GRIF - Griffin Industrial Realty

[KJP]

I took a quick look at North Carolina and Connecticut property records as well.

 

For North Carolina:

~50% of 160 International Drive (73,000 sq ft)  is leased to Brooks Equipment, a national distributor of fire protection equipment (https://www.brooksequipment.com/Locations/)  (See Instrument 28187, Book 13780, page 0091 of the Cabarrus County, NC property records)

 

In the Windsor, CT property records, I found records of recent leases to the following:

SCA Pharmaceuticals (at Tradeport Development V, LLC): https://scapharma.com/about/

Blue Line Foodservice Distribution, Inc.:  https://www.linkedin.com/company/the-illitch-group-blue-line-distribution-

 

Thanks. I started looking for the CT info as well to do my part, and here you are, already got it.

 

most of these look like fine tenants. I'm just surprised how far this thing is dropping. I know, it's illiquid, but still.

 

Agreed. 

[bilo]

Annual Letter To shareholders posted:

 

https://www.sec.gov/Archives/edgar/data/1037390/000103739020000030/grif-20200331ex9915a6bff.htm

 

"To Our Stockholders:

 

We write this letter in the midst of great uncertainty with COVID-19 spreading and impacting the health of the world’s population and crippling the economy.  It is too early to understand fully the effects this situation will have on social behaviors, business norms and corporate financial performance in the future, but in the near term there is severe pressure on many industries and workers, particularly those related to the service industry.  We have a fairly diversified tenant base and a portfolio of properties that we believe are critical for our customers’ missions, supply-chains and production but our tenants will not be immune from the macroeconomic impacts of the current crisis.  We expect that the near-term absorption of vacant space will slow, certain tenants may defer rent or default on their leases, construction activities, including tenant improvement projects, may be delayed and potential property sales may be postponed or cancelled.  We continue to run our business for the long-term but are cognizant of the current environment and plan to manage our business conservatively to help ensure we remain in a strong position.  While we believe that, over time, the industrial/warehouse sector will continue to benefit from the growth in e-commerce, optimization of supply chains and, as this crisis has shown, the likely need for buffer inventories and redundancies, we expect the industry to face some near-term challenges.

 

It is difficult to write a typical annual letter to Stockholders with the above-mentioned backdrop, but we wanted to provide the history and context leading up to the series of actions we announced in March of this year, as well as review the past twelve months.

 

History and Geographic Expansion

We have spent the past several years expanding our geographic footprint, establishing both our acquisition and development capabilities in several markets, recycling our capital, notably from land sales, into income generating properties, growing and stabilizing our industrial/warehouse portfolio and selling off non-core assets.

 

Hartford, CT. When Griffin became an independent company in 1997, we had approximately 386,000 square feet of commercial and industrial space in the greater Hartford market, several thousand acres of land, an operating landscape nursery growing and wholesale business and other non-real estate related assets.  Frederick “Mike” Danziger, who led our company for its first 20 years, embarked on an effort to simplify our business over time by selling off the various non-core businesses and assets and growing our real estate assets by concentrating on the development of industrial/warehouse properties, typically built on speculation. His efforts created the platform that enabled our subsequent growth and geographic expansion.

 

Lehigh Valley, PA. In the aftermath of the 2008 financial crisis, we purchased an industrial/warehouse building and land for development in the Lehigh Valley of Pennsylvania, our first market outside of Hartford, in 2010.  We developed our initial industrial/warehouse building in that market in 2012 and this past fall acquired a land site to support what we expect to become our seventh industrial/warehouse building in the Lehigh Valley market, which, when completed, would bring our total square footage there to over 1.4 million square feet.  Our efforts in the Lehigh Valley established our ability to purchase both existing buildings as well as identify, entitle, build and lease industrial/warehouse properties outside of Connecticut.

 

Charlotte, NC.  We followed our success in the Lehigh Valley with our entry into the greater Charlotte, North Carolina market in 2017.  We initially purchased a 277,000 square foot industrial/warehouse building and soon after entered into an agreement to acquire a 22 acre land site across the street. We subsequently entitled this land, and in the fall of 2019, delivered our first two buildings, totaling 283,000 square feet, in the greater Charlotte market (“160 and 180 International”). Additionally, in fiscal 2019, we closed on the acquisition of 44 acres of land in Charlotte, providing a potential development pipeline for an additional 520,000 square feet spread across three industrial/warehouse buildings.

 

Orlando, FL. Most recently, we entered our fourth geographic market and acquired three industrial/warehouse buildings totaling 276,000 square feet in the Orlando, Florida market.  Two of the buildings are under full-building leases to tenants with a long history of occupancy in the respective properties, and for the third building, we are preparing its approximately 50,000 square foot vacant space for marketing to lease.  We believe that Orlando’s location, strong economy, population growth and transportation infrastructure creates an attractive long-term market for local and regional distribution.

 

Since the start of fiscal 2015, Griffin’s property portfolio has grown 68%, or 1.9 million square feet as of March 2020, and net operating income from leasing (“Leasing NOI”)1 has grown 90%, or $11.5 million as of the end of fiscal 2019.  Importantly, we have accomplished the growth in our portfolio to its current size of 4,638,000 square feet (including 4,205,000 square feet of industrial/warehouse space) through the use of internally generated capital, including significant sales of undeveloped land, as well as non-recourse mortgage loans.

 

Year in Review

In fiscal 2019 we continued the growth of our business with Griffin’s property portfolio increasing 9.4% in square feet.  Subsequent to the end of fiscal 2019, we purchased an additional 176,000 square feet in the Orlando market.  As of the date of this letter, our Connecticut and Lehigh Valley industrial/warehouse portfolios are 100% leased, although we expect a 201,000 square foot tenant in the Lehigh Valley to vacate in the third quarter of this fiscal year.  Overall, our industrial/warehouse portfolio is 95% leased (99% when excluding 160 and 180 International).  Our office/flex portfolio currently stands at 72% leased, which includes the two multi-story office buildings (“5 & 7 Waterside”) in the greater Hartford area that we previously announced we intend to sell.

 

Leasing NOI increased approximately 4.2% in fiscal 2019 when compared to fiscal 2018.  The slower growth compared to recent years was principally due to the already high occupancy in our existing portfolio, the delivery towards the end of fiscal 2019 of 160 and 180 International, and the lease-up subsequent to the end of fiscal 2019 of 6975 Ambassador Drive, our most recent delivery in the Lehigh Valley.  We expect fiscal 2020 Leasing NOI to benefit from the recent leasing we have accomplished in these properties and in our Connecticut portfolio, as well as from our acquisitions in Orlando.  At the same time, we note that fiscal 2020 results may be impacted negatively from the current crisis precipitated by COVID-19, including delays in completing tenant improvements and construction, and from potential vacancies, including the one noted above in the Lehigh Valley.

 

1 Leasing NOI, which Griffin defines as rental revenue ($34.2 million in fiscal 2019 and $32.8 million in fiscal 2018) less operating expenses of rental properties ($10.0 million in fiscal 2019 and $9.5 million in fiscal 2018), is not a financial measure in conformity with U.S. generally accepted accounting principles (“U. S. GAAP”).  It is presented because Griffin believes it is a useful financial indicator for measuring results of its real estate leasing activities.  However, it should not be considered as an alternative to operating income as a measure of operating results in accordance with U.S. GAAP.

 

We continue to monetize our land holdings and reinvest those proceeds into our real estate business. In fiscal 2019, Griffin realized net proceeds of $9.5 million from land sales and, subsequent to the end of fiscal 2019, entered into three separate agreements to sell over 580 acres of land for total proceeds of approximately $15 million.  Included among these potential sales is an option agreement with a national land conservation organization to sell Meadowood for net proceeds of $5.4 million.  While Meadowood is a fully-entitled, 277 acre residential subdivision, we determined that the proposed transaction would provide greater certainty of closing in a shorter period of time and provide other benefits than if we continued to pursue a sale to potential residential developers. There is no guarantee that the foregoing transactions will be completed under their current terms, or at all.

 

In fiscal 2019, Griffin invested $39.5 million into its real estate assets, the major portions of which were $15.4 million in new building construction (principally 160 and 180 International), $10.1 million for our first purchase in the Orlando, Florida market, $7.9 million for the purchase of undeveloped land in Charlotte and the Lehigh Valley and $5 million for tenant and building improvements.  In addition to using cash on hand (including the cash received from asset sales), we funded these investments with new borrowings of $7.1 million, including $5.9 million from our acquisition line of credit (which was subsequently refinanced with a permanent mortgage).  As of February 29, 2020, Griffin’s weighted average interest rate on its debt outstanding was 4.21% and only $4.1 million (out of a total of $161.7 million) of the Company’s debt (excluding borrowings under our revolving lines of credit) is due before the end of fiscal 2024.

 

Moving Forward

We believe our efforts to increase the size of our portfolio and expand into other markets over the past several years have positioned us well for our next growth stage.  As a proven owner, developer and acquirer of well-located industrial and logistics assets in select, high-quality markets, we have an established platform to support future growth.  We have a strong record of creating value through development, acquiring both stabilized and value-add assets and reinvesting proceeds from the sale of non-core assets into increasing the size of our industrial/warehouse portfolio.  Earlier this month, we announced a series of steps which we believe, upon a stabilization of the current environment, will help us accelerate the growth of our industrial/warehouse portfolio and increase stockholder value, including increasing our ability to access external capital sources and having our new Chairman and Director helping guide us on strategy and execution.

 

REIT.  As previously announced, we intend to pursue conversion to a real estate investment trust (“REIT”) for federal income tax purposes. If successful in the conversion process, we expect to elect REIT status commencing January 1, 2021.  This decision was based on the Board’s and management’s consideration of ways to maximize stockholder value and generate growth opportunities, and the recognition that many real estate companies operate under this structure.  We believe a REIT conversion may enhance our ability to access capital, lower our overall cost of capital and expand our investor base over time.  Additionally, it may allow us to compete better for industrial assets, especially portfolios consisting of multiple buildings rather than the single building acquisitions we have completed historically. While we do not expect a material change in our dividend rate in the near term, we intend to meet the REIT requirements by distributing not less than 90% of our annual REIT taxable income to our stockholders, which will largely eliminate our corporate level income tax. As part of the conversion process, we expect to distribute our accumulated earnings and profits of approximately $14 million to $19 million to stockholders (the “E&P Distribution”), to be paid out in a combination of at least 20% in cash and up to 80% in Griffin common stock. We intend to distribute substantially all of the E&P Distribution in the fourth quarter of calendar year 2020.

Sale of Multi-Story Office Portfolio.  With our primary focus on our industrial/warehouse properties, we previously announced our intention to sell 5 & 7 Waterside, which together total 161,000 square feet. The office market in the Hartford area, particularly the north submarket where our office/flex properties are located, remains challenging and these properties require a disproportionate amount of capital to maintain as compared to our industrial/warehouse portfolio. However, as a result of the current market conditions related to the turmoil caused by the COVID-19 pandemic, we suspended the marketing efforts for the sale of 5 & 7 Waterside. We intend to resume the process when we believe the market has stabilized. Upon completing a sale of 5 & 7 Waterside, Griffin’s remaining office/flex portfolio would consist of ten single-story properties totaling approximately 272,000 square feet, equating to approximately 6% of our total property portfolio, and comprise approximately the same percentage of our Leasing NOI.  We expect this percentage to continue to decline as we grow our industrial/warehouse business and opportunistically may seek to sell Griffin’s other office/flex properties over time. There can be no assurances that Griffin will be able to sell 5 & 7 Waterside, or any other office/flex properties, on favorable terms, or at all.

New Chairman and Additional Director.  Gordon F. DuGan joined us as Chairman of the Board and Molly North joined us as a director in early March of this year.  Already, both have provided valuable insights and guidance as we develop and pursue our strategies for increasing stockholder value.

 

Gordon has over 25 years of experience in the real estate industry and served as the Chief Executive Officer of Gramercy Property Trust, an industrial-focused REIT, from 2012 to until its sale to Blackstone Real Estate Partners VII in October 2018 for an enterprise value of $7.6 billion.  Prior to Gramercy, Gordon was the Chief Executive Officer of W.P. Carey Inc., one of the largest net-leased REITs in the U.S.  Gordon brings to us a wealth of experience within the industrial real estate sector and in the capital markets, as well as a deep knowledge of building and growing a high-performing, publicly-traded company.  Gordon is taking an expanded role within Griffin, and in addition to serving as Chairman, he will utilize his background and experience in helping us develop and execute our growth strategy including identifying markets, acquisitions and other transactions, recruitment of key personnel and potential capital raising efforts.

 

Molly has over 20 years of business and real estate experience, with the last 13 years at Al. Neyer, a commercial real estate development and design-build construction firm, where she has served as President & Chief Executive Officer since 2015. Molly is a well-recognized and talented business leader who brings experience growing an organization in targeted geographic markets and deep knowledge of locating, financing and developing real estate development opportunities.  Under her leadership, Al. Neyer has constructed over eight million square feet of properties, including more than six million square feet of industrial real estate.

 

Closing

We remain optimistic about our long-term prospects and future opportunities but recognize the potential challenges ahead. There is great uncertainty related to the COVID-19 pandemic and the governmental response, and as we move forward, the upcoming Presidential election in November.  We remain in a solid financial position and are proactively evaluating our spending and contingency plans and will continue to be disciplined in our approach to investments.

 

Our employees continue to be critical to our success and we greatly appreciate their efforts, especially during this current health crisis.  Before closing, we note that this is the first stockholder’s letter in Griffin’s history without Mike Danziger’s signature.  Mike stepped down as Chairman of Griffin in March but remains a Director.  We continue to benefit from Mike’s wisdom, knowledge and experience, and we owe him a deep gratitude for establishing the platform to enable Griffin’s past and future success.

 

We are excited by our progress in fiscal 2019 and while the near-term macroeconomic outlook is uncertain, we look forward to the continued growth of our real estate business."

 

 

 

 

 

 

/s/Gordon F. DuGan

/s/Michael S. Gamzon

Gordon F. DuGan

Michael S. Gamzon

Chairman of the Board

President and Chief Executive Officer

 

 

 

[BG2008]

Thanks for posting this

[SugarRE]

Thought I would throw this into the mix.  Sorry if its already posted.  Hopefully he continues to spend sufficient time on GRIF.

 

https://realassets.ipe.com/news/new-european-property-investment-firm-gets-1bn-capital-backing/10044091.article

[shhughes1116]

Thought I would throw this into the mix.  Sorry if its already posted.  Hopefully he continues to spend sufficient time on GRIF.

 

https://realassets.ipe.com/news/new-european-property-investment-firm-gets-1bn-capital-backing/10044091.article

 

Thanks for sharing this link.  Maybe someone should pose this question, whether Dugan has time to be effectively involved in both businesses. 

[SugarRE]

Another thought, i touched base with good friend at a top 10 sophisticated, industrial owner in the US.  They have large, institutional product with credit tenants and they don't anticipate an problems with April rent, are not receiving many rent relief requests.....at least for April.  On the other hand, they think Rexford is f'd.

[matts]

Another thought, i touched base with good friend at a top 10 sophisticated, industrial owner in the US.  They have large, institutional product with credit tenants and they don't anticipate an problems with April rent, are not receiving many rent relief requests.....at least for April.  On the other hand, they think Rexford is f'd.

 

why would that be?

[SugarRE]

Could be wrong, but my understanding is that the majority of their tenancy is small tenants with no credit.  Even with a diversity of tenant base, I think there is a higher probability of non-rent payment when compared to larger, distribution centric assets (think prologis/blackstone/GLP, etc.).  Maybe the CARE act takes kicks in for a few months rent, but at the very least its going to be a conversation with everyone/asset management nightmare.

 

Note that this was an anecdotal comment and I've done no real work on Rexford, capital structure, etc.

[BG2008]

As we continue to sort out what secular trends will affect which industries and sectors, this crisis is a bit different than the 2008/2009 crisis in that warehouses fundamentally performed much worse during that time period.  So the plunging share price of Prologis back then.  There are both short term and long term qualitative factors at work here.

 

Short Term - Warehouses are the only places that are still hiring as there is a rush for people to order deliveries etc.  This will likely mitigate as it becomes safe to shop for your own grocerries

Long Term - This further eats away at traditional retail models and shifts more sqft into warehouses

 

This is a pretty interesting articles stating that warehouses are the only places that are currently hiring and hiring aggressively

 

https://www.wsj.com/articles/warehouse-hiring-surge-defies-crashing-u-s-jobs-market-11585939391?cx_testId=3&cx_testVariant=cx_2&cx_artPos=1#cxrecs_s

[matts]

GRIFFIN ANNOUNCES FISCAL 2020 FIRST QUARTER RESULTS

 

https://www.globenewswire.com/news-release/2020/04/09/2014366/0/en/GRIFFIN-ANNOUNCES-FISCAL-2020-FIRST-QUARTER-RESULTS.html

 

They didn't even mention the virus. that's disconcerting. A shareholder-friendly management team would address it.

[bilo]

Perhaps they didn't mention the virus because they just shot their "virus info" wad with the annual letter? 

 

https://www.sec.gov/Archives/edgar/data/1037390/000103739020000030/grif-20200331ex9915a6bff.htm

 

 

[matts]

Perhaps they didn't mention the virus because they just shot their "virus info" wad with the annual letter? 

 

https://www.sec.gov/Archives/edgar/data/1037390/000103739020000030/grif-20200331ex9915a6bff.htm

 

You mean the boilerplate lawyer-speak? I wouldn't call that a wad. Prologis gave a whole conference call outlining who has paid/who hasn't, home many tenants as for some sort of break, etc.

 

These guys insert a couple of sentences drafted by their lawyer and don't say a word about it 9 later and you are happy with that?

 

They are doing the bare legal minimum to commuicate with shareholders during this crisis.

[BG2008]

Perhaps they didn't mention the virus because they just shot their "virus info" wad with the annual letter? 

 

https://www.sec.gov/Archives/edgar/data/1037390/000103739020000030/grif-20200331ex9915a6bff.htm

 

You mean the boilerplate lawyer-speak? I wouldn't call that a wad. Prologis gave a whole conference call outlining who has paid/who hasn't, home many tenants as for some sort of break, etc.

 

These guys insert a couple of sentences drafted by their lawyer and don't say a word about it 9 later and you are happy with that?

 

They are doing the bare legal minimum to commuicate with shareholders during this crisis.

 

Matts,

 

Welcome to small cap investing.  You do have the choice of buying Prologis at a 4% cap rate or whatever it trades at.  If you want to own GRIF at a 10% cap rate, this is simply part of the "charm".  If you are really enterprising, you can google the addresses and see who the tenants are.  Just my worthless 2 cents. 

[BG2008]

Has Griffin ever disclosed tenant profile characteristics?

Does anyone have info on the types of businesses they have exposure to?

 

Sorry if i missed it in the rest of the thread, I did look through all of it.

 

If you go all the way back, there is a slide deck that has 2 slides on who all the tenants are

[realassetsvalue]

I think this continues to be attractive relative to other industrial REITs. After this recent rebound, after trading into the 6s on implied cap rate, First Industrial by my (very rough) math trades at a 5.2% cap. Prologis, Duke, East Group all sub 5% cap.

 

My notes / organization of my thinking after reading through the 10-Q are below in case they are helpful to those following this one.

 

Valuation

 

Enterprise value of $340m after DuGan share purchase (53k shares at c. $47 / share) less $9m Charlotte / Lehigh Valley development land and $15m sales under contract / option is Property Value of $317m. Less $17m BV of Office / Flex (implies a 12.5% cap rate on 2019 NOI) leaves Industrial Property Value of $300m.

 

I estimate annualized Q1 2020 Industrial NOI is $21m results in an implied cap rate of 7% and $72 PSF. This NOI doesn't try to factor in any adjustments for acquisitions (most notably the recent Orlando acqusitions, most recent which was fully leased closed 18 Feb), leasing, developments so is likely lower than a 1-year look forward NOI estimate (although there is the 201k sq ft known moveout in July, which will have a negative impact).

 

Cash Flow

 

This has always been challenge for Griffin due to being sub-scale and having higher G&A due to land holdings / development team. Based on Q1 2020 annualized NOI of $24m, G&A of $8m and interest expense of $7m I get c. $9m of "FFO" or $1.72 per share. On this basis, GRIF trades at a 20x FFO multiple.

 

After factoring in c. $4m of annual mortgage amortization and $5m of leasing CAPEX (TIs, building expenses, etc. - these were higher than average at $2.2m in the Q1 2020 quarter), the business is approximately "AFFO" break even.

 

G&A is c. 2.35% of enterprise value and would be c. 2% of industrial property portfolio if valued at a 5% cap rate, which is high but reflects the size of the portfolio. The positive hypothesis is that there will scale benefits as the portfolio grows and incremental property-level cash flow will drop to the bottom line. The negative side is that there is little margin for error and any material reduction in NOI will mean the business would need to raise equity or debt to fund interest / principal / CAPEX needs.

 

AFFO does not cover the current dividend (c. $2.5m a year) by my calculations and c. 10% growth in NOI is required to cover (assuming all drops down to AFFO).

 

Liquidity

 

$11.2m of cash pro forma for DuGan share purchase and undrawn $19.5m revolver - $30.7m of available liquidity (not counting the acquisition line).

 

Cash covers about 7 months of G&A, Interest and mortgage amortization. If we assumed no rent is received, cash covers c. 4 months of Property operating expenses and leasing CAPEX in addition to G&A / financing costs.

 

If the revolver is fully drawn, liquidity covers 19 months and 10 months of G&A / financing and all costs incl. OPEX and Leasing CAPEX respectively.

 

If one is thinking of disruption to rent payments being a 3-6 months event, the liquidity position looks adequate. If disruption is a year or more and tenant defaults are material, could be a challenge. Definitely one area to watch.

 

Leverage

 

$161.7m of mortgage debt, most of which are 10 year fixed rate loans. One maturity of $4.15m in 2022, next maturity is 2025 so well termed out. Revolver expires September 2021 with $4.1m drawn on the acquisition line so that will need to be refinanced and extended in the near term.

 

Based on Leasing NOI of $24m and Leasing EBITDA of $16m, this results in debt yield of c. 15% and net debt / EBITDA of 9.7x. Debt is 45% of enterprise value. Leverage is optically high but not super worrying - yellow light rather than red light. Flow through of NOI and EBITDA from recent property acquisitions and lease up should help improve debt metrics assuming rents otherwise remain stable.

 

COVID-19

 

Nothing beyond standard language / disclaimers in the 10-Q. Impact on GRIF in general and vs. other industrial REITs is unknown - only real data point I know of is Prologis who said on their business update call that April rent was in-line.

 

 

 

[bilo]

Perhaps they didn't mention the virus because they just shot their "virus info" wad with the annual letter? 

 

https://www.sec.gov/Archives/edgar/data/1037390/000103739020000030/grif-20200331ex9915a6bff.htm

 

You mean the boilerplate lawyer-speak? I wouldn't call that a wad. Prologis gave a whole conference call outlining who has paid/who hasn't, home many tenants as for some sort of break, etc.

 

These guys insert a couple of sentences drafted by their lawyer and don't say a word about it 9 later and you are happy with that?

 

They are doing the bare legal minimum to commuicate with shareholders during this crisis.

 

Yea, that.  it is their comment on the crisis.  Its a small controlled company, that is how it works - my being happy/unhappy has nothing to do with it.

[BG2008]

Not sure if this has been posted, Prologis talks about potential for increased levels of inventory post Covid 19

 

https://www.reit.com/news/articles/prologis-ceo-expects-businesses-operate-higher-inventory-levels-post-crisis

[shhughes1116]

Not sure if this has been posted, Prologis talks about potential for increased levels of inventory post Covid 19

 

https://www.reit.com/news/articles/prologis-ceo-expects-businesses-operate-higher-inventory-levels-post-crisis

 

Do you think this will actually play out like this?  That is a serious question, no sarcasm intended.   

 

I agree with the takeaway that just-in-time inventory has made it more challenging to get things from the factory to the consumers' hands in a timely manner.  -- I think in drugs/devices, we will see manufacturing capacity come back to the United States, with larger inventories of this product kept in the warehouse.  That is certainly positive for the logistics/warehouse industry, and bullish for GRIF.

- I also think in the food sector, we are going to see an expansion of refrigerated storage and dry storage closer to retail food stores, which will enable more rapid re-stocking during times of stress.  (I think re-purposing parts of Class C and Class B malls for this purpose would be effective, but that is another discussion.)   

 

But I question whether this will extend to other products which take up the vast majority of warehouse space (e.g. consumer electronics, home goods, clothes).  A delayed or disrupted supply chain for these goods is simply an inconvenience for consumers, which will be quickly forgotten.  The costs of increased warehouse storage for these items, on the other hand, will not be quickly overlooked or forgotten by investors, who will push for less inventory and warehouse space. 

[BG2008]

More Blackstone Deal

 

https://finance-commerce.com/2020/04/csm-sells-59-building-portfolio/

 

6.9mm sqft in Twin City and Colorado

[bilo]

The obvious value-creating move is to sell vs. becoming and under-scale REIT that the market might or might not appreciate.  Anyone disagree?

[BG2008]

Since ThePupil is the unofficial IR for Vornado, I guess I am the unofficial IR for GRIF.  I was watching a video interview of Robert Vinal of RV Capital and he was stressing the quality of management team.  He mentioned that good management teams surprise you with good news.  It was kind of thinking about that comment over the last few weeks and I circled back to GRIF.  Here we have a good asset class, warehouses, with a CEO who asked his father-in-law to give up a $350k board compensation.  He brings in a well known former CEO who sold his warehouse REIT to Blackstone in a $7.6bn deal to replace his father-in-law.  In terms of management quality, I think the CEO is passing with flying color with the REIT conversion news and the new chairman.  The new chairman bought $2.5mm of stock at $46 or $47.  I guess the question is "can we ask for more in small cap value investing?"  I don't know what the end game is, but I suspect that it will be decent outcomes.   

[bilo]

Excellent point on GRIF management quality and its importance to the investment case.    I feel very good about this position and indeed have been adding over past two weeks - might buy more today. 

[jckund]

Shareholder meeting is today. A few highlights from the press release:

 

• Entered into a lease for the previously reported 200,000 sq ft that was expected to become vacant on July 31, 2020 in Lehigh Valley
  
• Lease ups in Charlotte will take longer than expected
  
• Previously announced $3.8m land sale fell out of contract
  
• Other sale processes (Meadowood residential) and 280 acres undeveloped land are still in progress
  
• 99% of April rent collected; 89% of May rent collected. Some tenants pay later in the month... we were at 73% collected this time last month.
  
• Rent relief requests totaled 15% of monthly rent, but 2/3 were withdrawn or denied
  
• Short-term rent relief granted for three leases (4% of monthly rent) subject to them entering into early lease renewals
  
• Construction prohibitions have delayed some of the site work and TI work, so lease commencement will be delayed
  
• Drew down $10m of revolver in March, but subsequently repaid it. $24.5m of current liquidity
  
• REIT conversion still the plan
  

[BG2008]

Anyone knows how to use get the control number from Interactive Brokers?  These Virtual meetings have been frustrating to attend.

 

GRIFFIN INDUSTRIAL REALITY, INC. will be hosting a Virtual Stockholder Meeting this year. The meeting will be held on Thursday, May 7, 2020 at 2:00 PM Eastern Time and stockholders of record will be able to vote and ask questions online during the meeting. If you would like to attend the virtual meeting and you have your control number, please go to www.virtualshareholdermeeting.com/GRIF2020 5 minutes prior to the start of the meeting to log in. If you came through your brokerage firm's website and do not have your control number, you can gain access to the meeting by logging into your brokerage firm's website 15 minutes prior to the meeting start, selecting the shareholder communications mailbox to link through to the meeting and the control number will automatically populate.

 

[BG2008]

Shareholder meeting is today. A few highlights from the press release:

 

• 
  
  • Entered into a lease for the previously reported 200,000 sq ft that was expected to become vacant on July 31, 2020 in Lehigh Valley

• Lease ups in Charlotte will take longer than expected
  
• Previously announced $3.8m land sale fell out of contract
  
• Other sale processes (Meadowood residential) and 280 acres undeveloped land are still in progress
  
• 99% of April rent collected; 89% of May rent collected. Some tenants pay later in the month... we were at 73% collected this time last month.
  
• Rent relief requests totaled 15% of monthly rent, but 2/3 were withdrawn or denied
  
• Short-term rent relief granted for three leases (4% of monthly rent) subject to them entering into early lease renewals
  
• Construction prohibitions have delayed some of the site work and TI work, so lease commencement will be delayed
  
• Drew down $10m of revolver in March, but subsequently repaid it. $24.5m of current liquidity
  
• REIT conversion still the plan
  

 

The 200k sqft lease is a huge positive and de-risk the investment significantly