GRIF - Griffin Industrial Realty

[thepupil]

in my experience, I believe they show up on the price / volume chart/graph in US markets (though not some international ones). Don't think this is unique to bloomberg and can be found on like google/yahoo finance as well.

[BG2008]

Did INDT release a date for earnings call?  Also, does anyone have updates on selection for INDT special dividend.  We have to make a cash or stock selection at some point. 

[vpagano]

Sure looks like tomorrow after the close:

 

https://newsfilter.io/articles/indus-announces-fiscal-2020-fourth-quarter-and-full-year-earnings-webcast-706f96f7374a029dae8f4c30da29f236

[KJP]

Did INDT release a date for earnings call?  Also, does anyone have updates on selection for INDT special dividend.  We have to make a cash or stock selection at some point.

 

I received my Notice of Dividend Election from my broker last week.  The cash/stock election is due by COB on February 24.

[realassetsvalue]

I have updated my NAV estimate, which gets to $400m or $68.65 per share (attached). I peg a slight NAV decrease from Q3 2020 as a couple assets went into rent free due to leasing, not a permanent issue. Also this is pro forma for the imminent E&P distribuion. One could argue that the cap rates I am using are too conservative for how hot the industrial market is. At a ~$65 share price, this is a little undervalued but not a lot. For posterity I bought back the shares I trimmed at about $62.75 so still at a full position.

 

Positives coming out of the quarter:

• Good 2020 leasing, strong retention, 2.6% cash rent growth. Steady but not amazing compared to peers. Addressed ~50% of 2021 expiries already with a 1 year renewal
  
• Put 91 acres of land with book value of $0 under contract for sale for $5.25m (subject to contingencies)
  

 

Negatives coming out of the quarter

• Didn't use the ATM to raise equity when trading at what looked like a premium to NAV (in the high 70s / 80s)
  
• The multi-storey office, 5&7 Waterside, fell out of contract and is being remarketed
  
• Leasing up 160 & 180 International in Charlotte and the refurb deal in Orlando continues to be a challenge
  

 

What I'd like to hear more on in the pre-recorded call: The Charlotte development land is now likely to be a 140k sq ft BTS for an e-commerce tenant, total development cost of $35m - $40m, what are the economics like of that deal in terms of yield on cost? Construction cost looks like ~$240 PSF, is it a huge TI package or super specialized building? How do they compare to the spec development plan of 500k+ sq ft that was the previous plan for that land?

2021-02-18_INDT_2020Q4_NAV_Analysis.xlsx

[BG2008]

I have updated my NAV estimate, which gets to $400m or $68.65 per share (attached). I peg a slight NAV decrease from Q3 2020 as a couple assets went into rent free due to leasing, not a permanent issue. Also this is pro forma for the imminent E&P distribuion. One could argue that the  rates I am using are too conservative for how hot the industrial market is. At a ~$65 share price, this is a little undervalued but not a lot. For posterity I bought back the shares I trimmed at about $62.75 so still at a full position.

 

Positives coming out of the quarter:

• Good 2020 leasing, strong retention, 2.6% cash rent growth. Steady but not amazing compared to peers. Addressed ~50% of 2021 expiries already with a 1 year renewal
  
• Put 91 acres of land with book value of $0 under contract for sale for $5.25m (subject to contingencies)
  

 

Negatives coming out of the quarter

• Didn't use the ATM to raise equity when trading at what looked like a premium to NAV (in the high 70s / 80s)
  
• The multi-storey , 5&7 Waterside, fell out of contract and is being remarketed
  
• Leasing up 160 & 180 International in  and the refurb deal in  continues to be a challenge
  

 

What I'd like to hear more on in the pre-recorded call: The  development land is now likely to be a 140k sq ft BTS for an e-commerce tenant, total development cost of $35m - $40m, what are the  like of that deal in terms of yield on cost? Construction cost looks like ~$240 PSF, is it a huge TI package or super specialized building? How do they compare to the spec development plan of 500k+ sq ft that was the previous plan for that land?

 

Nice model!  I'll provide my notes later.  For the NAV, I think you are penalizing yourself a bit because, it will increase share count, but you will receive the stock/cash dividend.  The birds will be in your hands soon.  Until then, I guess you can't use the diluted PF for the dividend.  But generally a very good model.  You've got game!

 

 

[BG2008]

Does anyone else use TD Ameritrade?  I am trying to make my stock/cash election and it seems like I have to call them?  Oh the horror!  Is there a place on TD where I can make the election electronically?  I did that with IB. 

[hillfronter83]

Does anyone else use TD Ameritrade?  I am trying to make my stock/cash election and it seems like I have to call them?  Oh the horror!  Is there a place on TD where I can make the election electronically?  I did that with IB.

 

You can use their message center for corporate action: Client Service->Message Center->Compose then choose "Reorg or dividend".

It usually takes one business day.

[BG2008]

Does anyone else use TD Ameritrade?  I am trying to make my stock/cash election and it seems like I have to call them?  Oh the horror!  Is there a place on TD where I can make the election electronically?  I did that with IB.

 

You can use their message center for corporate action: Client Service->Message Center->Compose then choose "Reorg or dividend".

It usually takes one business day.

 

Thank you.  I just sent them a message. 

[Williams406]

The default if no election is cash and stock dividend with the cash being a fixed total amount of the company-wide distribution, I think. If you're comfortable with potentially all stock, my read is you don't have to make an election. Does anyone see that differently? IB's message on this seemed a bit clearer on the default option than TD's.

[BG2008]

Btw, I am taking all shares.  I think this trades at 85-90%.  I think the market will get excited about INDT over time and it can trade at 1.1-1.2x P/NAV.  I am pretty excited about that $35-45mm deal.  I think they are probably building to a 6%  is my guess which will add about $2.4mm.  If financed with 50% debt @3%, that's only $0.6mm of interest expense.  This will increase FFO by $1.8mm.  There is a pipeline of $90-95mm of developments, I think that will up NOI by $5.6mm.  If finance with $50mm of debt at 3% interest expense, that's $1.5mm.  So $4mm in crease in FFO.  I think a lot of the infrastructure is in place.  Some of the rent increases isn't as high as I think.  But if you look at the GAAP numbers, it implies about 2-4% over a 5 year time frame.  Not too shabby for a fairly  ex light business.  I think Michael continues to impress me with his acquisition and development. 

 

I recall  somewhere that they got long term financing for their  warehouses.  This is usually a sign that they are about to sign a lease.  Otherwise the banks won't lend.  I hope this doesn't move the shares upward as I would like to receive my shares at lower prices.  But I try to give back to the CoB community. 

[SoonParted]

The default if no election is cash and stock dividend with the cash being a fixed total amount of the company-wide distribution, I think. If you're comfortable with potentially all stock, my read is you don't have to make an election. Does anyone see that differently? IB's message on this seemed a bit clearer on the default option than TD's.

 

Williams406, I never received any communication about the election from TD.  How did you receive yours? Email?

[Williams406]

TD notice sent via e-mail but I work with TD Institutional, not the retail side.

[BG2008]

TD notice sent via e-mail but I work with TD Institutional, not the retail side.

 

Baller

[Williams406]

Inelegantly put by me. Geez, not how I meant that. Just wasn't sure if notification protocols were handled differently.

[thepupil]

1.75 million share offering, 2mm w/ the greenshoe. that's 35% of current shares outstanding. a pretty big step to "real company" status as pro-forma market cap is almost $500mm.

 

feels a little bit much with the stock low $60's, but unless these guys are total idiots, then an equity offering is like a marriage proposal. you don't ask unless you already know the answer (that there's demand).

 

now that we're a REIT, guess there's demand!

 

 

 

 

[cubsfan]

Got to hand it to BG2008 on getting these guys headed in the right direction.

[BG2008]

Wrote out a long response and then accidentally x out my browser.  So here it goes again.  Another 20 minutes because I love you guys. 

 

I kind of suspected that a deal was going to happen.  Prices naturally trend towards the deal price from my experience.  I recall that the $50 deal had a similar dynamic where the prices trends towards $51-52 when it happened. 

 

I consider this the official IPO of the company.  Yes, it has been public for a long time.  But it never had a real shareholder base.  So this is a $100mm raise with a roster of bankers that you would want.  I suspect that Dugan wrangled research coverage from at least MS, Citi, JMP, and hopefully JP Morgan as well.  So this goes from having BG2008 as the unofficial IR to having Ashley as the dedicated IR and having 3-5 legit IBs providing research.  For $7mm in fees, yeah, these banks will gladly provide the research coverage and trading support.  I imagine that daily trading volume will trend towards $2-5mm in the coming months.  As value guys, we tend to think this doesn't matter.  But it does.  A bunch of nobodies on CoB isn't going to move the stock.  I love you guys, but we are who we are.   

 

Morgan Stanley and Citigroup are acting as co-lead joint book-running managers for the proposed offering. Baird is acting as bookrunner and BTIG, JMP Securities and J.P. Morgan are acting as co-managers for the proposed offering.

[BG2008]

Let's talk about pricing.  This deal is almost identical to CTRE that I owned back in 2014/2015.  It had 3 similar dynamic

 

1. Concentration - CTRE was 60-70% run by its former parent Ensign and INDT has large concentration in Hartford and large family ownership

2. Market cap - both were $400mm market cap and small trading volume, not the kind of stuff that Fidelity and Wellington of the world wants to own

3. leverage - In the REIT world, investors want certain level of debt/EBITDA metrics.  You just have to conform.  We know that INDT owns a lot of land and the G&A is higher due to the company being smaller. 

 

By doing a $100mm deal, INDT can solve a lot of these issues right away.  They can use the proceeds and develop/buy to a blended 6% and maybe put 30% LTV debt at 3-3.5%.  This will drastically decrease the DEBT/EBITDA metric.  I was too rigid as a value investor back in 2014/2015 and I was pissed that CTRE did a couple deals below NAV.  As value guys we tend to think "below NAV = buy back" and "above NAV = issue shares."  Well, life isn't all clean and squeaky like that.  The reason why they did the deal is so that the stock can trade from below NAV to over NAV.  Imagine if all the CEO did was buy back shares.  We would have even more concentration in land and warehouse in Hartford CT and the liquidity would have been crap. 

 

Some of you mentioned disappointment that they didn't use the ATM when shares traded to $80.  If I know one thing about these guys, it is that they know how much INDT is worth.  They have mentioned that there were black out periods where they could not use that ATM.  That is likely why they didn't issue under the ATM.  I assume this is a straight equity deal with no warrants.  With this capitalization, the company is officially grown up.  Before you know it, INDT will probably show FFO growth in the teens due to developments and deploying the equity capital.  If I didn't already own a sizable position, I may add here.  For what it is worth, I took all the dividends in stock. 

[bilo]

I agree with BG2008's points.  I am impressed with the size and use of top-tier firms.  It makes it clear that there is a reason they converted to a REIT.  Doubt had started to creep in for me when I read the Q4, which IMO focused on relatively slow development and as I noted the pathetic levels of recent trading volume which act as a road block to the big money.  Now we can hope they deploy the proceeds intelligently but also reasonably quickly - which will allow them to scale G&A (badly needed!) and show growth.  I will certainly add if we get a nice dip, the stock has made itself far more interesting with this big move.

[BG2008]

FWIW, I bought some more shares yesterday.  Gregmal would have been awesome to get an opinion on this.  I just feel like the $60 secondary offering will act as a floor on pricing for the short term.  Now the balance sheet is fortified.  NAV is probably in the mid $60s.  But this offers a great runway for growth. 

[Gregmal]

Just for you since I love ya BG....I'm buying, all day at $57 here. I think $75 was pie in the sky(probably 30% premium to NAV) and I had a hard time getting a hard on for a bull case that was basically "I hope management issues a fuck ton of stock at these price"....but at $57 with a cash hoard similar to FRP...which I also really like...play ball again. Very limited downside here.

 

 

 

Back to my silence now.

[BG2008]

Thanks bud. I was too much of an idiot.  Should've taken some chips off the table in the high $70s.  But CompoundTown is sooo cool!!

[cubsfan]

Just for you since I love ya BG....I'm buying, all day at $57 here. I think $75 was pie in the sky(probably 30% premium to NAV) and I had a hard time getting a hard on for a bull case that was basically "I hope management issues a fuck ton of stock at these price"....but at $57 with a cash hoard similar to FRP...which I also really like...play ball again. Very limited downside here.

 

 

 

Back to my silence now.

 

DAMN! - This thread is haunted !! Gotta love it!

[thepupil]

Thanks bud. I was too much of an idiot.  Should've taken some chips off the table in the high $70s.  But CompoundTown is sooo cool!!

 

there was barely volume for little old me to sell at the best of prices. those didn't seem like "real" prints.

 

I'd see a last trade at $75 and often end up selling some at $70 or $68 (all numbers inexact and from memory, don't hold me to that, just illustrating a point).  I doubt you could have materially trimmed in the high $70's.  I also think this is another reason why the ATM wasn't used.

 

 

With this big placement at $60, and assuming price gets high enough for the warrants to be excercised (another $50mm+) at $60, you're starting to get real scale.