| | | The Microcaps real estate company I have been buying recently is MNPP (Merchants National Properties). This is an OTC company trading around $1850/ share with ~93k shares outstanding. The company does not file, but the audited financials are published yearly on their website and look pretty good.
marxrealty.com
Valuation wise, the company trades at a moderate premium to stated book ($1600/ share). profits were around $82/share. EBITDA is around $270/share. There is about $100M in debt outstanding, mostly mortgages on their limited partnerships. I do not know this number exactly, but this is based on the grossed up interest rates they have published and assuming a 5% interest rate. The is about $1100/ share. The do have liquid investments of about 33M or about $370 share to offset (interesting enough this investment had a cost basis of only 700k, so it has done incredibly well!).
Most of their properties are interests in partnerships around NYC and CT, including a 30%+ stake in a class A mall in Yonkers, NY with sales of $780/sqfst and some buildings in Manhattan ( near the UN headquarter, 708 Third Street, Park Avenue and Madison Ave). This is fairly prime real estate. I calculated the NOI cap rate, based on the balance sheet metrics and my assumption of net debt at around 10%, which I think is a 50% discount based on prevailing market prices.
Disadvantages of this investment are illiquidity, tax disadvantage of being incorporated as C-Corp and a somewhat elevated corporate overhead. I bought a huge (for me) chunk of shares recently, simply because there was an apparent seller who made shares available. I think it is due to the CEO leaving for another job and I suspect he is selling some of his shares.
You think is a fairly safe long term bet. The stock may not go anywhere quick, but I think the assets are of very high quality and trade at a substantial discount to fair market value. |
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