Author Topic: GRIF - Griffin Industrial Realty  (Read 19694 times)

Greg

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Re: GRIF - Griffin Industrial Realty
« Reply #10 on: June 22, 2019, 09:01:28 PM »
G&A $7+ million does not seem too good for the non-employee outside stockholders. The members of the Cullman family who control GRIF, but are not employed by it, may be better off if were sold to a good REIT which would (1) take out a lot of the expenses and (2) pay them a dividend.


Deepdive

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Re: GRIF - Griffin Industrial Realty
« Reply #11 on: June 22, 2019, 09:42:01 PM »
G&A $7+ million does not seem too good for the non-employee outside stockholders. The members of the Cullman family who control GRIF, but are not employed by it, may be better off if were sold to a good REIT which would (1) take out a lot of the expenses and (2) pay them a dividend.

How closely have you looked at the company?  People said the same about FRP Holdings which had a similar $7-8mm G&A and that turned out pretty well.  It cost about $2mm a year just to be public.  The company explains some of this in one of their presentations and they are quite conscious about this.  Some of it is the property tax for their large 4,000 acre of land holding.  They expense some leasing expenses that would normally be capitalized under most REIT treatments.  They chose to have the leasing guy in house because they feel his productivity would cost 2-3x if they outsourced it.  A lot of the G&A also goes towards development activities, site acquisition, permitting, obtaining financing, construction management, etc.  G&A would be lower if they just paid 5.5% cap for a leased warehouse.  They have kept the G&A relatively the same despite growing revenue and NOI by quite a bit in the last 3 years.  Despite the $7mm in G&A, they are still creating $4-5 per share of value a year on a $38 stock. 

If you want everything nice and perfect with larger scale, normalized G&A ratio, REIT status, high ESG scores, etc, you can pay sub 5% cap rate for Prologis.  GRIF trades at over 10% cap when adjusted for office and land parcels.

Sure they can sell to a REIT and we can all cash out at $70 a share

Greg

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Re: GRIF - Griffin Industrial Realty
« Reply #12 on: June 23, 2019, 03:41:05 PM »
I suspect that the members of the controlling Cullman and Ernst Group, who are mainly individuals, would fare best  in a tax-free exchange with a strong company that is either a good compounder or pays a reasonable dividend. Taking out $7.5 million G&A a year alone can translate to an additional $1.50 dividend. Could be handled with a preferred stock.

Deepdive

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Re: GRIF - Griffin Industrial Realty
« Reply #13 on: June 23, 2019, 05:08:18 PM »
I suspect that the members of the controlling Cullman and Ernst Group, who are mainly individuals, would fare best  in a tax-free exchange with a strong company that is either a good compounder or pays a reasonable dividend. Taking out $7.5 million G&A a year alone can translate to an additional $1.50 dividend. Could be handled with a preferred stock.

I understand and agree with you to a certain extent.  But have you actually looked at what the current management team have done in the last 5-10 years with regards to getting out of the nursery business, diversifying the company into LeHigh Valley and Charlotte, and growing the warehouse business?  They actually did a pretty good job.  Most companies can get a premium by selling to a larger REIT and I would like them to sell to Prologis.  But I think all shareholders will do quite well if they let the current management team continue to execute.  The current format has certain advantages such as having all non-recourse debt at the property level. 

no_free_lunch

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Re: GRIF - Griffin Industrial Realty
« Reply #14 on: June 25, 2019, 11:50:08 AM »
I am just reading up on this company but at a quick glance their track record is less than impressive.   I see book value of $139M in 2007, vs $92M today.   5.1M shares in 2007 vs 5.05M shares today.  So shares are basically flat and book value is down considerably.  There hasn't been much dividends.  Why would I want to invest with this management team?

EDIT: Is the issue that the real estate is recorded at cost? 
« Last Edit: June 25, 2019, 12:20:34 PM by no_free_lunch »

BG2008

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Re: GRIF - Griffin Industrial Realty
« Reply #15 on: June 25, 2019, 03:31:40 PM »
I am just reading up on this company but at a quick glance their track record is less than impressive.   I see book value of $139M in 2007, vs $92M today.   5.1M shares in 2007 vs 5.05M shares today.  So shares are basically flat and book value is down considerably.  There hasn't been much dividends.  Why would I want to invest with this management team?

EDIT: Is the issue that the real estate is recorded at cost?


Interesting question, this wasn't something that I thought about.  But it is interesting to analyze.  I looked through the 10-Ks and found the following:

Profits From Leasing (NOI) in 2007 was $7.9mm (pg 24 in 2007 10-K), now it is approaching $25mm run-rate for 2019.  So they tripled their NOI from 07 to 19 while the share counts shrunk by a small amount.  Book value is not a good way to value GRIF.   Assuming the same cap rate of 6.5%, the $25mm of NOI today is worth $384mm and the previous NOI was worth $121mm.  Net debt today is $120mm and long term debt back then was about $15mm.  The increase in the non-book equity value is about $158mm over this time period.  Not necessarily the most impressive, but there was a great recession, their nursery business lost money for a few years during the housing collapse, and they were always sub scale and had to overcome a larger than normal G&A. 

The total sqft of buildings also increased from 1.7mm sqft to over 4.0mm sqft in total and they have another 250k in the pipeline. 

They paid out $19mm of dividends which lowers the accounting book value by that amount. 
They had a nursery business which lost money during the 2008/2009 period.  Real estate tends to have GAAP depreciation that lowers book value but in reality the warehouses were appreciating.   

In general, real estate companies do not grow their book value if they hold the assets over long period of time.  If there is a lot of recycling of assets, book value tend to grow as the sales will reflect market value at the time of the asset sale.   

The company is also much more "investable" today.  The nursery has been sold off.  Land parcels are either sold off and 1031 into warehouses or they built warehouses on the land parcels.  Over 90% of the buildings are warehouses making it more of a pure play industrial company. 
 

BG2008

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Re: GRIF - Griffin Industrial Realty
« Reply #16 on: July 11, 2019, 08:58:19 PM »
The executive Chairman is stepping down and it looks like the company should be saving $350k in salaries   

https://www.sec.gov/Archives/edgar/data/1037390/000155837019006031/grif-20190531ex10679570d.htm

Greg

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Re: GRIF - Griffin Industrial Realty
« Reply #17 on: July 12, 2019, 03:28:55 AM »
$350k out of $7.5 million operating expenses. Compare operating expenses to book value over years and you will see what the problem is.

BG2008

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Re: GRIF - Griffin Industrial Realty
« Reply #18 on: July 17, 2019, 09:15:57 PM »
Prologis bought Industrial Property Trust for $4bn for a 37.5mm sqft portfolio two days ago.  This values the deal at $108 per square feet.  This deals implies a $70 per share value for GRIF. 

BG2008

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Re: GRIF - Griffin Industrial Realty
« Reply #19 on: August 13, 2019, 09:28:19 AM »
$350k out of $7.5 million operating expenses. Compare operating expenses to book value over years and you will see what the problem is.

$350k out of $7.5mm is a small amount.  But the intention is important.   Unlike certain fella who uses the BH ticker and yet tries to find ways to screw shareholders at every turn, the GRIF guys understand that they run the company for public shareholders.  Bought a little more today given today's pull back.