HMG/Courtland Properties – HMG

[mjohn707]

HMG/Courtland Properties is a US-based REIT that is trading at about 66% of TBV.  The book value I think is a reasonable mark as most of the company’s assets are in marketable securities or small private investments, and it’s at least possible that it might even be conservative depending on how things work out with some of the miscellaneous investments and remaining real estate. 

 

The problem with the stock, or at least the reason I believe for the current discount, is that the company is controlled by the 76 year-old Maurice Wiener who receives a management fee that is probably too high in relation to the company’s assets and incomes.  Also there are a couple of related party receivable and lease issues.  With Weiner it’s not all bad news however.  I think he’s been relatively astute with the company’s real estate investments over the years, and although I think he might be a little less tested with the marketable securities, I think as a large owner of the company’s stock he is motivated not to lose money. 

 

I have no special insight into management’s plans for the company going forward.  This risk with this one is that a management initiative goes bad in a major way and there’s a big impairment of value.  It’s also possible that the management fee will bleed the NAV over a number of years.  All things considered, I think the stock is a reasonable investment at current prices using a basket approach with a similarly situated group of statistical bargains.

 

I’m attaching a copy of a spreadsheet with a 10-year summary of the company’s income and balance sheets, and a little summary of the major balance sheet items as of the last 10-K.  Shares are very illiquid, but it’s possible to get a decent position with a little patience.

 

Current Price:  14.61

Market Cap:  14.6M

P/E:  N/A

P/TBV:  66%

HMG_Courtland_Properties.xlsx

[fishwithwings]

Took a quick look at the company.  The stock has always traded at a significant discount to book.  What makes you think this will close anytime soon?

[mjohn707]

Took a quick look at the company.  The stock has always traded at a significant discount to book.  What makes you think this will close anytime soon?

 

There's really no guarantee that it will.  It's possible that the guy retires and liquidates the company eventually, but there's no indication that he's planning on doing that right now.  Maybe one of these old real estate positions or small investments pays off big in some way.  I don't think that's super likely, but it's at least possible.  It's one of those situations where there's not a whole lot of downside at the current price, and something always could shake loose to the upside.  There's no certainty here though, and you wouldn't want this as a concentrated position or anything like that.  But I think if you had enough similar situations sized appropriately they'd probably work out as a group over time. 

[SugarRE]

I've owned this for a few years and went to the AM two years ago.  Maurice is a smart guy and owns a ton of the stock.  His management fee is not egregious and he has proven that he will sell assets to create value.  I don't think you ever get to NAV here, but he does distribute cash each time he sells an asset.  Anyone look at Transco?

[mjohn707]

I've owned this for a few years and went to the AM two years ago.  Maurice is a smart guy and owns a ton of the stock.  His management fee is not egregious and he has proven that he will sell assets to create value.  I don't think you ever get to NAV here, but he does distribute cash each time he sells an asset.  Anyone look at Transco?

 

Is that the holding company?  Does it trade, I seem to remember I couldn't even get a quote on it