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Strategies & Market Trends : Value Investing

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To: bruwin who wrote (67029)	4/2/2021 10:25:31 AM
From: E_K_S	Read Replies (2) of 78768

RE: MAC Would you have any guess why this Mall company was losing money last year? Now that we have a vaccine, do you believe that loss will continue? An investor always looks 'Forward' and if you can buy those assets at 35% below stated BV (remember those assets not valued at Market value either) and the same assets have a upgrade path to generate 20% more FCF when their Capx improvements are completed (converting single use to multi use), Do you know what this opportunity reminds me of? The opportunity is like the foreclosures I would Buy in the 90's. You Buy the assets at a significant discount to Market price, do the fix-up, and sell and/or rent. Rinse & repeat. MAC now has over $95 million in cash and authorization for up to $500 million in equity available to complete their transition to converting some of their properties to multi-use from single use properties. Based on my calculation, the Risk/Reward opportunity is +330% ( fair value is/may be $40/share vs current stock price of $12/share). The investor receives a 5% dividend while you wait too. (Fair value can be determined by looking at the market value of the assets divided by the normalized Capitalization rate for such properties - probably at/near 8% ) ------------------------------------------------------------ Management has a backup option (used already on some marginal properties) to raise capital and that is they may/could obtain 1st mortgages on 'individual' properties. This way, the bank becomes their partner and by collateralizing the 'specific' asset and not the company/REIT. Worst case (because of some Black Swan), that property can go into foreclosure and directly back to the bank. I believe that is why their interest expense may be as you stated since those 1st deeds could be interest only along w/ their corporate credit revolver they are using for CapX capital. Having the Bank w/ a vested interest in seeing the assets perform is a great negotiating tool for refinancing individual term loans and/or new credit revolver terms. -------------------------------------------------------------- Bruwin your comments are always appreciated as it just confirms my 'Valuation' thesis and checks the boxes on my list: 1) Risk/Reward Excellent; low downside Risk for possible 300% upside return 2) Earn income while you wait; 5% REIT dividend (considered capital gain income) 3) Management has plan to improve the value of the asset by increasing FCF from single use to multi-use. 4) Management has strategy to diversify 'Leverage' Risk having Banks secure 1st Deed of Trust on 'specific' marginal individual properties as deemed necessary 5) Management has possible Exit Strategy to Sell and/or merge assets as needed (in the past rejected take over offer valued at $98/share) but has sold 'Non-Core' assets to raise capital FWIW, still building my position w/ recent Buys at/near $11.30/share last month bringing my avg cost/share to $10.50/share or about 64% of stated BV I have to thank Madharry for bringing this name to my attention and Grommit for identifying many other undervalued REITs (operating in different sectors; industrial warehouse and office eg STAG &FSP among others). The key take away for me: Look at the opportunity/potential in the asset and try to Buy it at a deep discount. EKS

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