KJP
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Posts posted by KJP
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I'm buying puts on BURL. Retailer with 100% of stores closed indefinitely, with no sales on website, because they closed it last year (!), and trading for over 20x trailing profits.
If they are closed for months, they will have stale inventory,
This is an interesting problem for clothing retailers, or anyone else that sells seasonal goods. How far in advance does the typical clothing retailer acquire inventory, e.g., by mid-march I assume most winter clothing is already gone. Is the mid-march inventory primarily spring or summer clothes?
Either way, it seems like there is going to be alot of out-of-season clothing around. Would off-price discounters benefit from that? Also, someone's going to have to eat most of that. Will brands take some of it back?
Maybe off-price can buy tons of stuff cheap, but who wants Easter stuff after the holiday? How many people just don't need new swimsuits at any price if they are cancelling their trip to Hawaii?
Plus, we were at all time high consumer sentiment in February....how's consumer sentiment now? All of my friends are delaying or cancelling vehicle/house purchases, and sticking to the necessities, even if they have money. Who is going "shopping" even if stores re-open? And to what extent was BURL's target market (women with incomes $25k-100k) affected financially?
I was just asking about the balance sheet writedowns to inventory (and potential covenant and working capital/cash flow arising therefrom) that seem likely. As you note, the fact that stores might not even be able to sell seasonally appropriate inventory is, of course, another even bigger potential problem.
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I'm buying puts on BURL. Retailer with 100% of stores closed indefinitely, with no sales on website, because they closed it last year (!), and trading for over 20x trailing profits.
If they are closed for months, they will have stale inventory,
This is an interesting problem for clothing retailers, or anyone else that sells seasonal goods. How far in advance does the typical clothing retailer acquire inventory, e.g., by mid-March I assume most winter clothing is already gone. Is the mid-March inventory primarily spring or summer clothes?
Either way, it seems like there is going to be alot of out-of-season clothing around. Would off-price discounters benefit from that? Also, someone's going to have to eat most of that. Will brands take some of it back?
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Job title/description: Founding partner of firm
Industry you work in: Law
City and Country: Philadelphia, PA, USA area (live 20 miles from Philadelphia, office in Center City)
Anything expected or unexpected from being forced to work from home: I'm around 40 with 1+ hour commute. The option of working from home a few days per week is very appealing.
But when I was 22 and just starting my first post-college job in New York, I would never have signed up for working all day from my cramped, dingy and dimly-lit apartment.
As for office space now, I still need it for client meetings, depositions, etc. For those reasons, downtown office space isn't going away for law firms. The prime office space law firms need has shrunk over time as the number of secretaries declines and firm-wide back-office functions are moved off-site to cheaper locations. On the other hand, at a top law firm, every lawyer -- even a new associate -- expects to have an exterior office with windows. That leaves alot of dead space in the interior of squarish floor plates that used to be occupied by secretaries. Newer buildings with differently shaped floor plates that minimize interior, windowless space help address this problem.
More broadly, depending on what they do, I think people just starting out in their fields could be making a big mistake by working primarily from home. For professional service firms where business generation (or internal politics) is ultimately what separates the top earners/owners from middle management, you need to build as many connections as possible, and it's easier to do that when you're physically present in the same area as the people you should get to know. That's less of an issue if you're already 40 or 50 years old and have an established reputation and client base.
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Perhaps single-family housing, driven by new family formation. People are spending alot of time at home with their significant others, which probably doesn't hurt family formation. In the meantime, housing sales have ground to a halt, and I assume single-family construction is slowing down (or perhaps stopping) in many areas of the country.
Of course, buyers need money to buy a house.
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I find another forum I often visit much more insightful that this one when it comes to discussion of the oil/gas industry. I think this is pretty appropriate to the discussion of tariffs:
"I struggle to see how import tariffs will have any impact on WTI pricing. What we import and what we produce are essentially two different products, even though we call them both crude oil.
US refiners are already using as much light sweet crude as possible. They're tooled up to run primarily heavy sour crude. That's why we export so much crude. So an import tariff doesn't mean the refiners will be more inclined to run more domestic oil to help the shale producers.
Tariffs on imported crude will just raise the price of gasoline, not WTI... We live in a world where the international markets are going to weigh heavily on the price of WTI, in part due to large volumes of exports. Trump's tariff does nothing to alter international pricing. As long as OPEC keeps flooding the international market, WTI is along for the ride. Saddle up boys..."
As an aside, I didn't know this, but apparently Trump didn't know semi's run off of diesel:
https://www.businessinsider.com/trump-trucking-shortage-elds-leaked-audio-2020-1
Anyways, I think this thread has completely derailed. I don't think I or anyone else on here has any real edge in oil investments. I've looked at Deep Basin Capital's recent filings, and even these guys have been making pretty bad bets on the sector. But what I do know is this:
1) There's a shit ton of oil out there -- peak oil was stupid
2) For the next few years, oil demand is going to stay low
3) NA oil / gas production will likely be decimated
4) The only real long term bet is integrated majors and some midstreams. But, even refiners will have a hard time. Midstream MLP's will likely get wiped out or their dividends will get crushed.
My bets are going to be: BP, RDS, CVX, VLO, and maybe PSX. Shorting all things shale related.
You don't predict that natural gas demand will crater. So, regarding (3), why is gas production going to get hit? I understand why associated gas may decrease and potentially decrease substantially. But the US has plenty of high-quality areas for gas-directed drilling, and won't those areas be helped by a decline in associated gas?
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I'm part owner in a company selling custom built websites. I regularly speak with Joe public about their finances.
I speak with about 5-10 new people every day from around the country.
Every third person I speak with has lost their job or been furloughed. Half of them have stopped paying some of their bills, credit cards go first. Many are seeking unemployment but are so broke the gap in income will hurt them badly. People are pulling all or some money out of retirement accounts. In general, those who needs support are confused as to what they will receive and when or how to apply.
Many are only a month or two away from missing mortgage payments.
I usually show people how to do balance transfers with credit cards to get 0% for 15 plus months, the credit card companies aren't approving new applications anymore, except for perfect credit. I haven't heard from anyone that credit limits are being reduced yet like in 09 however inactive cards are being cancelled en masse.
Surprisingly, those working that are 60 plus years old think they will be going back to work by May.
The leads we buy as a company are not available in the same quantity and the quality is lower. Generated online.
That's interesting. From what i read a lot of lower-income people losing their jobs right now, will actually have more money coming in than before (combination of unemployment and the check from Mnuchin). How fast do you get an unemployment check after you file in the US. There might be some cash flow mismatch, but my impression was that for a couple of months most people will be able to scrape by.
It could be a other wrinkle they this crisis leads to a further destruction of the middle class. Let’s say you have a couple earning 200k/ year in 2019, you get zero Covid-19 check. 200k is a lot in some parts of the country but not they much in others. If now both lose their jobs, they could be worse off than a low income family actually.
The group you're describing is also one of the groups most likely to be forced to sell investments at the bottom, tap retirement accounts, etc. That won't help their long-term net worth.
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That's disappointing to hear.
In this case they created a fake LLC under my name. Some merchant processor gave me the name on the application. The fake business's address is at a UPS store in Atlanta. Manager was super helpful, said she had the ID on file of the person who opened the box, and would be happy to notify the police next time he comes in or give the ID to the police. Atlanta Police were legitimately mad at me that I'd suggest they'd do that, and said it was Denver police's responsibility. Obviously Denver police said they can't go to Atlanta so it seems to be dead from there, despite doing most of the work for them. FBI said they don't look into that sort of stuff, talk to the FTC. FTC just has you fill out a form.
I've frozen equifax, although right now I'm trying to apply for a loan for a small business. Banks must lose a ton on this sort of stuff... you'd think they'd care a bit. Reminds me of that Seinfeld episode where Kramer is convincing Jerry to file a fraudulent damaged package claim, and his rationale is they just "write it off".
Thanks for everyone's help. Hopefully someone at the government somewhere is actually doing something!
Many District Attorney's offices in major metropolitan areas now have specialized units that focus on identity theft or the broader category of white collar crime. Contact them directly.
I believe this is the relevant Fulton County unit: https://www.atlantafultoncountyda.org/services/prosecution-units/white-collar-crime-unit/
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One thing to keep in mind is that EVERYONE hates the oil companies.
Do you know how I know you don't live in Texas?
Fair enough. Everyone outside of Texas hates oil companies. But even there the number has to be close to 50%.
Maybe even higher in Austin...
But I think most Americans like energy independence and recognize the national security aspect. Especially post-coronavirus.
I believe a tariff would be pretty well received.
Do you think most people value long-term intangible things like "energy independence" over higher prices at the pump? Will tariff revenues be used to offset a cut in the gasoline tax? (I assume tariffs would also be imposed on refined products.)
More broadly, if a large percentage of oil production in the US were shut-in (and new drilling went essentially to zero), how long would it take to restart that shut-in production and how much damage would there be to reservoirs? It seems to me that we'd do more to preserve our energy independence by leaving it easily accessible in the ground and taking advantage of foreign sellers willing to sell us oil at very low prices.
How many times have you been to the pump last couple of weeks? This tariff would not be forever. For right now, I think it will make a lot of sense to trump (not necessarily make sense to many of us).
My comment was directed at the validity of the reference to "energy independence," not whether or not Trump will actually impose a tariff. As you imply, there are other reasons that Trump might favor a tariff, such as protecting big donors from the oil patch.
I suspect the claim of "energy independence" will be used to sell any such action to the public. But is that claim factually valid? That's what I'm trying to get at.
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One thing to keep in mind is that EVERYONE hates the oil companies.
Do you know how I know you don't live in Texas?
Fair enough. Everyone outside of Texas hates oil companies. But even there the number has to be close to 50%.
Maybe even higher in Austin...
But I think most Americans like energy independence and recognize the national security aspect. Especially post-coronavirus.
I believe a tariff would be pretty well received.
Do you think most people value long-term intangible things like "energy independence" over higher prices at the pump? Will tariff revenues be used to offset a cut in the gasoline tax? (I assume tariffs would also be imposed on refined products.)
More broadly, if a large percentage of oil production in the US were shut-in (and new drilling went essentially to zero), how long would it take to restart that shut-in production and how much damage would there be to reservoirs? It seems to me that we'd do more to preserve our energy independence by leaving it easily accessible in the ground and taking advantage of foreign sellers willing to sell us oil at very low prices.
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Anybody opposed to this idea?
Nobody has ever been opposed to infrastructure spending. It just never happens.
Anybody can explain why? (I'm fine if it's in Politics section).
I've heard bipartisan support to infra spending for hmmm 10+ years now? And nothing? Why?
It's neither party's top priority. There's also a philosophical difference between the parties in how it should be done. Dems generally favor full government spending and then government ownership of the assets built. GOP likely favors "public-private partnerships" that would end up with the assets in private hands.
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4. I looked at my credit card spend since March 10th - and was almost nothing on it until the 28th. I wasn't even trying to cut back but
we just have not been going out. Probably distracted too. Curious of other people credit card spend?
Mine is probably down 75% to just groceries and cell/broadband/streaming service bills.
Other anecdotes:
1. Various Facebook debates about whether you should continue to pay people who regularly provided you with various services, e.g., cleaned your house, but are no longer able to do so. These people likely have no other income and their ability to claim unemployment is unclear to me.
2. Some daycares/private pre-schools still expecting full payment even though no in-person classes (the stated reason is to continue paying teachers), some asking for half-pay, some not asking for any payment. Many pre-schools/daycares are having virtual classes via Zoom
3. The weather has been quite poor the last few days (cold rain), but otherwise the local public outdoor tennis courts have been quite busy
4. No longer any expectation that K-12 public schools will reopen this year
5. Local universities are starting to prepare for the possibility of online classes for the 2020-21 academic year
6. People remain quite orderly and polite, despite having to stand in line six feed apart outside in the rain to wait their turn to enter Trader Joes
7. National and regional law firms are cutting partner pay/draws, eliminating 401(k) match, etc. to avoid layoffs of staff, but I doubt that will last for months
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Disclosure: Department of defense contractors are on a long term watchlist and would make them easily 10% of invested funds if the price is right. i may contribute to this discussion more fully in due course.
IMO, the pension issue is very significant. I guess it has the potential to be smoothed away over time but the potential long term cash flow implications are significant.
If interested:
https://www.gao.gov/assets/660/651387.pdf
https://us.milliman.com/insight/Pension-Funding-Index-March-2020
I agree on both points. Given the size of the pensions here, and how they impact reported financials, I'm doing more reading to understand how they work. As for price, I believe current prices still reflect a bullish take on future military spending, in contrast to the multiples you had in 2011/12.
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Regarding the FAS/CAS adjustments I mentioned in the first post, after reading a few of the 10-Ks for these companies, I believe it works like this:
Pension costs associated with US government contracts represent reimbursible costs ultimately paid for by the government. The timing of those payments are governed by the government's accounting standards, known as "CAS". These companies rely on CAS when they report their segment operating figures. So, the segmental net sales, COGS, and operating profit reflect real-world CAS reimbursements.
The company's consolidated audited financials, however, must be reported according to GAAP, which has different cost recognition principles. Thus, GAAP pension expense and CAS pension expense on the income statement can vary widely, but should converge over time. The CAS/FAS adjustment to "other income" reconciles the GAAP annual pension expense to the CAS pension expense embedded in the reported COGS. Thus, in years where the CAS figure is higher than the FAS figure (as in recent years), the reconciling entry will be positive and increase reported earnings, and vice versa in years that FAS is lower than CAS.
I believe the CAS numbers, i.e., the pre-CAS/FAS adjustment, a better reflect the underlying business economics. I'm particularly interested in whether others agree or disagree and why.
Actual cash contributions to the pension plans are governed by a different set of ERISA rules, as modified by the Pension Protection Act of 2006. So, that requires its own analysis, separate from what is recorded on the annual income statement.
There's a discussion of the pension issue in this VIC write up and its comment thread: https://www.valueinvestorsclub.com/idea/LOCKHEED_MARTIN_CORP/7341821351
Note that back at the time of that writeup, Lockheed's most recent CAS/FAS adjustment was negative, rather than positive, as reflected in the writeups chart.
Also of note is the multiples at which these companies once sold for. There are several VIC writeups of these companies from 2011/12 showing much lower multiples than are available today, even after the recent declines, apparently out of fear of upcoming defense budget cuts. In addition to the Lockheed writeup above, see:
https://www.valueinvestorsclub.com/idea/HUNTINGTON_INGALLS_IND_INC/1604269707
https://www.valueinvestorsclub.com/idea/GENERAL_DYNAMICS_CORP/8583285979
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NRA sues California Gov. Gavin Newsom and other state officials over gun store closures
https://www.cnn.com/2020/03/28/us/nra-sues-california-over-gun-store-closures/index.html
I'm not surprised. This has already been litigated in Pennsylvania. The day after the Governor ordered all non-essential businesses (including gun shops) closed, various parties petitioned the Pennsylvania Supreme Court to enjoin that order as applied to, among others, gun shops: http://www.pacourts.us/assets/files/page-1305/file-8694.pdf
A few days later, the Court denied the petition with respect to gun shops, but there were three dissenters:
Majority opinion: http://www.pacourts.us/assets/files/page-1305/file-8710.pdf
Dissent: http://www.pacourts.us/assets/files/page-1305/file-8709.pdf
Shortly thereafter, the Governor revised his closure order to permit gun shops to continue to operate with certain restrictions: https://www.fox43.com/article/news/health/coronavirus/gun-shops-reclassified-as-life-sustaining-businesses/521-b8d38d12-0438-4410-9488-7e8fbc5ce993
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Defense contractors have fallen alongside everything else. On the theory that (ii) their primary customer (U.S. government) will keep paying, and (ii) neither Trump nor Biden (nor Cuomo 2020) will push for defense spending cuts in the near future, I've started looking at them. I have no background knowledge, so these are some initial, first-pass, relatively uneducated thoughts. I welcome comments and insights about the industry generally, specific companies listed below, or other companies I should add to the research list.
General industry thoughts: Overall, it looks like strong, stable cash flows and some of the most dominant competitive positions you will find, e.g., BWXT in naval nuclear reactors and Huntington Ingalls in aircraft carriers. The other IT/systems companies may have as big or bigger moats, but that's not as easy for me to assess one way or the other. Many companies have significant pension liabilities, but the U.S. government is on the hook for most of it. So, the balance sheet entry probably isn't a big concern. There do, however, appear to be some differences in how the companies account for these pensions (FAS/CAS adjustments) in their discussions of operating income. I need to look at that further.
BWX Technologies (BWXT) – Dominant in nuclear reactors for US Navy ships -- may have no real competition here; also has ancillary nuclear businesses (commercial reactors; radioisotopes; remediation; space/NASA) ; even with recent share price decline, it’s trading at 16x EV/EBIT
General Dynamics (GD) – Gulfstream is ~$1.5 billion EBIT non-defense segment – doubt there are long-term injuries due to Covid, unless we have deep recession/depression; rest of the business looks like very strong defense, such as Electric Boat – dominant general contractor for construction of US Navy submarines (Virginia and Columbia class); trading around 10x EBIT; recent cash flow from ops has lagged due to slow payment on 1 international contract on which it received $500 million in January 2020 (see note H to Item 8 in 2019 Annual Report); capital allocation weighted towards dividends; levered at ~2.5x EBIT; large bump in backlog due to Virginia class subs, Block V
Raytheon (RTN) – Large information systems, sensors, cybersecurity and missile businesses (both offense and defense); 30% international; very strong recent bookings growth; merger with United Technologies targeted to close in 2020 (haven’t looked at implications of this); very little net debt ($4.3 billion cash; $4.7 billion debt); appears to trade at 8.5x EBIT but significant CAS pension adjustment in operating earnings; better cash flow than GD, due in part to GD’s receivable issue
Huntington Ingalls Industries (HII): Largest US Navy shipbuilder, maintainer, modernizer – aircraft carriers (sole source), amphibious assault ships, destroyers, subs (likely second to GD; duopoly that splits contracts); big recent backlog growth from USN orders (e.g., 2 aircraft carriers; looking to grow IT, unmanned systems, and remediation services; “Technical Solutions” segment has low single-digit margins – why?; exiting high point in CapEx cycle (shipyard expansion) – should see big ramp in FCF as a result; trading at ~13.5 EBIT (without accounting for CAS adjustment); levered ~2x EBIT
Nothrup Grumman (NOC): Haven't looked at it yet
Lockheed Martin (LMT): Haven't looked at it yet
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Trump announces that perhaps today a quarantine will be put into effect on all of New York and New Jersey and it could last for 2 weeks. Lock them up!
https://www.cnn.com/2020/03/28/politics/trump-new-york-new-jersey-quarantine-coronavirus/index.html
New York's governor said that he spoke with Trump this morning and they did not discuss any such thing.
Why does Trump do this? I believe that Trump throws these random ideas out during appearances before the press just to see what the public response will be.
It is idiotic to announce a potential quarantine before doing it. It creates nothing but a mass hysteria. If you need to quarantine, quarantine, but don’t say talk bout it before. Grossly incompetent.
Yes, it's like announcing that you're considering closing all banks ...
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It seems to me that the better risk/reward now compared to before the covid crisis has drifted towards the names with worse balance sheets. They're down multiples compared to the better names, which have held up. Hard to know what survives if things stay bad for long enough, but I never thought I'd see fortune 600 names at 1-5x trailing earnings.
Just seems like before the crisis, risky stuff and safer names were priced much more similarly, and now the balance is much different. Hard to know how it all shakes out, but I've sold some safety, Japanese cash boxes and al of that, for riskier stuff
What are your favorites now?
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LICT Corp.
Volvere PLC
IES Holdings -- $27 million cash, no debt, undrawn $100 million revolver maturing 2024, but cyclical construction business
Rosetta Stone
Daily Journal
Park Aerospace
Pason Systems -- challenging business environment
Micro-caps with Good balance sheets, but unlikely to be used (several cash boxes here)
Advant-E (ADVC)
Pacific Healthcare (PFHO)
Tandy Leather Factory (retailer, so 2020 highly uncertain)
The Reserve Petroleum Company (business obviously challenged)
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Based on some comments in this thread two years ago, I opened an account at Fidelity to keep open the option of buying non-reporting OTC securities. I tried to place a few stink bids today via Fidelity on LICT and ADVC and couldn't do it. For some reason I could place one on LAACZ after filling out a waiver form. So, now I've had no luck at both Merrill and Fidelity with many OTC companies, even ones that publish audited financials on their websites like LICT. I've previously had trouble buying them through Interactive Brokers as well.
So, anyone have current recommendations for a US resident on the best broker to buy this type of stuff through?
Schwab aus better for OTC stock than Fidelity. Fidelity allows to buy some OTC stocks, but many are restricted.
Thanks. I will give Schwab a try.
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Based on some comments in this thread two years ago, I opened an account at Fidelity to keep open the option of buying non-reporting OTC securities. I tried to place a few stink bids today via Fidelity on LICT and ADVC and couldn't do it. For some reason I could place one on LAACZ after filling out a waiver form. So, now I've had no luck at both Merrill and Fidelity with many OTC companies, even ones that publish audited financials on their websites like LICT. I've previously had trouble buying them through Interactive Brokers as well.
So, anyone have current recommendations for a US resident on the best broker to buy this type of stuff through?
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We can't have wartime deficits without pretending to try to pay the bill, right?
The US ran 13% deficit to GDP ratios after the GFC, and neither taxes nor inflation went up, net-net. These CV deficits will probably a bit higher but will recede since they are either temporary measures or loans that need to be paid back.
We'll see, I guess, but I don't think you can predict with certainty what will happen.
wabuffo
You're absolutely right. But like the post-GFC period, government debt to GDP will presumably jump higher again. The question no one seems to know is how high that ratio can go. Indeed, is it even a relevant metric? My understanding is that the last time debt to GDP was this high was post WWII: https://tradingeconomics.com/united-states/government-debt-to-gdp [i believe the U.S. government also has much higher off-balance sheet liabilities now than it did then.]
Debt/GDP fell quite quickly for various reasons, including, I believe, a few bouts of high inflation: https://tradingeconomics.com/united-states/inflation-cpi (Of course, high real GDP growth, helped higher population growth rates than we have today.)
So, today we appear to be going toward higher government debt to GDP ratios than we had post-WWII, higher off-balance sheet government liabilities, with significantly lower population growth. I don't know where all of that leads, but I don't think it's ultimately headed towards a free lunch.
If you want to go through history, I think Britain is the best example. It had debt to GDP ratios higher than this for most of its history.
I looked and couldn't find charts going very far back. Since 1975 the UK appears to have generally followed the US: https://tradingeconomics.com/united-kingdom/government-debt-to-gdp
But I assume you're talking about going much further back.
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We can't have wartime deficits without pretending to try to pay the bill, right?
The US ran 13% deficit to GDP ratios after the GFC, and neither taxes nor inflation went up, net-net. These CV deficits will probably a bit higher but will recede since they are either temporary measures or loans that need to be paid back.
We'll see, I guess, but I don't think you can predict with certainty what will happen.
wabuffo
You're absolutely right. But like the post-GFC period, government debt to GDP will presumably jump higher again. The question no one seems to know is how high that ratio can go. Indeed, is it even a relevant metric? My understanding is that the last time debt to GDP was this high was post WWII: https://tradingeconomics.com/united-states/government-debt-to-gdp [i believe the U.S. government also has much higher off-balance sheet liabilities now than it did then.]
Debt/GDP fell quite quickly for various reasons, including, I believe, a few bouts of high inflation: https://tradingeconomics.com/united-states/inflation-cpi (Of course, high real GDP growth, helped higher population growth rates than we have today.)
So, today we appear to be going toward higher government debt to GDP ratios than we had post-WWII, higher off-balance sheet government liabilities, with significantly lower population growth. I don't know where all of that leads, but I don't think it's ultimately headed towards a free lunch.
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Griffin Industrial Realty
What's your take on their tenant base? I imagine it's quite full of smaller companies since they don't talk about tenants
I've never seen a breakdown of their tenants by size or credit quality. But on what they have said, and the types of companies that use warehouses in the places they have them, I don't think it's all smaller companies. See, for example, slides 5 and 15 here: http://www.griffinindustrial.com/assets/uploads/files/Investor%20Presentation%20-%20November%202018.pdf
Thank you for the response. It looks like slide 5 is talking about tenants in the markets they operate in, not tenants in their buildings.
from slide 15: "Key locations for national or international companies (regional/super-regional distribution)" nice but the next line is "For smaller tenants, the property may be a tenant’s sole or mission-critical location" so it's a bit of a wash. It's also under the Aquisition Strategy slide so not necessarily indicative of current tenants.
The lack of any tenant profile disclosure is disconcerting. If you had very creditworthy tenants, you would be highlighting it.
Yes, the slides refer to tenants in the markets, not their tenants specifically. I agree with you that if they had all investment-grade tenants, they'd say so. The broader point, however, is that these types of assets are (or at least were pre-corona) in demand, particularly Lehigh Valley and likely Charlotte and Orlando.
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Griffin Industrial Realty
What's your take on their tenant base? I imagine it's quite full of smaller companies since they don't talk about tenants
I've never seen a breakdown of their tenants by size or credit quality. But on what they have said, and the types of companies that use warehouses in the places they have them, I don't think it's all smaller companies. See, for example, slides 5 and 15 here: http://www.griffinindustrial.com/assets/uploads/files/Investor%20Presentation%20-%20November%202018.pdf
High Quality Multi-family REITs - EQR, CPT, ESS, AVB
in General Discussion
Posted
I believe it will make a big difference who the tenants are. Many people in the US are effectively judgment proof, because they have no assets. So, it's ordinarily a waste of time to sue them, and that is why debt buyers generally can buy debts for pennies on the dollar. But there are others who do have plenty of assets and very good credit ratings. This is the group that, for example, can't simply give the keys of a house back to the bank if its underwater (at least in states that have recourse mortgages).
My understanding of the thesis articulated in the original post was something like EQR likely has many fewer judgment proof tenants than something like NEN and so should be priced accordingly.