Author Topic: NYRT - New York REIT  (Read 22396 times)

thepupil

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Re: NYRT - New York REIT
« Reply #40 on: December 08, 2017, 06:04:06 AM »
The appeal to me is to hopefully get a highly leveraged stake in OWW at a discount to where credible operators just bought the thing when they were one of a few (if not the only bidders) after a slowdown in NY RE.

The eventual value of that levered and illiquid stub is obviously very volatile/dependent on the re-positioning and NYC RE market a few years from now. Illiquidity of the remaining stub doesn't bother me. I want to own that stub to have levered exposure to the asset's re-positioning at a discounted price, for a small chunk of my portfolio.  That's the trade in my view. If you buy that thing for $1.00 and they are saying it's throwing off 42 cents over the next 4 years (implying a 10 ish % cash on cash for a big NYC building) that seems decent.

Not amazing or anything, but I think a good risk/reward that is on offer because this is bombed out by the loss of credibility/extension of event driven hedge funds timeline and blowing up of the IRR spreadsheets.

Assuming the $3.14 in contracted sales go through, then you are paying $0.94 - $1.64 for 1/2 of 1WW ($150mm - $275mm), versus $250 million where the asset just traded/re-financed and the upper bound is if they got $0.00 for the $0.70 of remaining non 1WW which we know will not be the case.


How come no one talks about the levered nature of this investment? 

who is saying it isn't levered? the leverage is kind of the point. If you can point me to where else I can buy fully levered NYC real estate for ~10% cash on cash initial yield (based on the estimate of cash flow over the 4 years) with upside optionality, I'm all ears.

I agree it's similar to real estate PE, which is not easy to access without a)very large check size, b) paying full fees.

I view this as a direct private real estate investment with a low minimum investment, unclear but probably lower than PE fee drag.

But it's definitely highly levered and exposed to a weakening NYC office market. the likely discount to where the asset just traded is modest and does not provide a large margin of safety, but one can easily see SLG paying you $2+ in stock for the half of the JV down a few years down the road, which along with the presumed cash flow over the four years can provide high upside.
« Last Edit: December 08, 2017, 06:24:26 AM by thepupil »


johnny

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Re: NYRT - New York REIT
« Reply #41 on: December 08, 2017, 06:32:51 AM »
At these prices I'm not sure I'd even call the gross discount unsubstantial. By my math it's about 20%.

The WWPstub should have a marketcap of $180m, of which $90m is just the cash they claim is totally optional and sitting on the side. So that is $90m for half of the equity of WWP.

That makes the implied gross value of WWP $1.2B + $90*2, or $1.38B, which is about 20% shy of the $1.725B figure

I'm a bit concerned that this cash reserve they're setting aside is being somewhat mischaracterized. One gets the vibe from the call that it's this totally optional just-in-case pot of money that they might use to gold-plate a lobby and really send the property into the trophy stratosphere, but I'm suspicious that it might actually just realistically be the money they're going to need to fund tenant improvements to keep the thing at 99% until 2021. In other words just maintenance capex, in which case the implied gross value of WWP is actually something like $1.56B.

The behavior of the shares over the past few days has me concerned that some parties may know things that we don't. Is there any hint that these sales aren't going through as planned? I just can't come up with a theory for why somebody would own this stock last week but be willing to sell at under $5 today.

Foreign Tuffett

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Re: NYRT - New York REIT
« Reply #42 on: December 08, 2017, 08:51:36 AM »
At these prices I'm not sure I'd even call the gross discount unsubstantial. By my math it's about 20%.

The WWPstub should have a marketcap of $180m, of which $90m is just the cash they claim is totally optional and sitting on the side. So that is $90m for half of the equity of WWP.

That makes the implied gross value of WWP $1.2B + $90*2, or $1.38B, which is about 20% shy of the $1.725B figure

I'm a bit concerned that this cash reserve they're setting aside is being somewhat mischaracterized. One gets the vibe from the call that it's this totally optional just-in-case pot of money that they might use to gold-plate a lobby and really send the property into the trophy stratosphere, but I'm suspicious that it might actually just realistically be the money they're going to need to fund tenant improvements to keep the thing at 99% until 2021. In other words just maintenance capex, in which case the implied gross value of WWP is actually something like $1.56B.

The behavior of the shares over the past few days has me concerned that some parties may know things that we don't. Is there any hint that these sales aren't going through as planned? I just can't come up with a theory for why somebody would own this stock last week but be willing to sell at under $5 today.

I think one reason for the discount, is that the market doesn't trust most anything that NYRT's management says anymore. Maybe I'm playing the role of a gullible patsy here, but IMO they've done an OK job after being dealt a poor hand in the form of a NYC commercial real estate market that has weakened substantially since the initial announcement that the company would liquidate. Their biggest mistake has been overly optimistic NAV estimates, but I think the NAV has been substantially derisked by (1) NAV estimates coming way down (2) asset sale realizations and (3) months of discussions with potential buyers that should allow management to have a decent idea of how much the remaining buildings can be sold for. 

Yes, you could be right that the 1WW cash reserve will end up basically being maintenance capex. I don't believe that any credit is given for the reserve under the GAAP liquidation accounting, so there's possible upside if it ends up being, as management has signaled, more growth capex-ey.

I think the stock has fallen due to the recent distribution announcement. Maybe some holders were expecting a larger Dec. distribution (which would equal a quicker liquidation and a higher IRR)? I dunno.

johnny

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Re: NYRT - New York REIT
« Reply #43 on: December 08, 2017, 05:14:40 PM »
Eh, I think the IRR impact of the 15 cent move in the past few days probably overwhelms the IRR impact of a few lost dollarmonths. But I guess it doesn't matter.

I am having some amount of trouble getting comfortable with another thing. They say they expect the four years of free cash from WWP to be about 42 cents, which is ~$17.6 million a year.

But on the 3Q call when they went over their liquidation accounting, they mentioned that they were adding in $13m for WWP cashflow for the coming year. This seems like a pretty big difference that isn't going to be explained by standard escalations. They're already 99% leased, and I think there are only two or three floors expiring from 2017 to 2020, so even the rosiest assumptions about releasing spreads doesn't get me there. Any thoughts here?
« Last Edit: December 08, 2017, 05:17:58 PM by johnny »

bizaro86

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Re: NYRT - New York REIT
« Reply #44 on: December 10, 2017, 11:25:12 AM »
I'm pretty sure there are some "free rent" incentives expiring shortly that could make up part of that difference.

johnny

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Re: NYRT - New York REIT
« Reply #45 on: December 11, 2017, 06:25:13 AM »
Who would the new tenants be? We're talking about two floors of missing rent, if that's the explanation.

Speaking of tenants: In the September call, they mention that they think a key component of the asset reposition/revaluation would come from an opportunity to do ~something~ with a current tenant. Since there's only two big tenants, I would have guessed this is Nomura, they've got a ton of space and pay less than almost everyone else for it.

But in the November call, Wendy actually mentions possibly doing something with Cravath. Cravath's lease expires in 2024, and they re-upped at the tippy top of the market in 2007/2008. So their current rates are the highest in the building, by far.

http://www.abajournal.com/news/article/cravath_signs_900_m_midtown_lease/news/article/do_you_volunteer_on_a_regular_basis/?utm_campaign=sidebar

Quote
I think $100 a square foot is going to look like a pretty good deal in five months.

Also, right after signing the richest-law-firm-lease-ever deal, they were almost immediately laying off associates and offering buyouts to new hires.

Cravath got burned REALLY bad the last time they renegotiated their lease, AND they currently pay the highest prices in the building; so I'm actually super interested to see how that thing could possibly be extended in a way that reads as a clear victory for NYRT and a boost to the value of WWP. It's hard to imagine Cravath has just forgotten what happened last time, especially since they're still not utilizing all of the space on their lease.

SIDENOTE:

I've gotten so pre-occupied with the WWP situation I've sort of handwaved away the big question about the 70 cents of the no-offer-yet-in-place proceeds. Has anybody figured out how leveraged that pool of properties is, or are we stuck just assuming that it's a representative sample?

Foreign Tuffett

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Re: NYRT - New York REIT
« Reply #46 on: December 11, 2017, 02:07:45 PM »
Johnny is asking some good questions that I don't have the answers to. Here are a couple of slides from SL Green Realty's recent analyst day that might hint at them.

johnny

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Re: NYRT - New York REIT
« Reply #47 on: December 14, 2017, 07:18:17 AM »
Alright, I'm in.

I wasn't able to get to very confident about the estimated 70 cents, but the bottom line is that the entire 70 cents could blow up and your return will be mediocre, but probably not negative.

On the incentives, I just don't see why management would not be motivated to underwrite that 70 cents very conservatively, since they were going to get beat up over the revision anyway. Would they have suffered any more, really, if they called it 50 instead of 70? Surely they all have a strong incentive to go out on a positive note. This isn't a strong case, just thinking out my rationale(ization). I realize the same case could be made about the first NAV revision, but I think I buy management's argument that the market simply moved; the third party data is totally consistent with that.

I think there's a very good chance this gets snatched up or at least substantially reprices before the liquidating trust, so I don't think the probability of truly, totally being locked in the thing for four years is as high as some people may be fearing.

As mentioned before, assuming management sells everything at par, WWPstub is $180M right now. The JV partners committed about 2x that price for their same stake in the building. So it's hard for me to imagine why, of all people, they wouldn't be very tempted to pick up the stub once the rest of the properties have been cleared out.

I'm really taking the lazy way out here on this analysis, but if there are any strong skeptics still cruising the thread, please give me a reason to cancel some orders. :)

johnny

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Re: NYRT - New York REIT
« Reply #48 on: January 29, 2018, 12:30:50 PM »
Almost had a heart attack when I opened my Schwab app and saw this.

Just a glitch in the chart drawing.

Anybody else actually messing around with this still?

given2invest

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Re: NYRT - New York REIT
« Reply #49 on: January 31, 2018, 08:50:40 AM »
Johnny:

"So it's hard for me to imagine why, of all people, they wouldn't be very tempted to pick up the stub once the rest of the properties have been cleared out."

They can't buy the stub.  It would trigger transfer tax in 1WWP.

I also own this and agree w/ the rest of your analysis.  The only real wildcard here on out is Viceroy and it's marked really low, less than 50 cents on dollar they paid for it and well below what even the crappiest NYC hotels have traded at on a per key basis.