Mephistopheles Posted November 25, 2015 Share Posted November 25, 2015 In August, Macy's sold half of its 620,000 square ft Fulton St. Brooklyn building, so 310,000 sqft (plus air rights and a parking garage) for $170 million. The buyer is also committing another $100 million to redevelop. MAYS owns 201,000 sqft in one building, and 90% of 380,000 sqft in another building in that same area. The market cap for the whole company is $112 million. Any thoughts on this? Link to comment Share on other sites More sharing options...
BG2008 Posted January 20, 2016 Share Posted January 20, 2016 This update came from the Sumzero.com website Many shareholders have asked me for an update since the November 2015 shareholder meeting 1.More than 90% of the shareholders were present during the meeting (including shareholders from Canada and out of state who fly in specifically for the meeting) 2. Minority holders includes the Goodman estate (23% holder) and various value oriented investment firms each representing 2-5% blocks were present 3. Unlike the 2014 shareholder meeting, management was more upbeat about leasing activities at its Brooklyn and Jamaica locations. The next task is to try to lease up the upstairs portion of the Fishkill building. The first floor is currently lease to a flea market. 4. Shareholders pressed management to consider a host of activities to enhance shareholder value including: REIT conversion Joint Ventures to re-develop the site Paying a dividend Debt recapitalization 5. While management danced around many of the topics, most of the shareholders are firm without being confrontational. There were very specific and direct communication from the shareholders including: Even if a REIT conversion would cost $10mm, it is well worth the cost as it will save on taxes and create a mechanism to return capital to shareholders Management team needs to be mindful that while they are compensated for their management, shareholders currently do not extract any value as we wait for the assets to continue to appreciate in value Management should consider joint venture redevelopment opportunities where the outside partner contributes the bulk of the capital and assume the bulk of the risks 6. Management is ultra conservative and appears reluctant to consider any of the abovementioned initiatives. A dividend is probably the most likely out of all the above mentioned options. Overall, no short term catalysts. However, management understands that the engaged shareholders are not going away. 7. When asked about management’s intention about J.W. May’s Jamaica location, the CEO responded that his private company will continue to lease the ground to J.W. Mays. The previous $88 price target utilize a DCF analysis valuing that building at $24mm. If J.W. Mays can continue to ground lease that building, the value is likely greater than 2x our previous estimate. This is an additional $12 per share. Investment Thesis Today (Many of attending shareholders have the same following view and intend to hold onto their shares.) Given the recent trends in the area, we believe that J.W. Mays is worth closer to $120 per share and growing each year. This will imply a $350/sqft price for the 2 Downtown Brooklyn assets. At $55/share, the stock is trading at less than 50 cents on the dollar. Even with a 10 year holding period, an investor can generate mid teen’s level CAGR. Eventual value realization will likely be sudden and catalyst driven if any of the above mentioned events take place. If the events take place in a 3-5 year period, the CAGR from today’s price is likely in the 20-30% range. This high CAGR return is possible largely because investors are buying in at a deep discount to intrinsic value while intrinsic value is expected to grow rapidly in the next 5-10 years. It also helps that the Chairman/CEO is already 73 years old. We will provide a separate update on neighborhood development and leasing activities. Link to comment Share on other sites More sharing options...
SugarRE Posted June 6, 2016 Share Posted June 6, 2016 Did anyone see the latest 10Q (excerpt from p18 below)? Given much of the value thesis is dependent upon the release of this specific space at market terms, the fact that MAYS did not disclose the renewal terms is a bit scary. Any thoughts/insight? I have some market feelers out to see if I can get the comp. "In March 2016, the Company extended a lease with a retail tenant who occupies 126,996 square feet at the Company’s Nine Bond Street Brooklyn, New York property. The original expiration date was April 29, 2021 and was extended until January 31, 2036. The tenant also has two five year option periods." Link to comment Share on other sites More sharing options...
OracleofCarolina Posted June 10, 2016 Share Posted June 10, 2016 yea, I would agree. These lease renewals/extensions could be really good or really bad to the thesis depending on what the terms are. Did anyone hear anything about the terms? Link to comment Share on other sites More sharing options...
iambagman Posted June 10, 2016 Share Posted June 10, 2016 I think it is almost definitely categorically bad. I have reached out to management - they would not disclose - if you have seen the space - I think it is highly unlikely they are paying top dollar of a national retailer who wants to be in Brooklyn. The much larger problem, in my opinion, is it takes off the table the redevelopment of the property. The possibility of having an empty building for a developer to build condos or anything like that is extended to 2046. I have a long time horizon - longer than most (I think) but for me - that was too much. I think if you own Mays (I sold after I saw this) - you have to accept that management is very skeptical of the Brooklyn renaissance. They have zero desire to redevelop / monetize this in even the medium term. Ex the CEO, management has virtually no equity - their incentives are to keep the status quo / their high salaries. They had a vacant board seat this year - instead of putting somebody with development experience on the board - they put a CPA. Mays has had a gift dropped in their lap with the gentrification of Brooklyn - but they are pushing out Christmas so far. If you could be long the assets and short the management - I would - but that is not possible. Link to comment Share on other sites More sharing options...
glorysk87 Posted June 10, 2016 Share Posted June 10, 2016 Sounds like a good situation for an activist to step in ... Link to comment Share on other sites More sharing options...
Deepdive Posted June 11, 2016 Share Posted June 11, 2016 The family owns over 50%. I think an activist has to come in on the grounds that the CEO has violated fiduciary duties or this lease is so bad that it's fraudulent. Link to comment Share on other sites More sharing options...
glorysk87 Posted June 15, 2016 Share Posted June 15, 2016 Hm. So is there real risk that the value of these properties never gets realized? It seems insane, because it doesn't take much more than a quick glance to realize that the properties are incredibly valuable. I'm baffled why management would be so hesitant to take action to realize that value. Link to comment Share on other sites More sharing options...
premfan Posted June 15, 2016 Share Posted June 15, 2016 Hm. So is there real risk that the value of these properties never gets realized? It seems insane, because it doesn't take much more than a quick glance to realize that the properties are incredibly valuable. I'm baffled why management would be so hesitant to take action to realize that value. My practical opinion on this after zero research is salary + control + lack of reinvestment with sale of assets. Why sell if can't reinvest at a greater return? Just sit on ass and get your salary and keep it status quo. Link to comment Share on other sites More sharing options...
glorysk87 Posted June 15, 2016 Share Posted June 15, 2016 I really want to like this company. But the lack of liquidity plus the family control makes this pretty much a non-starter for me. If the family has majority control of the company, there's no way for shareholders to force any change, ever. Management can sit, entrenched, and collect their salary in perpetuity. I'm guessing they have successors already set, and the management team that succeeds this one will likely do the same thing. So how can anyone justify an investment? Seriously. Because I want to find a reason to contemplate investing here, but with the above, I can't. Link to comment Share on other sites More sharing options...
iambagman Posted June 17, 2016 Share Posted June 17, 2016 At the annual meeting last year the CEO basically said he would not know where to put the cash if they sold anything - he rambled on about gold and inflation - it was all pretty disconcerting. The guy is hardly a go getter - he inherited a bunch of real estate - he seems intent on passing on a bunch of real estate - and extending a lease five years early is consistent with a no intention of monetizing anything anytime soon approach to life. Link to comment Share on other sites More sharing options...
glorysk87 Posted June 17, 2016 Share Posted June 17, 2016 So then the natural question is, who inherits the real estate next and are they the right person to monetize the assets? Or at least drive add'l value in the portfolio? I would love to park some money here, but I'm having a hard time justifying it with current management. Link to comment Share on other sites More sharing options...
glorysk87 Posted June 17, 2016 Share Posted June 17, 2016 Have come across some more interesting stuff that I'm hoping others might be able to shed some light on. Two things of note: 1) MAYS pays $825,000 annually to Weinstein Enterprises for a lease of two properties. CEO Shulman is obviously closely related to Weinstein, though I haven't yet determined in what specific capacity. Does anyone know what this $825k is for? It's not an insignificant part of their cost structure. 2) There's an outstanding $1mm loan that the company borrowed from a former director. That director has since passed away and the note continues to be held by his estate. MAYS pays $50k annually in interest on this note. The interesting part, though, is that the note has been continuously renewed at the end of it's duration multiple times over the years. Maturity is currently set for Dec 2016, but I'd be willing to bet it gets renewed again. This seems odd. Link to comment Share on other sites More sharing options...
SugarRE Posted June 29, 2016 Share Posted June 29, 2016 I have used every contact I can think of to come up with the lease comp on the Cookie's space. Only one contact was able to give color that they heard the lease was done around the same rate. Given the term stated in the Q that is very bad. I viewed this lease as a huge amount of value creation that is now not available. While I'm comfortable with the real estate side of this equation, I am less so with the securities side. If in fact they signed a lease at the current rent, there is no way that one could argue the lease is market. What recourse do shareholders have? And I agree that its pretty hard to own this stock now. Link to comment Share on other sites More sharing options...
glorysk87 Posted June 29, 2016 Share Posted June 29, 2016 Any insight on the two questions I posted above? Link to comment Share on other sites More sharing options...
sae85400 Posted August 6, 2016 Share Posted August 6, 2016 Greenhaven Road Capital discusses how they exited the position in his latest investor letter http://static1.squarespace.com/static/5498841ce4b0311b8ddc012b/t/57a4dca9d482e9689c2b3d2b/1470422186553/Q2+2016+FINAL.pdf "The decision to sell JW Mays came down to a single sentence buried on page 17 of the 10Q. The sentence read, “In March 2016, the Company extended a lease with a retail tenant who occupies 126,996 square feet at the Company’s Nine Bond Street Brooklyn, New York property. The original expiration date was April 29, 2021 and was extended until January 31, 2036. The tenant also has two five year option periods.” Effectively the company signed a 25-year lease on one of its most valuable assets five years early. The terms of the lease were not disclosed, and it is possible the terms were incredibly favorable, but given the tenant is a discount retailer with low margins and management’s disbelief in Brooklyn real estate, an incredible lease is unlikely. I would like to think that I have a very long investment time horizon, but pushing out the crystallization of value 30 years was beyond even my time horizon. If it were possible to short the management and to go long the assets, I would have. Instead, much like my daughter when presented with a new fact, I completely changed my opinion of the opportunity and we exited the position that day with a reasonable profit. " Link to comment Share on other sites More sharing options...
SugarRE Posted October 17, 2016 Share Posted October 17, 2016 This is a few days late of the posting of the 10K, but to me, it seems the K confirmed the lease is below market and that the company is not going to share many other details. I might buy back a share just to go to next years AM for S&G. If anyone has greater insight into how one might be able to figure out the rent Cookies is paying, it would be greatly appreciated. From the rent expiration charts (via which you can calc what the rent is for cookies) in the last 2 K's, and the lack of information given on the renewal, it (cynically) seems that Cookies got a very long term extension at a very favorable rate. It could be that there are a bunch of rent bumps, market resets, etc, but I really can't find a way to tell. Looks like I'll revisit this when my google calendar tells me to in 2029 Link to comment Share on other sites More sharing options...
OracleofCarolina Posted October 18, 2016 Share Posted October 18, 2016 It seems the 10-K confirms that management is perfectly content just renewing leases and keeping this business chugging along as a landlord. The annual meeting is coming up next month but I don't think there is a chance that the minority investors can convince management to do anything differently. I use to have a position but also sold out the past couple of months as I don't see any catalyst to a higher stock price in the next couple of years. Link to comment Share on other sites More sharing options...
Gregmal Posted October 18, 2016 Share Posted October 18, 2016 This company has all the earmarks of something I'd love to like. I probably have a longer time horizon than most as well. Unfortunately these shysters have not only made this as opaque an investment as possible, but they have also now forced investors to assume the worst. A horrible and debilitating combination. Link to comment Share on other sites More sharing options...
LC Posted October 18, 2016 Share Posted October 18, 2016 There are many ways for the REAL owners to pull money out of real estate. It seems JW mays sharholders are not the real owners here. Frankly, knowing how Brooklyn real estate works, this does not surprise me. Link to comment Share on other sites More sharing options...
Spekulatius Posted October 18, 2016 Share Posted October 18, 2016 This company has all the earmarks of something I'd love to like. I probably have a longer time horizon than most as well. Unfortunately these shysters have not only made this as opaque an investment as possible, but they have also now forced investors to assume the worst. A horrible and debilitating combination. I disagree on management being "shysters". They are running their RE business suboptimal, that is true, but they are running it the same way they always have, no better no better or worse. The investors (hedge funds etc) have been betting on change, but that did and will not happen. Management controls this and outside investors are just along for the ride. Link to comment Share on other sites More sharing options...
OracleofCarolina Posted November 22, 2016 Share Posted November 22, 2016 If anyone goes to the annual meeting tomorrow..please share some notes. Thanks Link to comment Share on other sites More sharing options...
Gregmal Posted January 5, 2017 Share Posted January 5, 2017 Anyone have any new thoughts on this? I've kicked around putting some new cash in this here but its hard to overlook how pitiful this has done in a very favorable market. If the SOTP story isn't in play and we're forced to value this on an income basis, it could get ugly. Link to comment Share on other sites More sharing options...
Grahamfan2 Posted January 5, 2017 Share Posted January 5, 2017 Gregmal, Are you saying you would be more interested in buying this if the price was a lot higher? Who would "force you" to value it on any basis other than the one you thought was most appropriate? Link to comment Share on other sites More sharing options...
Gregmal Posted January 6, 2017 Share Posted January 6, 2017 Gregmal, Are you saying you would be more interested in buying this if the price was a lot higher? Who would "force you" to value it on any basis other than the one you thought was most appropriate? The first question would depend on the scenario. Your second question depends of the probability of certain scenarios. It appears some of the catalysts may not be occurring as swiftly as some may have hoped. Link to comment Share on other sites More sharing options...
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