least narrow that gap over the few quarters; but I also could be wrong and maybe they just keep telling stories and milking the heck out of this...but we should have an answer soon and its a heads it doesn't really go anywhere and tails it goes up a lot situation, which I like. And had I listened to BG several years ago I'd have spared myself a huge opportunity cost here...but I think at this point the cards are on the table and we get to see if these guys are respectable dudes(my first impression of them) or just another bunch of schemers(my next impression of them).

Why is it a terrible short? I actually thought the Seeking Alpha article that moved the market today was quite well done. There’s zero proprietary work for one. It’s basically just another “they don’t make money, issue shares, and seem promotional” piece. Which isn’t ideal, but at the same time, there is absolutely a flip side that justifies why some companies would be at that stage, and regardless, there’s certainly a market/appetite from investors. The gist of the thesis is basically it should be valued like peers and what if every investor wakes up tomorrow and decides they’re done. In other words a no catalyst investment that is basically reliant on macro factors abruptly deviating from the same course they’ve been on for a decade now. An Einhorn short basically. If you need a macro event to be right, well there’s better ways to play that.. Don’t get me wrong, it’s certaibly a very high risk investment, but when looking at it from a risk/reward, and especially from a “what stops it short term?” perspective; sorry, but it’s just another smart guy analyzing a growth company, oblivious to the bigger picture. TDOC, another high risk, dare I even say, shitty company with a great story and big revenue growth runway several years back was/is a good comparison. It’s also comparable to the bull thesis on Macy’s right now. Hey you’re probably right about the company but you have too many other things moving against you.

Added a little NVTA. First the VIC write up a couple days ago, now the coordinated SA piece, when once again these thick framed dimwits keep putting on the wrong Einhorn like “oh but the valuation! They lose money!” Short. As if there isn’t enough evidence to point towards this being a terrible short, they just keep banging their heads against the wall wondering why they can’t make money. I remember reading the same pitch verbatim about TDOC at $14... Andrew Left has this correct in his evaluation.

Im just kidding... relax. Im just shocked at the prices people pay for investing advice. The buyer doesn’t pay for investment advice, they pay for advertising that comes from a possible news story with him having lunch with a semi famous person. I was referring just as much to the $3,500 30 minute conference call. But to the above, I don't really think that's why people are doing this. Let's face it, Warren Buffett is known the same way Michael Jordan or Woody Allen is. Nobody outside of us investing dorks really know or think lunch with Monish Pabrai is worth paying big bucks for. You could say the same about any number of investing legends. Heck you could say it about Sanjeev too. I'd pay a few bucks to a charity for a lunch with Sanjeev. If I told the guy next to me in NJ, or even NYC, most would probably look at me like "who the f*** is that?" and then even after I explained it likely wouldn't get it.

Im just kidding... relax. Im just shocked at the prices people pay for investing advice.

Well when his fund liquidates he could certainly follow in the footsteps of investing legend Whitney Tilson, that's for sure!

Just my 2c, but if you're interested in the triple net stuff, check out CTO. They're not currently a REIT but I would bet my last dollar that either this year, or next, they do a REIT conversion. They are basically built to resemble NNN and O. Still have some land and a few spec projects which I think give you additional upside, but on the income property side they're basically single tenant retail with a bunch of high quality single tenant office(WFC, Fidelity) properties as well. By my estimates NAV is mid 90's, which against a mid $60's share price is a reasonable margin of safety considering peers(just going by who they consider their peers) trade at a 20-30% premium to NAV. This is one of my top positions.

People get paid to write articles. Those that dont get paid/make much, look to build an audience, which then later on gets them paid to write.

Thanks. Im out of town and going by my Fidelity mobile feed. Thought there had to be more than just that flimsy release.

https://markets.businessinsider.com/news/stocks/griffin-announces-agreement-for-building-acquisition-1028587151 Awful lot of disclosure.

Good article. Its probably as much on point as anything Ive read. People tend to need to keep up with peer groups and there is a certain human desire to be recognized and have status. I find this stuff to be toxic to the well being of a person and counter productive when trying to live what I consider to be a good balanced life. Well before even starting to work I determined what would be important in my life; my family, and in general just trying to be a good person who lives modestly and sets a good example. Being in NYC and around "peers" I saw as the equivalent as living in a house full of asbestos. Same as the guys in the article when it came to Silicon Valley. Just constant running in the hamster wheel and too much is never enough. The shallowness of constant materialism and degree to which people(particularly in the financial biz) place value and self worth into the amount of money one has; I wanted no part of this pathetic "sport". Over the years Ive even had some pretty generous offers to jump back into the wheel, but there isn't an amount of money that's worth sacrificing the things the are really important. Especially if you already have the things you need and don't live extravagantly. There isn't a person on the planet who shouldn't be able to live on $5,000-$10,000 after tax dollars per month. When you look at guys like Buffett, yea they won the money game, but even by Warren's own admission, he was a shitty father and husband. People just need to decide which they want to be great at. Staying humble and reminding oneself what they desire is easier when you live normally and see the pure gratitude when you tip a bartender $20, vs going out on the town with your colleagues and seeing who can rack up the bill with the most zeros as part of some pathetic competition to show off who can act like large and meaningful amounts of money are meaningless...

I think your interpretation is wildly off base. His idea isn't really groundbreaking, many have been using the framework of this idea forever. Its not really controversial or risky. Its really just called managing a position. For those of us capable of doing fundamental research and investing based off of that, doing this makes perfect sense. Ive never understood why value investors consider it perfectly acceptable to buy the dip over and over but find it blasphemous to sell on the bounce back up. To me it seems both perfectly reasonable, and just logically the proper way to keep you portfolio balanced and flexible. This is irrespective of the parameters one places around risk management and position sizing, which is a totally different subject.

I typically like to bust your balls; so I will. Congrats on your first useful investment related post. On a serious note, you are 1,000% right here.

My observations are that Spirit's advantages largely got competed away once the bigger carriers decided to play their lower rate higher fee game.