LAACZ - LA Athletic Co

[lschmidt]

Thanks for the advice. I've had no answer to 2 emails to the accounting Department, so I will take

your advice and ask for the CFO's email. I'm of two minds about this: 1) on one hand, I'm a bit

dismayed about their organizational efficiency and responsiveness to shareholders  2) it may be

reflective of low staffing and bare-bones overhead, which I generally like in an operation.

 

I still haven't received my K-1. Getting a bit late in the season. Wondering if others are in the same boat.

 

Anyone got their K-1 via their Broker today? I haven't seen anything via IB yet.

 

E-Mail the CFO.  Call the company and ask for the CFO. I hope you provided your name and shares to them already. Be nice and explain that it is getting late and you're worried.  If you did not provide name and shares and when you bought them, it will get tricky.  I learned the hard way last year.

[rkbabang]

Thanks for the advice. I've had no answer to 2 emails to the accounting Department, so I will take

your advice and ask for the CFO's email. I'm of two minds about this: 1) on one hand, I'm a bit

dismayed about their organizational efficiency and responsiveness to shareholders  2) it may be

reflective of low staffing and bare-bones overhead, which I generally like in an operation.

 

I still haven't received my K-1. Getting a bit late in the season. Wondering if others are in the same boat.

 

Anyone got their K-1 via their Broker today? I haven't seen anything via IB yet.

 

E-Mail the CFO.  Call the company and ask for the CFO. I hope you provided your name and shares to them already. Be nice and explain that it is getting late and you're worried.  If you did not provide name and shares and when you bought them, it will get tricky.  I learned the hard way last year.

 

I'm in the same boat as you.  I've been waiting for the k-1 to come in the mail.  I finally emailed the accounting dept this morning and haven't heard back yet.  Let us know how you make out calling.

 

[lschmidt]

I called LAACO and asked for the CFO. They routed me instead to the Controller, George Cox.

He was very helpful, explained the process, and said that the late batch of K-1s were

mailed out on Monday. He offered to email an electronic copy, which they promptly did.

Problem solved. If you've previously given the company your ownership info and haven't

received your K-1 in the next couple of days, I would give them a call and ask for Mr. Cox,

Controller  213-622-1254. If you haven't yet given them your share info., I would ask for

Shirley Lee in Accounting and give it to her promptly.

Cheers.

 

 

Thanks for the advice. I've had no answer to 2 emails to the accounting Department, so I will take

your advice and ask for the CFO's email. I'm of two minds about this: 1) on one hand, I'm a bit

dismayed about their organizational efficiency and responsiveness to shareholders  2) it may be

reflective of low staffing and bare-bones overhead, which I generally like in an operation.

 

I still haven't received my K-1. Getting a bit late in the season. Wondering if others are in the same boat.

 

Anyone got their K-1 via their Broker today? I haven't seen anything via IB yet.

 

E-Mail the CFO.  Call the company and ask for the CFO. I hope you provided your name and shares to them already. Be nice and explain that it is getting late and you're worried.  If you did not provide name and shares and when you bought them, it will get tricky.  I learned the hard way last year.

 

I'm in the same boat as you.  I've been waiting for the k-1 to come in the mail.  I finally emailed the accounting dept this morning and haven't heard back yet.  Let us know how you make out calling.

[rkbabang]

I called LAACO and asked for the CFO. They routed me instead to the Controller, George Cox.

He was very helpful, explained the process, and said that the late batch of K-1s were

mailed out on Monday. He offered to email an electronic copy, which they promptly did.

Problem solved. If you've previously given the company your ownership info and haven't

received your K-1 in the next couple of days, I would give them a call and ask for Mr. Cox,

Controller  213-622-1254. If you haven't yet given them your share info., I would ask for

Shirley Lee in Accounting and give it to her promptly.

Cheers.

 

 

Thanks for the advice. I've had no answer to 2 emails to the accounting Department, so I will take

your advice and ask for the CFO's email. I'm of two minds about this: 1) on one hand, I'm a bit

dismayed about their organizational efficiency and responsiveness to shareholders  2) it may be

reflective of low staffing and bare-bones overhead, which I generally like in an operation.

 

I still haven't received my K-1. Getting a bit late in the season. Wondering if others are in the same boat.

 

Anyone got their K-1 via their Broker today? I haven't seen anything via IB yet.

 

E-Mail the CFO.  Call the company and ask for the CFO. I hope you provided your name and shares to them already. Be nice and explain that it is getting late and you're worried.  If you did not provide name and shares and when you bought them, it will get tricky.  I learned the hard way last year.

 

I'm in the same boat as you.  I've been waiting for the k-1 to come in the mail.  I finally emailed the accounting dept this morning and haven't heard back yet.  Let us know how you make out calling.

 

I gave Shirley my info over 2 weeks ago, I'll give it until the middle of next week to come in the mail then I'll call. Thanks for this info.

[EricSchleien]

Annual Report: https://backend.otcmarkets.com/otcapi/company/financial-report/215312/content

[BG2008]

Looks like someone fat fingered a few shares today

[EricSchleien]

Looks like someone fat fingered a few shares today

 

Or they just wanted cash and didn't mind selling a few shares at low price...who knows.

[BG2008]

Has anyone reached out to LAACZ regarding the SEC propose to essentially stop Pink sheet trading? 

[BG2008]

This is the thread

 

http://www.cornerofberkshireandfairfax.ca/forum/general-discussion/proposed-new-sec-rules-for-otc-securities-relevant-for-us/

[Spekulatius]

Based on my understanding of the rule change, the proposed changes would only affect “no info” stocks, not “limited info” stocks like LAACZ.

[Gregmal]

I have/had a small tracking position in this until today. Finally got tired of the tax reporting and a few other issues which are besides the point. Was looking to sell and apparently there were FINRA rule changes regarding certain OTC positions, I was told these occurred back in May, which require the firm to jump through hoops when transacting in certain securities. Which of course just means the unit holder has to jump through hoops. I was further surprised to find out that Fidelity WILL NOT accept this security via an account transfer. I ended up having to chase down my paper confirmation statements from years ago... and finally after significant inconvenience, was able to sell this. Just a word of caution. Not sure it will apply to everyone and not sure you'll have any issues if you can prove(onus on YOU) that the securities where bought and sold with the same firm. But buyer beware.

[maude]

This year for Thanksgiving, I am going to say a special thanks to the regulators and lawmakers who keep all of us in the investment community safe from ourselves. Without them, we would all be lost.

[Spekulatius]

I have/had a small tracking position in this until today. Finally got tired of the tax reporting and a few other issues which are besides the point. Was looking to sell and apparently there were FINRA rule changes regarding certain OTC positions, I was told these occurred back in May, which require the firm to jump through hoops when transacting in certain securities. Which of course just means the unit holder has to jump through hoops. I was further surprised to find out that Fidelity WILL NOT accept this security via an account transfer. I ended up having to chase down my paper confirmation statements from years ago... and finally after significant inconvenience, was able to sell this. Just a word of caution. Not sure it will apply to everyone and not sure you'll have any issues if you can prove(onus on YOU) that the securities where bought and sold with the same firm. But buyer beware.

 

I own this also in. Fidelity account. I never had issues selling something, but sometimes have issues buying OTC stocks. Fidelity had me sign an online form, before I could buy in the pink sheets. Fidelity also doesn’t let you buy dark stocks at this point (they changed their rules a couple of years back), but you can sell the,. LAACZ is not a dark stock, so it can be bought in Fidelity accounts without issues (I bought some a couple of month ago and have open orders currently).

 

The new SEC rule regarding non filets will create a big problem for money managers dabbling into those, because without visible bids, there will be no objective value for them any more. I am not sure how one would even trade these outside of private negotiated transactions. So there could well be a lot of forced selling when this rule goes into effect.

[Gregmal]

The Fidelity issue was solely referenced in relation to transferring in LAACZ shares. They will not accept it I was told. Your ACAT will get NIGO'd and bounce. You can trade it freely once there, AFTER signing the form you mentioned. They also told me this is something they will now classify as an "alternative investment". For those of you with finance backgrounds, that is a very dirty area and means a lot of paperwork/documentation/CYA for the firm typically; which always seems to pass its way on to the customer. My assumption is that they won't let you transfer it in, but will let you trade it there, because its easier for compliance to document.

 

The new SEC rule is just icing on the cake for this kinda stuff. And it's a shame. I have no real issue with LAACZ as an investment, but the landscape is becoming ridiculous, and especially when managing OPM it's getting near impossible. One of the realities of managing money whether your own or others, is that sometimes you change brokers or use multiple ones. Regulatory requirements for firms with regard to OTC positions has gotten quite insane. Now imagine transferring around and then trying to sell and being asked to provide proof of open market acquisition from something you bought 5+ years ago? And then being told if you cant provide it you cant sell? And then your other brokers won't accept an ACAT with an OTC security? Now imagine this scenario but with someone else's money? Having to ask an investor to come up with that and then deal with it as an advisor? Just too much hassle to justify dealing with...

[Spekulatius]

I understand the issue when you manage OPM, but I just manage my own. The less competition there is for these securities, the better for a private investor who doesn’t care  8).

[Spekulatius]

One thing to consider when looking to invest in LAACZ right now is that the self storage markets in several areas seems to be weakening. The recent CC especially from PSA and Cubesmart with weak SS and occupation Trends gave an explanation. There has been a lot of supply coming to the market, and there is more coming (likely peaking in 2020), so they put a clear damper on pricing and the stocks of PSA and CUBE have not been immune to this. I think this will limit the near term appreciation potential of LAACZ as well. I am not terribly concerned, because LAACZ core markets in southern CA are supply constraint, but Houston not so much.

 

I would be quite concerned if holding UHAL, because they are betting the company on self storage and adding a lot of debt with 2-3 more years of heavy investing ahead, before they have build out all their acquired properties.

[EricSchleien]

"On December 3, 2019, the Managing General Partner of LAACO, Ltd. declared a quarterly cash distribution of $23.00 per partnership unit, and a special cash distribution of $1.50 per partnership unit, payable on December 20, 2019, to partners of record as of the close of business on December 16, 2019."

 

 

 

https://www.otcmarkets.com/stock/LAACZ/news/Distribution-Announcement?id=248454

[EricSchleien]

Due to the fact that LAACO is probably underlevered, is anyone concerned that perhaps today's valuation might be appropriate given the fact that if they never sell the real estate, the actual return on investment would be lower due to the fact that the company doesn't use much debt. The management told me their hurdle rate was to make an 8% return on any new investment property. That's a pretty low return, so perhaps the discount is warranted since it's not likely they'll be selling their self storage real estate anytime soon.

 

I was just thinking about this while purchasing some properties recently. I just purchased a residential property in Detroit at a 9.6% cap rate. For about 25,000 down, I'll make slightly over 5,000 net on year 1. Now if I was a publicly traded company and decided to pay for that in cash, my return goes from ~20% to somewhere between ~10%. And if I never decided to sell my properties, the market valuation of my company should be lower based off the way I do business even though I hold the exact same asset.

 

So perhaps LAACO isn't as undervalued as we may think if we look back a decade from now. Would love to hear everyone else's thoughts on this.

 

Warmly,

 

Eric

 

 

 

Hey all:

 

No doubt this company is probably worth more than what it trades for.

 

No doubt the company has very conservative managers.

 

It very could be an interesting play going forward.

 

The one caution I would add is that the "silly" high valuations on coastal properties may not last.  There is some amount of risk here that I think is being overlooked by the market.

 

What happens if an earthquake hits CA?  What happens if the ranks of homeless swell up even further than where they are at now?  What happens if CA's budget/pension falls to pieces?  A political crisis? 

 

I would just discount their CA properties a bit more than others is all I'm saying... 

 

Earthquake will probably temporarily be very good for the company as it creates more demand for the storage units as people get displaced.  In the long run, peoples views on Southern CA sours and it will impact value.  I think there is a degree of undervaluation where you say "yes, the market maybe silly, but I'm paying $80 a sqft for the portfolio and the market is low to mid $200 for the SoCal and mid $100 for the Phonenix, Houston, and Vegas.  At a certain point, it becomes a bit of a non-factor.  If your thesis is that NYC and CA will migrate to the warmer climates with lower taxes, I think the Phoenix, Houston, and Vegas are those cities that will become net beneficiaries of that migration.  There is an inherent hedge built into the portfolio.  Never thought of it that way until you bought up the question.  I wonder if management meant to do that.  It appears that Houston, Phoenix, and Vegas are the cities where development opportunities still exist and that's why LAACZ has allocated capital there.  It's very hard to build in SoCal with the NIMBYism there.  Which makes it a good portfolio.     

 

We're not saying that their CA properties should go for 2% cap rate.  Private market value is sub 5%.  Their assets sit on large sites and have re-development opportunities.  So, if you're paying a 5% cap rate for them in the private market, you've got optionality on the development side.  Sure, 2% is silly.  5% is too rich for me.  But, I'm paying 9% when I strip out the downtown LA assets.  Plus, they have development assets that should increase cashflow in the next couple years. 

[Gregmal]

Due to the fact that LAACO is probably underlevered, is anyone concerned that perhaps today's valuation might be appropriate given the fact that if they never sell the real estate, the actual return on investment would be lower due to the fact that the company doesn't use much debt. The management told me their hurdle rate was to make an 8% return on any new investment property. That's a pretty low return, so perhaps the discount is warranted since it's not likely they'll be selling their self storage real estate anytime soon.

 

I was just thinking about this while purchasing some properties recently. I just purchased a residential property in Detroit at a 9.6% cap rate. For about 25,000 down, I'll make slightly over 5,000 net on year 1. Now if I was a publicly traded company and decided to pay for that in cash, my return goes from ~20% to somewhere between ~10%. And if I never decided to sell my properties, the market valuation of my company should be lower based off the way I do business even though I hold the exact same asset.

 

So perhaps LAACO isn't as undervalued as we may think if we look back a decade from now. Would love to hear everyone else's thoughts on this.

 

Warmly,

 

Eric

 

 

 

Hey all:

 

No doubt this company is probably worth more than what it trades for.

 

No doubt the company has very conservative managers.

 

It very could be an interesting play going forward.

 

The one caution I would add is that the "silly" high valuations on coastal properties may not last.  There is some amount of risk here that I think is being overlooked by the market.

 

What happens if an earthquake hits CA?  What happens if the ranks of homeless swell up even further than where they are at now?  What happens if CA's budget/pension falls to pieces?  A political crisis? 

 

I would just discount their CA properties a bit more than others is all I'm saying... 

 

Earthquake will probably temporarily be very good for the company as it creates more demand for the storage units as people get displaced.  In the long run, peoples views on Southern CA sours and it will impact value.  I think there is a degree of undervaluation where you say "yes, the market maybe silly, but I'm paying $80 a sqft for the portfolio and the market is low to mid $200 for the SoCal and mid $100 for the Phonenix, Houston, and Vegas.  At a certain point, it becomes a bit of a non-factor.  If your thesis is that NYC and CA will migrate to the warmer climates with lower taxes, I think the Phoenix, Houston, and Vegas are those cities that will become net beneficiaries of that migration.  There is an inherent hedge built into the portfolio.  Never thought of it that way until you bought up the question.  I wonder if management meant to do that.  It appears that Houston, Phoenix, and Vegas are the cities where development opportunities still exist and that's why LAACZ has allocated capital there.  It's very hard to build in SoCal with the NIMBYism there.  Which makes it a good portfolio.     

 

We're not saying that their CA properties should go for 2% cap rate.  Private market value is sub 5%.  Their assets sit on large sites and have re-development opportunities.  So, if you're paying a 5% cap rate for them in the private market, you've got optionality on the development side.  Sure, 2% is silly.  5% is too rich for me.  But, I'm paying 9% when I strip out the downtown LA assets.  Plus, they have development assets that should increase cashflow in the next couple years. 

 

I dont really have anything specific to LAACZ because I think for a number of reasons, its hard to triangulate a proper valuation given a lot of the nuances here, in addition to your observation about the management style. I sold out here a few months ago. Many of the reasons had little to do with the company, but at the end of the day I didn't feel it was impossible to get better returns with better liquidity elsewhere.

 

But I arrived at the same conclusion as you did above, by making the same type of investments you described above. I used to have a little thing for under leveraged real estate companies. I still kind of do. But with the rate environment being what it is, I think its crazy for any real estate investor/company not to be utilizing some form of leverage. Many companies Ive followed and managers quote the 8% number, if anything I think its just boilerplate industry speak. A good deal is a good deal. The implications of a set hurdle kind of imply the bar is pretty low so Im not entirely certain why people so frequently cite figures like that. Purchasing RE with just cash, isn't very enticing, if it is, along with the never sell mantra, JW Mays probably checks a lot of boxes as well.

[BG2008]

Firework in the volume today, a whopping $0.5mm traded

[EricSchleien]

Firework in the volume today, a whopping $0.5mm traded

 

Wild times!

[Spekulatius]

Managed to get my grimy hands on a few more units today at a good price. I feel like a collector . They announced a small raise in distribution to $25 so business seems to be going on somehow.

https://www.otcmarkets.com/stock/LAACZ/news/Distribution-Announcement?id=255435

 

Eric is correct that if you actively manage your own real estate with significant leverage, you can get higher returns. I personally expect a compounded return in the high single digits (8-9% conservatively), consisting of a 4-4.5% distribution yield, some organic growth ~4% and share repurchases 0.5%. 4% organic growth shouldn’t be too hard with some inaction and some organic growth from upgrading properties or purchasing new ones from retained earnings. I have owned this since 2012 and they expanded from 47 wholly owned to 59 owned properties just with organic growth. It’s like watching grass grow, but in a good way. Easy to understand and no worries.

[EricSchleien]

I bought another unit today at 2070

[EricSchleien]

Down 50% today??

[jwelborn93]

Looks like the price fell on the volume of 4 shares...was most likely a market sell order.