MCN

Hi all, I’m hoping to receive feedback on the following.. I have recently come across a somewhat unusual commercial real estate investment opportunity and was wondering what the curious minds here would make of it, in particular how to analyse it. I say unusual as it is more like an amortising bond or annuity type asset than a traditional piece of real estate. Essentially, the owner is seeking to sell 20 years of future rental payments of a real estate lease but retain the underlying fee/ freehold title of the real estate. As it is so unusual, I can’t be too specific with the details but they are as follows: Asset: 20 years real estate lease payments Location: Europe Asking Price: €1.2m Lease: Year 1 Pre tax net income €100k/yr, 20 year remaining with break option in 10 years, 0-5% annual increases depending on inflation The land houses critical infrastructure for the tenant, who has recently invested significant sums into the site, so it would seem that the tenant is not planning to leave any time soon. Tenant: Multinational corporate with multi Billion € balance sheet and BBB+ rating My main issues are- 1. How to value this? There is no residual value after year 20, so I imagine this is a straight forward dcf valuation. And, depending on the annual increase in the lease payments, the asking price seems to discount the cash flows at between 5.5% and 10.2%. However, how to factor in inflation risk? 2. There is no collateral if the lease fails or the 10yr break clause is triggered. How to hedge/ insure? 3. Liquidity. Non, pretty much locked in for the duration (unless it can be flipped?) Considering that the tenant’s long term bonds currently trade at a yield of 2.77% I’m wondering if this could be considered a cheap bond investment? I don’t like the idea of locking my money up for 20 years at a low yield so will most probably walk away but I am tempted to look into this further for any possibility of flipping to a bond investor. So I am wondering how would they look at something like this? Please feel free to throw rocks at this, all comments appreciated....Thanks!

Landmark Infrastructure Partners LP (LMRK) is a Master limited Partnership that invests in real estate leases brought to it by its General Partner/ sponsor (also called Landmark). Just wondering if anyone on the board has come across this type of company and its business model before and has any insight into understanding where the value is. And just to be clear, I’m not suggesting this company as a long investment, I’ll be passing on it as my first impression is I don’t understand how shareholders benefit over the long term, although I haven’t gone into this much. Maybe its even a short candidate! But after coming across it I’m curious to understand its business model and how an investor should value it, given the depleting nature of its assets. From what I understand, the sponsor/GP purchases lease payments and easements from landowners that have leased their land to a commercial tenant. It aggregates these leases into a larger pool and then sells on to LMRK. LMRK holds these portfolios of leases for the long term, receiving the lease payments. So far, most of these have been for wireless tower leases but they are also moving into advertising bill board leases. LMRK shareholders receive dividends. What confuses me is that, unlike a typical real estate company, Landmark does not actually own the land outright (fee simple?) but simply pays an up- front lump sum amount in exchange for the right to receive the lease payments for the next 20, 30, 50 years etc. So the asset depletes in value over the course of the lease and there seems to be no real tangible asset at the end of it. Is this business model creating value by simply buying the lease at a higher IRR than cost of capital? What is the best way to value something like this, discount cash flow, as valuing a mine or leasing asset where the asset depletes to zero? Is this a ponzi scheme? If anyone is familiar with this type of company I’d be grateful of clarification.. many thanks!

Hi all, I’m curious to know if investors find a company’s investor relations web page helpful at all and, if so, how much do you rely on it for researching and understanding a company? And whether or not a bad impression from a company’s IR website ever put you off? I imagine for professional investors and most on this board this will come across as a dumb question but I’m interested to understand if a company’s website, particularly its investor relations page, might have any effect on investor interest in that company and whether having a crappy IR page discourages potential investors from digging further, especially if documents such as financial and regulatory filings are not easily available. This question comes to mind after my experience digging around in the Japanese market a few years back. I would often get somewhat discouraged when I could not do the in depth research that is possible in the US market. Largely this was down to the fact that there is relatively little information available in English. But I was thinking that one possible reason so many small and mid cap Japanese companies were so cheap back then, was because a large part of the investing world (i.e. non Japanese speaking investors) simply could not obtain the information they require to feel comfortable investing and so avoided the market. I would be interested to hear other people’s thoughts on this ….

Hi all, I’m new to this discussion, trying to catch up with a few questions……. Solar developers embark on a (utility scale) project only when a PPA has been signed, which may last 20/ 25 years, right? Is the pricing ($/kwh) fixed over the entire term or it varies in relation to wholesale power prices, rises with inflation etc? What are the solar plant operator’s options once the PPA has expired; a new long term PPA or he must sell on a daily basis to wholesalers/ spot market? At the end of the PPA or site lease what happens to all the equipment/ solar panels, do they need replacing/ refurbishing/ removing or can they be left in place until they stop producing completely? Must approvals, such as building permission etc be re-applied for? What time frame is used to calculate the returns/ IRR and can a residual value be estimated? Thanks

A poor choice of words on my part but I wrote this meaning that most on here seem to be US based value investors. And seeing as you are basically guessing on price direction rather than building a valuation off cash flow, this seems more like a speculative venture. Nothing wrong with that but most talk on here is about cash flows and returns. I didn't intend to cause offence. I took the time to respond because I have experience developing real estate and managing a property portfolio. I've made some poor choices and bad mistakes, usually when I ignored the facts and numbers. It's easy to be overoptimistic on rental income and underestimate expenses, plus dealing with tenants can be troublesome if you don't have a manager, especially if not local. If you are buying for your own enjoyment then investment rules go out the window but as I mentioned, I've also heard some disappointing stories from friends who have done this. If this is for investment purposes then, all things considered, swapping a liquid (and good ROE) investment for an illiquid, no yield speculation is risky, imo.

Gio, I wasn't aware that you only expected supportive responses. And I certainly didn't set out to irritate you, just gave you my 2 cents.

What makes you think this is a bargain? Just because the asking price today is half what they asked a few years ago is meaningless. It could still be over valued... Two ways of looking at this, as already pointed out- for your own use or as an investment. I know quite a few people who have bought holiday homes after falling in love with an area. Nearly always they have regretted this choice after a few years. They eventually got sick of going to the same place each year and having to deal with the headaches of ownership, which are compounded when in a foreign country. From an investment perspective you simply estimate (perhaps with the help of a local expert) what reasonable rental income it can generate in the future, deduct likely operating expenses, empty periods etc and compare the net return to other opportunities available to you or your existing stocks. Being real estate you could probably lever the purchase somewhat to boost return. At least by looking at rental yield you have something of a signpost to guide you on valuation Whichever option, unless you are local or have someone trusted to keep an eye on the place, it can be a total ball ache to administer effectively, distracting you from your main focus of stock picking or whatever it is you do. Personally, I think irrational investment bargains are more likely to show up in the stock market than in real estate owned by a knowledgeable local.. Asking folks opinions on here about Italian real estate is a waste of time.

Thanks for the feedback so far. Are there any issues to look out for in the financial statements that could be signaling impending problems?

Anyone?

Hi all, I'm hoping to get some pointers from those with experience of researching and investing in retailers, particularly clothing retailers. Would be great to hear your war stories, mistakes, screw ups when analysing these type of companies. What issues do I need to be aware of, accounting red flags to look out for etc.... And what is the most appropriate way to compare retailer performance against the competition. Some obvious ones I'm using are same store sales, Sales/ M2, Costs/ M2 etc Help avoiding typical rookie mistakes would be much appreciated! :) Many thanks!

Thanks. Maybe i didn't put my question across very clearly but i was just wondering if anyone has insight as to how the pro (western) firms deal with the language barrier. Thanks.

There are a few threads on here discussing investing in foreign markets (Japan, Russia etc) and the lack of information available in English, particularly with small caps. This is a problem I often bump up against. Google translate only goes so far... I'm curious to know how the large/institutional investors and hedge funds deal with this issue. Do they pay to have everything translated, which, if you consider that an annual report may have over 100 pages, can become pretty expensive if they want to research all filings and reports going back several years for every company they want to check out. Does Bloomberg/ Capital IQ provide a translated version of all filings? They employ local/ native speaker analysts for each market they cover? Thanks for any feedback

Apologies if this has already been discussed on the board but i was wondering what people think about the name licensing deal that Biglari has. At first glance it smacks of greed and a way to hook himself into place but is it perhaps simply to ensure that the company does not continue to use his name if he gets booted out? Any thoughts?

Is it similar to being an investment adviser, are there regulatory or legal implications with running an investment newsletter in the US or Europe?

Even at today's price of 11p you are effectively getting the business for 4p or £17m for the lot which, despite the fact that the €100m investment in the polysilicon plant has gone to money heaven, gets you a company with wafer production capacity of 750MW and an experienced team now concentrated on their core skills of wafer and ingot production It's a cheap option on a comeback but will require patience.