Author Topic: GRIF - Griffin Industrial Realty  (Read 8144 times)

BG2008

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Re: GRIF - Griffin Industrial Realty
« Reply #30 on: September 02, 2019, 08:48:33 PM »
https://www.wsj.com/articles/the-case-for-giving-money-away-now-11560714097

Lewis B. Cullman, brother to Edgar M. Cullman, who was the CEO of Culbro, LLC (parentco of Griffin), gave away $550mm of his wealth.  He passed away at the age of 100 and urged fervently that other wealthy people should give away their wealthy today rather than let it sit in a fund in perpetuity.   

This is not the sole merit for investing in Griffin.  But it is good to know that one of the family members you're dealing with gave away half a billion to charity in his lifetime.     


BG2008

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Re: GRIF - Griffin Industrial Realty
« Reply #31 on: September 04, 2019, 08:02:57 AM »
A lot has been made about the family ownership of Griffin.  I did some further sleuthing and found out a bit more about Culbro the company that spin off Griffin and how GRIF came about

The current CEO's grandfather-in-law and his brother were in the cigar and cigarette business.  The grandfather-in-law, Edgar M Cullman, took over the family's cigar business.  Edgar's brother Joseph F Cullman 3rd went to work for Phillip Morris after the family sold Benson and Hedge (maker of Parliament) to Phillip Morris.  Joseph Cullman 3rd eventually rose up the rank and became CEO and chairman.  Benson and Hedge was a pretty good business purchased for $850k in 1941 and sold to Phillip Morris for $22mm for stock in 1957.  Benson and Hedge was a higher end cigarette company and couldn't really grow after a while.  So the family sold it to Phillip Morris despite Edgar and Joseph's father opposing the sale.  This is one of the first instance of the family selling a business when they receive a good price and after they couldn't really grow the business anymore.       

https://www.latimes.com/archives/la-xpm-2004-may-03-me-cullman3-story.html
https://www.washingtonpost.com/archive/local/2004/05/03/philip-morris-chief-joseph-cullman-dies/a88cbda5-9e87-476f-8b77-ebc87f3f477e/?noredirect=on

While Joseph went on to an incredible career at Phillip Morris, Edgar stayed in the family cigar business and made tuck in acquisitions that would form Culbro.  Over the years, Culbro bought other cigar businesses and they winded up owning mass market cigars and premium cigars such as Macanudo.  When they bought American Sumatra, they acquired thousands of acres of land in the Hartford area that increased their acreage to the family's tobacco growing operation.  They became one of the largest land owners in Connecticut.  They also bought a nursery business which was why the company was previously called Griffin Land and Nursery until they sold the nursery operation a few years ago.  Over the years, the company bought a packaged food business, Ex-Lax (a gentler laxative for children), plastic packaging, etc.  Many of the acquisitions were attempts to supplement the cigar business.  For example the plastic packaging were purchased to make plastic tips for smoking cigars.  Over time, when they couldn't grow the packaged food business, they should it to their competitor because salty food is very regional and the value is really in the distribution which has a separate business.   They sold the Ex Lax when one of the European conglomerates were eager to make an acquisition and they made a pretty good profit on it.   In the 90s, Griffin was spun off from Culbro into a separate company.  Eventually, Culbro sold their mass market cigars to a company called Swedish Match.  Overtime, Culbro also sold the premium cigar business  to Swedish Match and fully exited from the business that was built up over multiple decades.   

Anyway, I think the key takeaway from the corporate history of Culbro and studying the family is that there is a pattern of "if the price is right, any asset is for sale."  This went all the way back to Benson and Hedge to the more recent sale to Swedish Match in 2005.  As far as I know, Michael is the only person from the family operating the business.  Danziger is a director.  None of the other children or grand children of Edgar Cullman is involved with Griffin.  I offer this analysis because people keep asking "is this a family and/or management team that will fight tooth and nails to stay entrenched even if they got a bid from a bigger REIT or from Blackstone?"   I am 95% sure that the answer is no.  If they get a good price, they will likely sell.  Another key data point is that the CEO and his wife owns about $27mm of stock (assume a NAV of $70).  Given that this roughly 40x of the CEO's 2018 total compensation, I think he behaves like a true owner rather than a CEO with lots of stock option. 

I don't necessarily enjoy putting the family in the spot light.  The stock holdings are public via the proxy statement and if you dig enough you can find the corporate history of Culbro.  But we are dealing with a family that owns almost 50% of the company.  So this analysis is necessary in my opinion.   


KJP

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Re: GRIF - Griffin Industrial Realty
« Reply #32 on: September 04, 2019, 08:25:32 AM »

I don't necessarily enjoy putting the family in the spot light.  The stock holdings are public via the proxy statement and if you dig enough you can find the corporate history of Culbro.  But we are dealing with a family that owns almost 50% of the company.  So this analysis is necessary in my opinion.

Thanks for posting that summary.  It's useful, relevant and based on public information, so I agree there's nothing inappropriate about posting it. 

I believe I've seen you post about the Baker family and FRP.  Has the timing of Cullman family asset sales been as good as the timing of the Bakers' sales?

BG2008

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Re: GRIF - Griffin Industrial Realty
« Reply #33 on: September 04, 2019, 09:29:53 AM »

I don't necessarily enjoy putting the family in the spot light.  The stock holdings are public via the proxy statement and if you dig enough you can find the corporate history of Culbro.  But we are dealing with a family that owns almost 50% of the company.  So this analysis is necessary in my opinion.

Thanks for posting that summary.  It's useful, relevant and based on public information, so I agree there's nothing inappropriate about posting it. 

I believe I've seen you post about the Baker family and FRP.  Has the timing of Cullman family asset sales been as good as the timing of the Bakers' sales?

It is hard to tell given that most of the sales are at least 10 years old.  It is probably hard to top selling the aggregate business in 2006.  Regarding the warehouse sale in 2018, apparently the Baker did not top tick it.  But that is still yet to be seen as we are only 1.5 years remove from that.  I know that Ex Lax was sold for $100mm which was much more than what they paid.  Edgar M Cullman has a way of convincing people that he doesn't really want to sell when he really did want to sell.  But that's not relevant to GRIF anymore as Edgar M Cullman has passed away and no longer running the company.   

Keep in mind that the Baker weren't seller with the aggregate business or the warehouse.  They woke up one day and had a bid for their business, they looked at the bid and said "this is much more than what we can do on our own."  I think if GRIF wakes up one day and gets a bid, they will sell.  That's the most important part of the analysis.  I guess the moral here is that if someone approach you for a deal and  you sell, that's probably a decent time to sell. 

Admittedly, this is sleuthing to the extreme here.  Someone in the family once did an analysis of the Phillip Morris stock that the family owned following the 1954 sale of Benson and hedge to Phillip Morris.  They owned about $22mm of the stock.  One of Edgar M Cullman's uncle was a broadway director.  He made a huge fuss over the fact that the family was overly concentrated in the cigarette business and needed to sell the Phillip Morris stock.  I checked Altria's stock price in going back to 1962 (sale was in 1954).  Altria stock was $0.12 back in 1962 and likely even lower in 54.  So a $22mm position would be worth $8bn.  But there is more.  This does not include the Philip Morris spinoff.  And this does not include the dividend which is $3.36 per share for Altria today.  In that sense, they were terrible sellers back in 1954!!!!  If they held onto to every share, the Cullman family could be one of the wealthiest families in America today.   

I'll bet there are many families in America who sold and regretted it.  I'll bet there are sellers to the Berkshire Hathaway business that regretted selling to Buffet, i.e. See's Candy. 


TwoCitiesCapital

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Re: GRIF - Griffin Industrial Realty
« Reply #34 on: September 04, 2019, 09:59:11 AM »

I don't necessarily enjoy putting the family in the spot light.  The stock holdings are public via the proxy statement and if you dig enough you can find the corporate history of Culbro.  But we are dealing with a family that owns almost 50% of the company.  So this analysis is necessary in my opinion.

Thanks for posting that summary.  It's useful, relevant and based on public information, so I agree there's nothing inappropriate about posting it. 

I believe I've seen you post about the Baker family and FRP.  Has the timing of Cullman family asset sales been as good as the timing of the Bakers' sales?

It is hard to tell given that most of the sales are at least 10 years old.  It is probably hard to top selling the aggregate business in 2006.  Regarding the warehouse sale in 2018, apparently the Baker did not top tick it.  But that is still yet to be seen as we are only 1.5 years remove from that.  I know that Ex Lax was sold for $100mm which was much more than what they paid.  Edgar M Cullman has a way of convincing people that he doesn't really want to sell when he really did want to sell.  But that's not relevant to GRIF anymore as Edgar M Cullman has passed away and no longer running the company.   

Keep in mind that the Baker weren't seller with the aggregate business or the warehouse.  They woke up one day and had a bid for their business, they looked at the bid and said "this is much more than what we can do on our own."  I think if GRIF wakes up one day and gets a bid, they will sell.  That's the most important part of the analysis.  I guess the moral here is that if someone approach you for a deal and  you sell, that's probably a decent time to sell. 

Admittedly, this is sleuthing to the extreme here.  Someone in the family once did an analysis of the Phillip Morris stock that the family owned following the 1954 sale of Benson and hedge to Phillip Morris.  They owned about $22mm of the stock.  One of Edgar M Cullman's uncle was a broadway director.  He made a huge fuss over the fact that the family was overly concentrated in the cigarette business and needed to sell the Phillip Morris stock.  I checked Altria's stock price in going back to 1962 (sale was in 1954).  Altria stock was $0.12 back in 1962 and likely even lower in 54.  So a $22mm position would be worth $8bn.  But there is more.  This does not include the Philip Morris spinoff.  And this does not include the dividend which is $3.36 per share for Altria today.  In that sense, they were terrible sellers back in 1954!!!!  If they held onto to every share, the Cullman family could be one of the wealthiest families in America today.   

I'll bet there are many families in America who sold and regretted it.  I'll bet there are sellers to the Berkshire Hathaway business that regretted selling to Buffet, i.e. See's Candy.

For every person who sold a concentrated position and lived to regret it, there were probably many multiples of people who held concentrated positions and regretted it.


spartan

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Re: GRIF - Griffin Industrial Realty
« Reply #35 on: September 11, 2019, 08:15:10 AM »
The discount to NAV is enormous, but here's my question: if management and other owners are aware of this discrepancy - and it bothers them so much, according to some who have spoken to them - why don't they do anything about it? Why aren't they buying back their shares? I understand that they are taking a more active approach re: investor relations, but if their stock is such a steal, why don't they just buy more of it back? Would that not be the most efficient use of their capital?

As a follow-up, did anyone read the WSJ article from yesterday about Amazon's three story warehouses? There are a lot of interesting points about the warehouse industry that take aim at GRIF's long-term prospects. Will their warehouses be good enough in the long-run? (i.e. is space and location the only thing that's important?) Does this even matter or is the discount still warranted?

Link here: https://www.wsj.com/articles/amazons-new-multistory-warehouse-aims-to-cut-delivery-times-11568113201

thepupil

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Re: GRIF - Griffin Industrial Realty
« Reply #36 on: September 11, 2019, 09:21:28 AM »
spartan, have you  tried to buy this stock? I moved the market pretty big recently with establishing a position. buyback will exacerbate illiquidity.

don't have an answe on the "good enough"...7 and change cap rate on in-place assets and going higher  is like a 40-50% discount to market on an asset basis. I'd say there's plenty of downside in other similar assets before this would be impaired.

« Last Edit: September 11, 2019, 09:24:41 AM by thepupil »

BG2008

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Re: GRIF - Griffin Industrial Realty
« Reply #37 on: September 11, 2019, 09:51:45 AM »
spartan, have you  tried to buy this stock? I moved the market pretty big recently with establishing a position. buyback will exacerbate illiquidity.

don't have an answe on the "good enough"...7 and change cap rate on in-place assets and going higher  is like a 40-50% discount to market on an asset basis. I'd say there's plenty of downside in other similar assets before this would be impaired.

Pupil,

Good to know you own some of this.  It has been bizarre to own GRIF for 2 years and have it trade at essentially the same price.  After a while you start to question yourself, okay maybe just a tiny bit, on whether you're missing some key fundamental.  Was that you with the 3,000 shares bid in the market? 


BTShine

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Re: GRIF - Griffin Industrial Realty
« Reply #38 on: September 11, 2019, 10:30:10 AM »
As an outsider that knows very little about this company, yet I did attend the annual meeting one time in the past few years, my thoughts at the time were that much of the GRIF earnings power were spent on corporate expenses (executive pay, etc) and therefore the underlying asset values were not of much use when the earnings are handed to others instead of common shareholders.   

A cursory look at the trailing FCF and market cap show me a yield to equity of around 5%.   $10 million in FCF to equity and $200 million market cap.   Clearly this cursory look is not in-depth and my assumptions may be far off, but that's how I view the company and therefore are not surprised it trades where it does.  I'm sure this board has discussed many things that would make my analysis wrong, but that's my donation to the GRIF discussion if you'd like them. 

BG2008

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Re: GRIF - Griffin Industrial Realty
« Reply #39 on: September 11, 2019, 12:22:20 PM »
As an outsider that knows very little about this company, yet I did attend the annual meeting one time in the past few years, my thoughts at the time were that much of the GRIF earnings power were spent on corporate expenses (executive pay, etc) and therefore the underlying asset values were not of much use when the earnings are handed to others instead of common shareholders.   

A cursory look at the trailing FCF and market cap show me a yield to equity of around 5%.   $10 million in FCF to equity and $200 million market cap.   Clearly this cursory look is not in-depth and my assumptions may be far off, but that's how I view the company and therefore are not surprised it trades where it does.  I'm sure this board has discussed many things that would make my analysis wrong, but that's my donation to the GRIF discussion if you'd like them.

There has been a lot of cursory look reactions to this thesis on this board, you're not the only one!  It probably tells you a lot about why it trades at the current price.