APTS - Preferred Apartment Communities

[Gregmal]

APTS $9.65

 

 

Company history

 

Founded by legendary Atlanta developer John Williams. Williams, at 26 created Post Holdings which went on to be one of the most successful REITs in market history. He was pushed out in the early 2000s and the company was eventually sold to MAA.

 

In 2009 he and his long time business partner started Preferred Apartment Communities. They took with them the Post model; beautiful, vibrant, class A multi family communities and a culture of excellence plus avid community involvement. The company went public in 2011 and by year end held $92M of assets which produced about $7M in revenues. At the start of 2020 APTS owned north of $5B in assets and was closing in on $500M in revenues. Whoa growth!

 

Williams passed in 2018. Current management consists of CEO Joel Murphy; an industry vet with over 30 years experience who previously had been heading up his own firm and before that a long tenured executive at Cousins. He started off at top law firm King & Spalding. At CFO is John Isakson who worked with Williams the prior decade and also happens to be the son of former Georgia senator Johnny Isakson. Both I consider competent, and savvy industry vets who know the business well and possess enough discipline not to screw up my investment.

 

 

Why its Cheap

 

2020 was not the year to undergo a major transformation if you were a small cap REIT with retail and office exposure as well as a funky capital stack and an external manager! Major changes occurred during the year; starting with internalizing the management…followed by the student housing portfolio sales and the decision to allow shareholders to vote on calling in the preferred shares at 5 years instead of 10. For these reasons and many others, the company screens like total dogshit. Makes total sense too.

 

Valuation

 

Sun Belt RE has been on fire. This was touched on very thoroughly on the recent YE call. As much as 50 bps compression and this after several industry reports put Q2/3 cap rates for similarly located MF assets in the low 4s! APTS portfolio is easily class A; most buildings have been purchased new, and within the past decade. There’s ~$135M NOI which yields a valuation between $2.4B if you assume its all “value add” stuff(for those less familiar with RE, value add basically means fixer upper crappola). If you value it as class B/C ~$2.85B, and if you value it as class A(why wouldn’t you? It’s the very definition of class A)…you get ~$3.4B….attached to these are about $1.4B in mortgages with more than 9 years average term, fixed and a mid 3s coupon.

 

 

For the New Market portfolio, which is the company’s retail portfolio, owns almost exclusively grocery anchored class A shopping centers. ~20% of NOI comes from southern powerhouse Publix…with which Williams and Murphy both hold(or held) close relationships with from decades of work together as they in many cases grew together throughout the same regions. Publix is frequently signing new leases that spur PACs development pipeline. At an 8 cap on the retail(which is generally reserved for value add type stuff) you get ~$960M and at a 6 you get around $1.3B…attached to these is ~$600M in mortgage debt, fixed, at a hair under 4% with more than 7 years remaining, on average.

 

Preferred Office is the final segment of significance and again features almost exclusively, class A office, 95% leased with predominantly investment grade tenants and an average remaining lease term north of 7 years and 1/3 or so going out into the 2030s. At an 8 cap you get an even $1B valuation and at a 6 you get a bit north of $1.3B. Attached are $633M in mortgages, fixed rate a hair over 4%, and average length of maturity over 12 years!

 

Taking the whole enchilada you can see a very clear value range between 4.36B assuming what they own is on par with Canadian Goose droppings in Central Park and on the more realistic, but still not stretched side of things…roughly $6B in FMV/NAV.

 

Other issues of importance…there are two.

 

Financing…which the company describes as:

 

consists of the Company's portfolio of real estate loans, bridge loans, and other instruments deployed by the Company to partially finance the development, construction, and prestabilization carrying costs of new multifamily communities and other real estate and real estate related assets.

 

 

There are about $320M in face value loans. These produced ~$50M in revenue last year. Average rates are low to mid teens. Traditionally, this has been a big time revenue generator for the company. Not just because the loans are asset backed and typically good….but because this is largely how the company funds its acquisition pipeline. They find interesting land or projects. They then put up the money for development in the form of a loan and included in this are a purchase option for the finished product. This does not mean they always convert…fairly often they sell the loan or simply decline purchase option and receive their proceeds plus interest when the entity is ready to be monetized. But in general, this unique process has been a way to cultivate relationships…of which they have more in their core Sun Belt markets than any other company I am aware of….and additionally locks in building relationships with other developers which can and does benefit future projects.

 

 

 

Preferred shares

 

This is the big one. The primary reason all the two bit book reporters on places like Seeking Alpha hate PAC…the preferreds! Its why even Brad Thomas’s Jim Cramer like summarizations of REITs land APTS in the “lemon” category. But context is key to everything. This company, as was mentioned earlier, started with nothing. Anyone familiar with the REIT world knows that subscale REITs simply cant raise capital….or if they do, its very expensive. So…how do you? You have a genius like Williams who knows a thing or two about the dastardly non traded REIT markets which have swallowed whole many stupid, yield hungry retail investors. Except over the years, FINRA/SEC have started frowning upon these issuances or making them much more difficult….except…what if you aren’t issuing shares of a non traded REIT? Afterall, its “non traded preferred stock!”….totally kosher and fine and because PAC is public…all the better! Issuing these shares in the public markets would not only be more expensive, it would also be impossible as PAC has ongoing broker dealer selling relationships that effectively allow them to raise capital AT WILL! The cost? 6-7% coupons and about a 7% commission to the agents….all in all, a bit expensive, but hardly anything outrageous if you considered the alternatives. Then consider the fact that these preferred basically have no say in anything and only a liquidation preference! To boot, you have incredibly harsh early redemption penalties…up to 12% for the first year…. And the company has the option to settle in cash or stock. Soooo….access to capital with no/little restrictions or covenants, at will, and a 6% coupon? Pretty darn creative and good to me… or so I think. Now flip things a bit and realize that many of the properties they are buying, net this out entirely….so the equation effectively looks like this….Preferred shares get the income, common gets the growth for free. Hardly worth all the tears every simpleton taking a look at this thing over the years has shed over “oh poo poo the preferred take all the economic benefits! Wah”….NOT TRUE. Besides, who cares about the dividend in the current REIT environment? ESRT cut its dividends and promptly doubled within several months last fall/winter. When value dislocation is this significant, focus on what really matters..which isnt a nickel or dime a quarter. Anyway..the company has about $1.6B of these bad boys outstanding.

 

Proof? Do you need proof that if you loaded the boat on Sun Belt RE the past decade that you’ve done well? Probably not, but look no further than the company's recent sale of Avenues at Creekside….boom.

 

Going into 2021, the objectives are clear. Listen to the Q4 YE call. Murphy is on point. These guys are focused. They’ve already backed off pipeline acquisitions as cap rates have compressed. Read between the lines. The narrative shift happened and on top of all this you have extremely favorable, covid enhanced NTM comps….Back out what you wish but the guidance on FFO covers what they need it to and that leaves you with a NAV range of $10 on the assumption that Class A is priced at “value add or worse”… or ~$43 per share assuming its priced as the current private market comps indicate….or somewhere in between? Who knows? Also add in the favorable upside, as I previously mentioned….that roughly every 10% increase in the portfolio value translate to $10 per share of NAV being created. Why is this go time? Because everything has been set in motion and the company has practically told shareholders what they intend to do. They’ve started doing it already. And it makes sense because the company has reached scale and once the preferreds are out of the equation there is little reason they could not then tap the capital markets the way traditional high quality REITS can.

 

Will probably have more….threw this slop together because its been a popular idea and I’m sure if nothing else it will help folks hone in on whatever it is they are looking for to either support or discredit the thesis.

 

Disclosure: Don’t ever trust a word I say and assume I am trading against you. I probably wont be….but your investment decisions or your own, not mine. Be responsible. I am actively purchasing shares in this name today, 3/22 and expect to continue to do so. Cheers

 

[thepupil]

you had me at Publix.

 

chicken tendies subs and sunbelt RE!

[thepupil]

Anyway..the company has about $1.6B of these bad boys outstanding.

 

Can you walk me through this?

 

I see

 

1.717mm of Series A = $1.7B

0.184mm or Series A1 = $184mm

0.09mm of Series M    = $91.3mm

0.018mm of Series M1 = $18mm

For total of $2.0 billion

 

I find the way they present the preferred confusing and may have missed something.

 

I'm taking the 10-K pref outstanding and adjusting for subsequent to Q4 sales/redemptions.

 

With a $500mm common, the $400mm delta b/w your pref and my pref numbers could be significant.

[Gregmal]

I also found it is a bit confusing, but not yugely material for the simple reason that much of the acceleration and rerating should occur as things clear up and if they proceed to do as they indicate, large swaths of preferred should begin disappearing, albeit not overnight but in a lumpy way like we just saw. Check the call where they basically said "we're in the market to buy, but when prices people were willing to pay accelerated, we pulled back and will remain disciplined".... the read through indicates to me they may make a couple sales... They've also, in a convoluted but eventually clear way kind of paired much of their assets in a way where you can match up each segment(at least thats how I view it) The MF nets out the entire stack of mortgages with a healthy positive balance. The office and retail pretty easily net preferreds. Cash+restricted plus loan portfolio goes straight to the bottom line. I grabbed the figure(looking at the notes I scrambled together) from the 1,631,646 additional paid in capital vs prior year 1,938,057 which looked to reflect redemptions(both forced from Series A call and investor requested).

 

I didnt really include some of the smaller items such as cash and receivables(yes, lazy mans solution..guilty as charged) because I figured it would largely net out vs issuance/discrepancies resulting from my lack of patience sifting through the balance sheet with respect to preferreds in/on which changes every month, which itself seems to be getting netted to a much more scrupulous degree as Murphy mentioned on the call(re: comment regarding working with the B/Ds). Even if we see $100M net preferred issued less selling fees that money, should X out in terms of NAV left for shareholders on a forward basis....assuming all else equal.

[thepupil]

your way underestimates the outstanding preferred balance. Preferred dividends and issuance costs (which are substantial over time) reduces the additional paid in capital from the prefs, so the notional/liquidation preference is > than the APIC from the prefs.

 

Issuance Costs (~$166mm over the past 4 years)

2020: $25mm

2019: $60mm

2018: $44mm

2017: $37mm

 

Preferred Divvies:

2020: $160mm

2019: $112mm

2018: $38mm

 

 

~$2.0 billion notional is the correct preferred balance. don't want to get too bogged down in the minutiae/miss the bigger picture, but when you multiply pref outstanding * $1000 / pref, you get $2.0 billion. I still like the idea overall and see a pretty clear path to how they could de-lever, make this more of a real REIT and they're incentivized to do so w/ the internalization.

 

I have bought a tiny sliver, just enough to make me curse myself regardless of outcome and do more work.

 

[Gregmal]

Good catch, thanks...as I warned, dont trust anything I say!

 

All aside, I think this is a one ft hurdle here. Its priced at a substantial discount regardless of how its broken down, its in a region that will continue to see tailwinds, and overall when you look across the RE spectrum, barring mismanagement(always a risk) I dont see many scenarios where other things do well and this doesnt. MF can probably be written conservatively at a 4.5 cap(what class B is going for currently), retail and office at 6.5-7 cap. Then throw in the "other stuff"....In this case, equity is worth north of $20 against roughly 4.6B in debt/preferred. If they get proactive or pull some levers upside only gets greater.

 

 

 

[Gregmal]

https://nypost.com/2021/03/23/business-leaders-warn-7b-in-proposed-tax-hikes-could-wreck-ny/

 

They just cant help themselves. And the Sun Belt will continue to be the benefactor. Its almost an inevitable. If you are an institutional investor...whether a fund looking to take private, or an insurance company just looking for an asset to provide a somewhat hedged against inflation income stream....why would you even want to bother with places that have rent freezes, rent controls during normal times, eviction moratoriums, and high taxes?

 

My expectation is that premier assets in business friendly states will eventually demand significant premiums to the traditional low cap coastal markets. The premium has always been associated with safety and predictability of the underlying asset and its cash flows. Which is no longer the case in many of those markets. ~80% of PAC revenue comes from top 5 markets in terms of population growth and net migration. ~75% of PAC multifamily is FL/GA/TX.....

[Williams406]

Do you have any sense for how management thinks about office and retail divisions in light of the renewed focus on Sun Belt MF? My take from the call was that the MF focus didn't mean they were looking to shed office and retail so much as direct incremental capital to Sun Belt MF. Plus, preferred call provisions put some limits on how fast they can retire prefs. I like the set-up here and appreciate the idea, just trying to develop a sense for the possible pace of deleveraging. I'd prefer APTS max out preferred retirement each year (high % of callable prefs, really limit issuance) and fund that by streamlining the portfolio. If that's selling office, great. If that's selling Overland Park, KS and Pittsurgh, PA, MF properties, great. They did exactly that in 2020 and I hope it continues. I just don't want to read in the 2022  AR "We continued to improve our balance sheet by having net pref redemptions in 3/4 quarters totaling $50 million, topping our 2021 net redemption amount by $5 million and putting us on track to work through our preferred balance by 2045." I hear the right talk and see good action so far.

[Gregmal]

Haha yea I hear you. I think management definitely needs to prove itself. But I like the head start we have here in terms of valuation starting point at $10 or whatever we want to call it.

My takeaway is that they likely won't be acquiring office and retail at the pace(or at all) that they have. This was primarily funded by the preferreds. In fact, about 5 years or so ago this was a total market darling and really only started getting into a rough patch because they seemed to max out MF and start wading into retail and office while ramping the preferreds which certainly wasnt anything to get excited about. I think I stated in another thread that I dont even consider that period of time to be a bright point or proof of stewardship. Frankly I think they put growth at all costs ahead of shareholder value...AND JUST HAPPENED TO GET LUCKY WITH WHAT THEY BOUGHT! However what an opportunity we have here now getting the reputational and collateral damaged carcass which somewhat fortunately turned out to produce this opportunity.

To the preferred point, the issuance escalated in a staggered way that I think gives us a reasonably deducible path to see big progress made in a staggered way over the next 5 years. Here's a article that kind of highlights how the narrative has shifted.

https://www.investmentnews.com/reit-with-a-twist-mdash-and-a-high-commission-mdash-is-new-darling-of-independent-brokers-dealers-68439

Anyway, the vote to reduce call from 10 to 5 years overlaps well and I agree on the highlighted properties, which in addition to retail/office could provide nice sources of capital to punch those out. Personally I'd like to see office go before retail. Ive been keeping an eye on some fo the Sun Belt retail market and for instance the other day got notice on a NNN Best Buy in North FL with a hair under 5 years left on lease at about a 5.8 cap....Some of those Publix strips could be 5 caps in not too crazy scenarios and in the above I slapped a 6.5-7 on them. I was cautiously optimistic about how coy management seemed to be regarding this on the call. It more so resembled an opportunistic value investor vs a promotional crew who wanted people to immediately price in all these major actions. The flip side is they could obviously underwhelm.

[Gregmal]

So...lotta people want to know...whats a Publix worth? Yea I know. The NYC centric investment world doesnt really appreciate the Lakeland based beast...its OK, most Southern folks dont know about Tim Hortons. And likely none of you all know about Bucee's...

Quick lazy primer

https://www.bouldergroup.com/blog/net-lease-publix/

What about any sales? I am sure the Publix asset can be carved out and sold, but typically the whole strip is easier to comp. Here's a recent one.

https://shoppingcenterbusiness.com/jll-arranges-26-3-million-sale-of-publix-anchored-shopping-center-in-metro-orlando/

$214 sq/ft for 82% leased. 

PAC's core New Market portfolio owns 48 shopping centers with a ~96% occupancy rate. 25 are anchored by Publix. The rest are Kroger, Harris Teeter, Fresh Market, etc types. 4 properties are below 90%, with the lowest being 83%. We dont need to talk about rent collection rates...this isnt New York or California here.

How in the money are some of these? For instance, the company acquired its Tampa Publix shopping center in 2014 for $180 sq/ft. They bought the Polo Grounds at West Palm for a mere $154 sq/ft in 2019. Both are currently 100% leased. 

How bout some 95% leased centers with real tenants as comps?

https://shoppingcenterbusiness.com/rothenberg-rosenfield-acquires-whole-foods-anchored-shopping-center-in-savannah-for-24-7-million/

$384 a sq/ft

You've got a series of Publix anchored comps in there Carolinas in the $230 range, and Atlanta and Savanagh based grocery anchors have been selling in the $200s with crap tenants such as small time nail salons and HR Blocks.

Further upside can be seen in the company's 1.2M sq/ft redevelopment pipeline, which was purchased generally around the $130 sq/ft range. There are 6 properties with the majority sporting 70-80% or so occupancy rates.

But we dont really need to use these numbers at all. Just put the whole portfolio at a 6.5-7 cap/$185 sq/ft mark and we get to $20 per share on the NAV anyway!

To me, at this point, this is a $30 share with some execution and maybe 18 months of time. If management simply isnt retarded, its worth $20. If management happens to be retarded/crooked, well, IDK then. Good margin of safety IMO though. 

 

Further wrinkle, which I will add to this in time, is Publix's expansion plans, plus their stealth RE arm, which is focused on buying out company anchored shopping centers. Such as stuff like this:

https://www.connectcre.com/florida/cushwake-arranges-70m-sale-of-publix-anchored-retail-center-in-doral/

 

EDIT: added info.

Edited April 6, 2021 by Gregmal

[Williams406]

FRP Holdings owns aggregate royalties in VA, GA, and FL, so I think that biz serves as a data point for Sunbelt construction activity/population growth. From the 2020 FRP shareholder letter:

"Yet the shock we feared would finally precipitate a down cycle after a decade of growth, did not appear to impact this segment and may have actually spurred further growth. Volumes for our mining royalties business grew by 160,000 tons in 2020, but volumes for the last seven months of 2020 actually grew by 499,000 tons—meaning all of our volume growth happened during the pandemic. This phenomenon bears out in housing data. Coming out of the initial shock of the pandemic, as of September 30, 2020, Florida and Georgia were significantly outpacing the national average for new housing permits issued. As migration into the sunbelt continues, we stand particularly well positioned to benefit from it. Aggregates prices are particularly “sticky” because of the high barriers to entry inherent to the industry from both a capital and regulatory perspective. And if you look at pre-COVID numbers, of the top 15 states by aggregates volume in 2019, Florida, Georgia, and Virginia ranked fifth, third, and first in pricing per ton, respectively. All three were still below 70% of their peak volumes. Even if volumes do not reach the levels the industry and our markets experienced nearly a decade and a half ago, there is clearly still room for volume growth, and the ability to push prices remains unimpeded."

[Gregmal]

https://investors.pacapts.com/news/news-details/2021/Preferred-Apartment-Communities-Inc.-Continues-Simplification-Strategy-with-Agreement-for-Transformational-Office-Portfolio-Sale/default.aspx

 

Getting out of office.

[rosemontseneca]

Seems like a good trade?  5.9% cap based on 42.7 GAAP NOI on 717 purchase price.  So they're selling office at their multiple and bolstering case for a multi-family rerate and using some proceeds to clean up balance sheet.  I didn't mind the office given the geographies but think this helps story?  I just hope they don't recycle into MF acquisitions at 4 caps.   

[Gregmal]

Yea I am not a huge fan of office but the locations and properties they have are fine. That said, if you can clear those at a 6 cap and then pay down the preferred I guess I am "ok" with some reinvestment in MF. Management gonna grow lol. That s just what they do. MF is the safest asset class IMO so if we get something like 25% of proceeds put back into that and the rest used to clean up the balance sheet and get out of less desirable stuff I'll take that all day. If I ran the company though I wouldnt be jumping to buy MF here at all, but nothing is perfect. 

This is definitely big for the story though. It shows a follow through and direct commitment to doing what they said they'd do. And it also shows they sandbagged their efforts in this regard on the previous call. Very coy about it when obviously this was something being discussed. 

[Williams406]

If I'm reading things right, after this transaction, PAC still has about 40% of pre-sale leaseable square footage (office) and 47% of office NOI they are looking to sell.

[thepupil]

i doubled my position today. 

I get pretty steep downside on this if you widen out the multifamily cap rates. but also get huge upside if marking the multifamily to the steamy market cap rates. I can simultaneously make a case for $0 / share and $25 / share on a liquidation basis.

Thankfully, half the capital structure has no maturity and the rest has pretty far out maturities so we have tons of time / aren't forced sellers. this sale is a big step to lowering their cost of capital, making APTS more of a "real" REIT (eventually). I think the complete exit of two of their segments in a short time frame makes the end game more believable. 

I would increase position materially if there's another big step to getting that preferred smaller (big equity offering, further asset sales). 

 

[Castanza]

27 minutes ago, thepupil said:

i doubled my position today. 

I get pretty steep downside on this if you widen out the multifamily cap rates. but also get huge upside if marking the multifamily to the steamy market cap rates. I can simultaneously make a case for $0 / share and $25 / share on a liquidation basis.

Thankfully, half the capital structure has no maturity and the rest has pretty far out maturities so we have tons of time / aren't forced sellers. this sale is a big step to lowering their cost of capital, making APTS more of a "real" REIT (eventually). I think the complete exit of two of their segments in a short time frame makes the end game more believable. 

I would increase position materially if there's another big step to getting that preferred smaller (big equity offering, further asset sales). 

 

Listened top the last call this morning. Management seemed pretty open and honest. They seemed to touch on all the concerns individuals have as well as highlight key areas to improve shareholder value. This sale is a big step in the right direction. 

@Gregmal what's your take on management? I know they are unproven thus far. 

@thepupil If you were running the company what would be your next steps? 

[Gregmal]

So I'll preface this with the disclosure that I did my very best to be a good financial professional today... I briefly read the news release this AM and just now got back from playing 18 holes. But at first glance, you cant complain about this at all. I will definitely dig in deeper(not tonight because Ive got a night fishing trip). But, quick points...

This size of a sale, this soon, is a huge positive in terms of validating what these guys are doing. And yes they still have a big chunk, over 1M sq/ft of office left. Its a great starting point, and also definitely not a Sears style, illusory hand waive as they seemed to indicate they will be exiting office entirely in the near term. 

On management, I think its not a question of whether theyre good at what they do; almost anyone in high level real estate is, good...the question is "are they aligned/willing to do what they need to do to create shareholder value"....and so far I think the answer is a resounding yes. That can change of course. But they internalized the manager. Exited student housing. Now quickly monetizing office. All positives. These guys are definitely proven in terms of what they can do deal wise. They can build an empire, many were associated with Williams and the Post crew. A decade ago this thing had like $5M in NOI. They just need to execute what they've communicated that they will, and they've already started in a very impressive way. 

Edited April 19, 2021 by Gregmal

[cubsfan]

terrific Greg - thanks for bringing to our attention this opportunity - when it's 100% MF and 100% occupancy - the rerating becomes more clear.

You should play golf and go fishing more often! Good shit happens.

[Williams406]

My big question a few weeks ago was how willing the company would be to part with office and/or retail.  While I don't know that retail is any sort of sacred cow, I note that PAC's CEO was CEO of the retail division from 2014-2020. Maybe they go 100% MF, but I'd be okay with MF and Retail (New Market) provided they focus on preferred stock reduction. What I want to see now (assuming rest of Office sold soon): Call as much preferred as the call schedule allows and add nothing to MF. The portfolio--sans office--is great, trim the few non-sunbelt MF properties. Your balance sheet is the problem, not a poor portfolio. Fix that and your equity comp and my equity position make us happy.

[LC]

"18 holes"

"night fishing trip"

 

Are these expenses already baked into RCI Holdings price or are we looking at one time earnings surprises here?

https://www.rcihospitality.com/

[Castanza]

4 hours ago, Williams406 said:

My big question a few weeks ago was how willing the company would be to part with office and/or retail.  While I don't know that retail is any sort of sacred cow, I note that PAC's CEO was CEO of the retail division from 2014-2020. Maybe they go 100% MF, but I'd be okay with MF and Retail (New Market) provided they focus on preferred stock reduction. What I want to see now (assuming rest of Office sold soon): Call as much preferred as the call schedule allows and add nothing to MF. The portfolio--sans office--is great, trim the few non-sunbelt MF properties. Your balance sheet is the problem, not a poor portfolio. Fix that and your equity comp and my equity position make us happy.

I did notice on the call that they seemed to agree with Dimon’s (JPM) view that office workplaces are still a necessity and the effects of wfh are beginning to show. This would lead me to believe that they aren’t yet willing to part with all of the office space. As you said, they don’t have a portfolio quality issue. So hopefully they keep the cream of the crop when it comes to Office. 

[Gregmal]

4 hours ago, Castanza said:

I did notice on the call that they seemed to agree with Dimon’s (JPM) view that office workplaces are still a necessity and the effects of wfh are beginning to show. This would lead me to believe that they aren’t yet willing to part with all of the office space. As you said, they don’t have a portfolio quality issue. So hopefully they keep the cream of the crop when it comes to Office. 

All I'll say is check out Three Ravinia. Big lease through 2031 with IHG representing over 50% of the building. 1 and 2 Ravinia recently sold for $270 a sq/ft. Definition of a trophy property. 

Edited April 20, 2021 by Gregmal

[thepupil]

23 hours ago, Castanza said:

Listened top the last call this morning. Management seemed pretty open and honest. They seemed to touch on all the concerns individuals have as well as highlight key areas to improve shareholder value. This sale is a big step in the right direction. 

@Gregmal what's your take on management? I know they are unproven thus far. 

@thepupil If you were running the company what would be your next steps? 

- I'm comfortable with the retail exposure, but if I could get a <5.75 cap for the stabilized shopping centers (which I don't think is impossible), I'd sell it and accelerate the transition to MF. 

- I'd cut the common dividend to zero and only pay out that which is necessary at year end, all capital goes to taking units from 11K to 15K to 20K sunbelt REIT

- sell non sunbelt multifamily

- stop the loan stuff, harvest capital from that, REIT guys don't want that shit, i don't care if it makes sense

- I would probably not pay down the preferred directly, but would instead use proceeds to buy trophy sunbelt MF properties at trophy prices financed with 50% LTV 10+ year type of debt.

- basically, I'd build scale and focus at all costs and embrace the 4.0 cap and not try to be a value investor about it, would hope to get stock to $20+ as value became more clear and would pay off the pref with stock issuance as it became callable. 

no buybacks, no more dividends than necessary, total pure play by 2025, give the market what it wants, not what it needs. value bedamned, lol

EDIT: the common dividend is 100% return of capital so I don't think they'd have to pay a cent and can cut it to zero, that's $36mm/year of cash going out of the company that doesn't need to. shouldn't be worried about giving money to commons until a sustainable cap structure is in place. yield pigs aren't who're gonna take the stock up. 

 

Edited April 20, 2021 by thepupil

[DooDiligence]

1 hour ago, thepupil said:

- I'm comfortable with the retail exposure, but if I could get a <5.75 cap for the stabilized shopping centers (which I don't think is impossible), I'd sell it and accelerate the transition to MF. 

- I'd cut the common dividend to zero and only pay out that which is necessary at year end, all capital goes to taking units from 11K to 15K to 20K sunbelt REIT

- sell non sunbelt multifamily

- stop the loan stuff, harvest capital from that, REIT guys don't want that shit, i don't care if it makes sense

- I would probably not pay down the preferred directly, but would instead use proceeds to buy trophy sunbelt MF properties at trophy prices financed with 50% LTV 10+ year type of debt.

- basically, I'd build scale and focus at all costs and embrace the 4.0 cap and not try to be a value investor about it, would hope to get stock to $20+ as value became more clear and would pay off the pref with stock issuance as it became callable. 

no buybacks, no more dividends than necessary, total pure play by 2025, give the market what it wants, not what it needs. value bedamned, lol

 

I’d love to see a dividend cut. Imagine the price plunge / buying opportunity.