Smart, Fiduciary-Minded Real Estate Operators

[BPCAP]

I'm trying to get a handle on Real Estate securities.  I've tried in the past, only to find balance sheets I didn't like and a ubiquitous principal/agent problem where managements are in it for the fees and have too many incentives for growing square footage (regardless of price).  I haven't seen a "per-share-net-worth" and fiduciary-minded approach (at least among U.S. REITs). 

 

Any operators impress you?  Looking for:

 

Conservative balance sheets;

Good, Conservative management;

Independent thinking;

 

Basically, you know what I'm talking about.

 

Thanks for the help!

[bizaro86]

FRPH?

[BPCAP]

Thanks, don't know that one, and I'll look into it.

 

Also willing to take ideas on private REITs selling at a discount (treacherous grounds, I know--but I thought I'd look across the whole RE landscape). 

 

 

[CorpRaider]

Sorry if this reply is too elementary:

 

The Zell/equity complex comes to mind, but I think he would tell you himself not to touch them/RE at this price (which kind of make me think he's not full of sh*t).  SRG has some Buffett associations/imprimatur, but then again he's loaning them money at 7%. 

 

You could check out HHC and JOE. I think the incentives are at least right there... 

 

People on here (I am not among them) like KW and BAM.

 

U could also maybe screen for REITs that have reduced float, since that would run contrary to the typical constant dilution behavior.

 

Happy hunting and let us know if you find anything interesting.

[Guest cherzeca]

Sorry if this reply is too elementary:

 

The Zell/equity complex comes to mind, but I think he would tell you himself not to touch them/RE at this price (which kind of make me think he's not full of sh*t).  SRG has some Buffett associations/imprimatur, but then again he's loaning them money at 7%. 

 

You could check out HHC and JOE. I think the incentives are at least right there... 

 

People on here (I am not among them) like KW and BAM.

 

U could also maybe screen for REITs that have reduced float, since that would run contrary to the typical constant dilution behavior.

 

Happy hunting and let us know if you find anything interesting.

 

JOE is interesting but something you put away and not look at for 5 years

[scorpioncapital]

Srg?

[Spekulatius]

HHC and VNO come to my mind.

[BPCAP]

I've read and re-read a lot of HHC filings, hoping to see what the bulls are seeing.  I don't get it. 

 

I know some of the choice properties well, and all I can see is they're not really making much profit at the end of the day. This is the time the big bucks start rolling in, but the numbers suggest they're still just washing lettuce.  It looks like the execution hasn't matched the promises of its people and premise. 

 

But I might be missing something.

[BG2008]

I've read and re-read a lot of HHC filings, hoping to see what the bulls are seeing.  I don't get it. 

 

I know some of the choice properties well, and all I can see is they're not really making much profit at the end of the day. This is the time the big bucks start rolling in, but the numbers suggest they're still just washing lettuce.  It looks like the execution hasn't matched the promises of its people and premise. 

 

But I might be missing something.

 

Haha

[BG2008]

I've read and re-read a lot of HHC filings, hoping to see what the bulls are seeing.  I don't get it. 

 

I know some of the choice properties well, and all I can see is they're not really making much profit at the end of the day. This is the time the big bucks start rolling in, but the numbers suggest they're still just washing lettuce.  It looks like the execution hasn't matched the promises of its people and premise. 

 

But I might be missing something.

 

Haha

 

BPCAP,

 

Can you outline exactly why you don't see value in HHC?  The haha isn't meant to be a taunt.  I feel like there are three groups of investors of HHC.  First, the ones that don't get the value.  On the surface, it is hard to see the value.  We struggled with it for a long time as well.  Second, there are the group that sees the value but believes that the catalyst is many years away and don't want to own it now.  Third, there's the group that owns the stock and are willing to ride through the up and downs and believes that it is crazy undervalued.

[BPCAP]

No offense taken.  It's the one seeing value that has to explain and has the burden of proof!  ;)

 

But since you asked... The short answer is profits.  Way too low for the phase of development they are in and for the price the stock commands.  They've pushed a lot of units already, and I just don't see a level of profits (or return on cap or equity) that justifies the almost $7.5 billion price tag (Enterprise Value).  Even if revenue estimates play out nicely and they achieve a double-digit margin, there's not a lot of profit vs. price.  Add to this the additional capital (debt plus printing shares) they'll need to build and monetize and economic uncertainty, and I don't see a margin of safety for buyers today.  Moreover, we have to remember that the times have been about as good as a real estate developer can ask for.  May not be as favorable going forward.

 

I could be wrong and my lack of faith might be because I find the complexity daunting and I've seen some of their best developments either already behind them (Honolulu) or disappointing (NYC). 

 

I hope the bulls are right and I'm too stupid to see this clearly. 

[Spekulatius]

Anyone has an opinion on SLG, the NYC focused office and retail REIT?  They are buying back stock aggressively. Implied cap rate according to their last IR presentation is 7.27%, while NYC real estate of comparable quality goes for 5% it less. I am not bullish on NYC real estate, but this discount is quite large.

https://slgreen.gcs-web.com/static-files/8e49a27c-5167-43f8-97e3-656c06eef5fb