Author Topic: SYTE - Enterprise Diversified  (Read 210573 times)

Tim Eriksen

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Re: SYTE - Enterprise Diversified
« Reply #570 on: November 07, 2018, 10:50:08 AM »

Mr. Moore, who built Mt. Melrose, did it by being "hands on".  He had help from a "crew" of people that he vetted & hired.  I would have to assume it was known by SYTE's management how Mr. Moore did things.  Further, I would have to assume, that they had a good idea of how Mr. Moore was to proceed in the near future in having a team to work on the properties.


It is my understanding that there was a misunderstanding in how Mt Melrose was to proceed in the near future and the size of the team.  That is the whole point.  It was nothing improper.  I don't know how many years it took Jeff to build up the company.  I will guess four, which means acquiring on average 30 homes per year.  That accelerated to more than 30 per quarter.  The 8-k notes additional operational (personnel) expense.  So it seems management expected slower growth from internally generated cash flows which would provide the equity part of the purchase price of additional properties.  It seems that is not what happened.  Thus the changes. 

The reality is SYTE could not support a fast growing "start up" losing money without raising capital  either through equity, changing terms of Alluvial agreement, selling HVAC quickly,or internet operations.  They decided to stop the growth all together instead of restructuring.  That is not explained.  Did Jeff want to grow fast?  Did he not want to let go of people he just hired?  Who would.  We just don't know. 

So we are left with two choices: we either believe management (and Jeff's comment on this board) that it was unfortunate, painful, yet friendly, necessary refocusing from SYTE's point of view, etc. or we don't.  I have always found Jeff and Steve to be straight forward and honest.


gfp

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Re: SYTE - Enterprise Diversified
« Reply #571 on: November 07, 2018, 10:55:43 AM »
Who gets to keep the ambulances, that's the important question...

(I guess some folks didn't get the reference - https://twitter.com/ragnarisapirate/status/956609512877772809 )


Here are some of the properties, by the way.  Should be able to search Lexington assessor's website for Mt Melrose LLC to find other representative deals:
$40k all in, rented for $600/month - wonder if this one transferred to SYTE?
https://twitter.com/ragnarisapirate/status/958566232789323777

This one is mixed use, $725k all cash
https://twitter.com/ragnarisapirate/status/956935470193225728
« Last Edit: November 07, 2018, 11:09:02 AM by globalfinancepartners »

writser

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Re: SYTE - Enterprise Diversified
« Reply #572 on: November 07, 2018, 10:58:36 AM »
If the comments of insiders are correct then they only have to fire the person responsible for writing and releasing an 8K during market hours that caused massive panic among investors and made the stock drop ~40% while nothing significant happened from a valuation perspective.
« Last Edit: November 07, 2018, 11:06:28 AM by writser »
When you are dead, you do not know you are dead. It's only painful and difficult for others. The same applies when you are stupid.

Broeb22

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Re: SYTE - Enterprise Diversified
« Reply #573 on: November 07, 2018, 11:27:22 AM »
I'm just not 100% buying this.

How can Kiel chalk this up to "we wanted cash flow" and "Jeff wanted capital appreciation". That's like saying you got divorced because you didn't know the other person didn't want to have kids. These are foundational conversations a partnership has, and either the conversation never happened, or one side changed their priorities after they said their vows.

Why take the drastic step of removing Moore from his employment agreement if they simply wanted him to stop buying properties and focus on generating cash from existing units. Seems like there were a whole bunch of intermediate outcomes here that could have taken place that would have left Moore in place, but they had "irrenconcilable  differences" that necessitated a change.

I wonder also if these properties were not well-financed. I went to the annual meeting this year, and met the guy who provides financing to Jeff. He was getting paid double-digit rates to lend Jeff money. (I thought to myself, I'd like to be that guy doing the lending.) If these properties were not generating as much cash as Jeff hoped, maybe they were in a negative carry situation, where the property was yielding less than the cost of capital. Seems potentially possible given the move in rates this year. I wonder how much the cost of capital over time.

Either way, there are a ton of questions and not very many satisfactory answers.

LC

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Re: SYTE - Enterprise Diversified
« Reply #574 on: November 07, 2018, 11:49:41 AM »
Oh man what a sh1tshow we've got here.

I periodically pop into this thread to quickly catch-up, since I remember when SYTE was being written up when Frank? ran it and then these guys came in and took control.

Jeff is ragnarisapirate, right? I think that was his name when he wrote about RE acquisitons.

Anyways, my memory is obviously a bit sloppy and I don't know all the details of what is going on here, but:

My take is (1) they couldn't manage an HVAC business (2) they couldn't manage a RE portfolio

These people do not seem like "get their hands dirty" kinds of people. Both (1) and (2) require experience. You can't just walk in with a checkbook and do it. I guess they found that out the hard way.

So now we're left with (3) an asset management business. What's the business model here, they seed managers for a take in the future?

What value do these people bring to the asset management business. I'm not talking about Keith because I've met him and he's a stand up guy who has a circle of competence and can work. I'm taking about the guys seeding him. What the hell do they bring other than cash? Can they help with marketing and introductions to funds of funds? It doesn't seem like it. So are they just tossing cash at some managers, walking away, and hoping 1 of 10 strikes it rich?

Isn't that similar to the playbook for the HVAC and RE businesses? Throw money at it?

What value do these people add? And if you have to respond with the words "scale" or "platform", then you are fvcked!
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gfp

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Re: SYTE - Enterprise Diversified
« Reply #575 on: November 07, 2018, 12:05:34 PM »
Yes, Jeff is ragnarisapirate.

I think Jeff does in fact know how to manage a Real Estate investment enterprise.  By all appearances he was quite successful at building a sizable operation.  It looked like he was also quite aggressive in growing the business, which may have been what spooked the new management at SYTE.  Or it may have been that someone discovered what the accounting would look like for a public company.  Or it may be that the new guy just didn't like the business.  However successful, it may not have appeared super profitable through the accounting.  When you're a private real estate investor, primarily presenting your accounting to the IRS and lenders, its fine - you know the economic reality and are happy to minimize taxes along the way.


Oh man what a sh1tshow we've got here.

I periodically pop into this thread to quickly catch-up, since I remember when SYTE was being written up when Frank? ran it and then these guys came in and took control.

Jeff is ragnarisapirate, right? I think that was his name when he wrote about RE acquisitons.

Anyways, my memory is obviously a bit sloppy and I don't know all the details of what is going on here, but:

My take is (1) they couldn't manage an HVAC business (2) they couldn't manage a RE portfolio

These people do not seem like "get their hands dirty" kinds of people. Both (1) and (2) require experience. You can't just walk in with a checkbook and do it. I guess they found that out the hard way.

So now we're left with (3) an asset management business. What's the business model here, they seed managers for a take in the future?

What value do these people bring to the asset management business. I'm not talking about Keith because I've met him and he's a stand up guy who has a circle of competence and can work. I'm taking about the guys seeding him. What the hell do they bring other than cash? Can they help with marketing and introductions to funds of funds? It doesn't seem like it. So are they just tossing cash at some managers, walking away, and hoping 1 of 10 strikes it rich?

Isn't that similar to the playbook for the HVAC and RE businesses? Throw money at it?

What value do these people add? And if you have to respond with the words "scale" or "platform", then you are fvcked!

slkiel

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Re: SYTE - Enterprise Diversified
« Reply #576 on: November 07, 2018, 01:23:51 PM »
Please find a joint statement that Jeff and I released through ENDI:

https://backend.otcmarkets.com/otcapi/company/dns/news/document/33645/content

As a fellow investor in small and micro-cap companies, I sympathize with the idea that things are not always as they seem and it can be healthy to be skeptical of management's statements. Heck, I have built the success of my fund on that idea! However, that also does not mean that management should never be taken at face value. Both Jeff and I have a long history of being direct and plain-spoken. We have no reason to be any different here.

The fact is that we thought we had to make a change based on the reasons in the link above. Clearly we both thought things would be different, but the reality is what it is after a thorough internal review and strategic planning process within the company. We have a great collection of properties, but the strategy that we enthusiastically announced when we made the acquisition didn't work. We could admit that now and change it with little economic impact, or we could continue down the path with larger ramifications.

I hope this information is helpful and more clear than the 8-K earlier this week. I apologize for the delay in getting this information out to you.

NBL0303

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Re: SYTE - Enterprise Diversified
« Reply #577 on: November 07, 2018, 01:39:36 PM »
I appreciate how difficult it is to run a micro-cap and I believe some of the most critical comments on CoBF about SYTE over the last few days were unwarranted. For a major change of strategic direction relating to a very large financial transaction, I personally was shocked at the initial 8-K and how it raised more questions than it answered. For a situation of this level of importance to the company, I would have expected an explanation and disclosure more akin to what Steve just put out. This statement is, I believe, what this situation requires and I commend Steve and everyone at SYTE for putting it out in relatively short order after the initial 8-K. I think perfection in such matters is impossible and I give Steve credit for realizing that more disclosure was required and providing it in short order.

LC

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Re: SYTE - Enterprise Diversified
« Reply #578 on: November 07, 2018, 01:47:55 PM »
Well Steve I don't know you but Jeff has a special place in my investing heart. He had a series back in the day of trying to buy a retirement home and convert it into rentals. Like a 4 part series and it was just brilliant.

In general I'm sad to see you having failed in this venture - but kudos on the announcement and putting it out there publicly.

I was never a SYTE shareholder - just a spectator. But from my seat, I wish you the best with the asset management business. Would love to see this thread filled with good news!
"Lethargy bordering on sloth remains the cornerstone of our investment style."
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Hielko

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Re: SYTE - Enterprise Diversified
« Reply #579 on: November 07, 2018, 01:59:15 PM »
I appreciate the letter, good to provide a bit more of an explanation.

What I'm wondering though, why is SYTE so hell bent on being a SEC reporting company? I rarely think it makes sense for nanocap companies given the costs involved, and especially in this case since apparently the accounting overhead with running the real-estate operations were one of the big factors that made the thing not work.