Recently, I significantly expanded my position in LAACO. Based on the 48 self-storage properties they own alone, this company provides the opportunity to buy a decently-managed portfolio at 10x Funds From Operations (FFO), with competitors trading for much richer valuations--Public Storage and Cubesmart trading at about 22x and 19x FFO, respectively. However much I like the value of self-storage properties, the exciting thing about LAACO is their downtown Los Angeles real estate.
Downtown revival is picking up steam as residential developers rush to build rental housing. In a car-obsessed culture, this caught everyone by surprise. In the last 14 years, the residential population in downtown L.A. has swelled from 19K to 52K, after a city ordinance allowed historic and underused properties to be converted into housing. Abandoned buildings have been transformed into luxury lofts.
There are now about 14K apartment units in downtown Los Angeles, up about 3K in the last 5 years. About 5K units are under construction; over 1K within a 3 block radius of the L.A. Athletic Club. In my opinion, Carmel’s 700-unit residential building underway close by at W. 8th and S. Grand Avenue (completion scheduled for 3Q15) is pivotal, because it includes a 42K SF Whole Foods.
LAACO owns three contiguous lots in downtown L.A. The footprint of each lot is 21K – 23K SF; altogether they are about an acre. From W. 7th on S. Olive there’s the L.A. Athletic Club / Hotel, 8 story parking garage and surface parking lot, ending at the alley. In October 2013, Mack Real Estate Group and AECOM Capital bought six acres (parking lots) in the South Park area of downtown for $82 million, or $12 million / acre, intending to construct 1.5K units. I believe that within the next five years, a developer will seek to acquire and redevelop the L.A. Athletic Club assemblage, retaining the club, but developing and building on the two adjoining lots. In my opinion, this is not priced into the units.
Sentiment: Strong Buy
Nice piece of news yesterday: annual dividend announcement of $20, exceeding $10 last year. They paid $20 in total during 2012, but the second $10 at year end was more of a special one. This company is just continuing to impress me. The stock really caught a strong bid today. Regards, Ray
Hello fellow shareholders. It’s Rip Van Winkle here. It’s time for my annual check-in. Warren Buffet once said that he buys stocks that he would like to hold if the market was shut down for ten years. Our bank is a candidate for the “sleep well” portfolio.
After all this time, at $5,865 the stock had some nice appreciation in the past year, but it still trades at a $20 sliver below book value of $5,885. Now, the bank is expanding and investing in employees and technology. Just like it doesn’t care about quarterly results, but instead is building a solid franchise for the long-run. How refreshing!
Nevertheless, I still wish they would buy back a few shares under their existing authorization this quarter before they issue the proxy. “Do you feel like we do?” (see Frampton Comes Alive!, circa 1976). Sometimes the best investment is in yourself, you know? Yawn! Regardless, I'm still holding and going back to sleep...
Do you own due diligence,
Here’s a hat tip to the McClain boys for a great first quarter. Wish I could be in OKC this week for the shareholder’s meeting to give a “hip-hip-hurray” in person. Looks like some Arkansas gas wells clapped out, but nice increase in oil volumes. Healthy boost in oil and gas prices received.
There’s not a shred of pretense here. A simple, but strong balance sheet, with liquidity held largely in U.S. Treasuries. No dilutive executive stock options. No futures hedging. They are buying in stock for $180 / share again. Let the others chase the speculative offshore and shale plays. I’m happy right here.
Sharing your disappointment. Tough to explain the recent underperformance. Fundamentals and management seem to be in place here. Wonder whether the market likes other issues better for monthly dividend and European exposure? Regards, Ray
OK, got it that time. Nice looking yield. I will look for an opportunity to buy a share. I'm not a big fan of limited partnerships because I do my own taxes. But there are some opportunities that are worth the headaches, and this may be one of them. Thereafter, it may take awhile to research and fully understand, which gives the basis for expanding the position. Eventually, ownership + tact + persistence seems to bear fruit even with the most obscure issues. Thanks again, Ray
Happy to help. This one is a riddle, wrapped in a mystery, inside an enigma. Any chance you would feel comfortable sharing last year's income and distributions?. On Schedule K-1, Box L, for income you would divide "Current Year increase (decrease)" by the number of units you hold. Similarly, you would divide "Withdrawals and distribtions" by the # of units. I might put in a bid if I knew those two things. Hard to enter a game when the blind bet is a $2,600 ante. Regards, Ray
The company uploaded its statements to OTC Markets last week. When I first started following this company (before the Great Recession), units were trading around $1,500 range. In the scary year between February 2008 and 2009, you would need rappelling gear to successfully descend the cliff in the chart (over a 40% drop in the units).
Operating income declined about 20% from peak of ~$16.6 million (peak – 2007) to ~ $13.3 million (trough 2011). So the weakness in operating income was not nearly as severe as the sellers of units presumably anticipated. Since the trough, operating income has trended higher, and it’s a reasonable proposition that it could return to pre-financial meltdown levels this year.
At 48 self-storage properties, this company is not even mentioned in articles about the space (i.e. Public Storage, Cube Smart, Extra Space Storage, Sovran). PSA has 2,200 properties; the smallest is PS Business Parks at over 100. As group, the comparables trade for about 20 times funds from operations, at yields averaging 3.6%. By comparison, LAACZ trades at P/FFO
Sentiment: Strong Buy
Although we didn't receive a $1 year-end boost to the final distribution in 2013 as in the past several years, I was pleased to see the 7.1% increase in the distribution from last quarter. In a month, we will receive the year end report for 2013. I expect to see the self storage properties continuing slow improvement in average leasing rates and occupancy. Southern California and Phoenix should be good, Las Vegas not so much.
The ongoing renaissance in downtown Los Angeles has made the city favored by West Coast millenials for urban living, I'm increasingly intrigued by the redevelopment possibilities for the Los Angeles Athletic Club. The adjoining parking garage we own is positioned on a square-shaped lot, which means your car can climb quite a bit to find a spot, but it would support other purposes besides a 72 room boutique hotel.
Our management has been great stewards of our capital, as past asset sales and redeployments indicate. With the low leverage and a supported 4.8% dividend yield, I do not suffer any insomnia owning these units. Hope your year is going well (Sometimes, I think that you and I might be the only ones on Yahoo message boards these days).
Sentiment: Strong Buy
Because of the first year since the IPO, I have not known what to anticipate with regard to information reporting. On Tuesday morning, the company reported favorable year end portfolio information. The stock marked time all day, and it wasn’t until the end of the week that REXR caught a much stronger bid.
In full year 2012 and 9 months through September 2013, the company reported 194 and 172 lease renewals, with rental rates 1.6% and 1.0% below the expiring rent. The company cited uneven market conditions for the declines. In fourth quarter 2013, the 53 renewal leases had cash rates that were up 3.3% compared to ending cash rates. The 38 new leases had cash rents that were even higher at 4.5%.
The company gave another welcome pieces of news. It said that its Same Property Portfolio occupancy increased 3.0% as of 4Q13 to 89.3%, when compared to the fourth quarter of 2012. Rexford continues to acquire new properties at a deliberate pace.
By my reckoning, the weighted average cost of debt has dropped considerably. At December 31, 2012, Rexford had about $160 million in fixed rate debt, paying mostly in the 4.0% - 6.0% range. The IPO knocked that out, and any debt today is paying a floating rate around 2.0%. I fully acknowledge rate risk in a rising interest environment, but in the meantime there will be a dramatic drop in the interest expenses.
Here's my thumbnail perspective on Rexford: a recovering Southern California market, rising rental rates, stronger occupancy figures, more properties to cover general and administrative expenses, lower financing costs and very seasoned management.
Do your own diligence,
Sentiment: Strong Buy
Sorry about the second post--I tend to be a little long-winded…The last known address of LA Central was in Irvine, Texas on North O’Connor Blvd. (from fifteen years ago; source is OTCMarkets). It now appears to be home of Pioneer Natural Resources Company. Pioneer was formed through the 1997 merger of Parker & Parsley Petroleum Company and MESA Inc. (remember this was T. Boone Pickens’ company?).
Pioneer could be holding onto to the existing land in Monroe by production (which gives them the right to any future development). From their website, Pioneer serves as General Partner in four Parker & Parsley oil and gas partnerships. A shareholder could call the number for Parker & Parsley limited partners to see if Pioneer is also serving as the General Partner of Louisiana Central Oil and Gas: (972) 969-3583.
If this is a Delaware corporation as it appears, shareholders have the legal right to inspect the company’s books and record (which has been supported many times in Delaware courts). As a limited partner, you are probably getting K-1s evidencing your distribution for tax returns, so a reasonable request to the filing company would be to provide you a copy of the supporting tax returns. Thus, a written request to the transfer agent, Compushare in Massachusetts, might prove fruitful.
I will not try this if I don’t own shares. First, I don’t contact any company under false pretenses. Secondly, when I have made inquiries to the companies I already own for financial information, invariably they ask for documentation of my ownership (a trading comfirm or brokerage statement usually does the trick). If you tell me the amount the annual distributions, I might buy a share or two and try to accumulate a position and more knowledge over time, as I have with several other obscure companies. Right now I don’t know enough to pay over $2,500 to buy a unit.
This one is quite a conundrum, which I have investigated without a huge amount of success over the last several years. Please note from the outset that all of the following comes digital sleuthing from many miles away, combined with conjecture.
A search with the Delaware Secretary of State indicates that a company known as Louisiana Central Oil and Gas Company incorporated in Delaware on May 17, 1926. A search on the Louisiana State Department of Natural Resources indicates that a company matching this description has about four active gas wells in north Louisiana. They appear to be marginal gas wells located five to twenty miles south and west of Monroe, Louisiana.
It could be that the majority of your distribution comes from timber or surface rights, rather than production of hydrocarbons. While the company appears to have incorporated during an era in the mid-1920’s where natural gas exploration was widespread around Monroe, it appears that the action was largely north of town (into Union and Morehouse parishes from Ouachita parish). Monroe Gas Field, one of Louisiana’s largest gas fields, is ten miles north of town and has produced more than 7.3 Tcf of gas in the last 90 years.
My amateur geological skills are poor, but based on the location of LA-Central’s active wells, they appear to be located at the southern margin of the Smackover / Brown Dense shale, in the dry gas part of the play, which would be much less prized than the condensate-rich part to the north or oilier part further north. It’s located 9,000 – 11,000 feet under the ground, so more costly to drill than other shale too.
This bank is "sticking to its knitting". Second year with a nice special dividend at year end 2013. Just checked in at the First National of Nebraska website and I was surprised to find a basic investor relations page there. Strong operating performance has led to a nice uptrend in the stock price over the last two years. So, I know that I'm not the only person who notices. Just the only poster here. Happy New Year, Ray
Looks like this stock really caught a bid again on Friday. I wonder whether Heartland Value is adding to their position? Do you own due diligence, Ray
Sentiment: Strong Buy
I rarely answer myself on the boards, but here goes. Reserve (RSRV) reported 3Q13 results about 10 days ago. My impression is that the McLain gentlemen really know their business. It looks like they are doing it the old-fashioned way: vertical wells in proven fields (the horizontal ones haven’t worked out very well). No hedges or collars, just outright exposure to petroleum prices, which is a good thing as oil prices are relatively flat and natural gas prices have rebounded from last years.
Much of the nice boost in profits comes from increased production. The McLains appear to have a disciplined approach to limit exposure to any one well and field, with a hope for singles and doubles, rather than home runs. But the hits are adding up.
They are still buying in stock from minority holders for $230 / share (they did eliminate the fractional share which always stuck out like a sore thumb on the face page of the 10-Q/K). Now I’m going to be quiet, unless someone else wants to discuss this stock.
Big alpha, Ray
Thanks for the tip on JMHLY. In my opinion, Jardine Matheson is the ultimate “widows and orphans” stock for the new millennium. I have held it for many years for a double, without missing a wink of sleep. (I don’t trade in foreign markets, but I do buy ADRs). I recently looked through the Singapore-listed ADRs again, and decided to buy SingTel (SGAPY), for wireless exposure in a growing part of the world: India, Indonesia, Philippines, Thailand and Australia. Thanks to Jim Jubak, I have also been quite intrigued over the last several years by Keppel, but have never bought it. More alpha to you, Ray
This was a quiet IPO that I found quite by accident. There are several diversified ways to play industrial in SoCal, but Rexford Industrial Realty is the focused way. There have been some post-IPO gyrations in the stock due to the roll-ups. In the Southern California warehouse niche, I believe the fundamental strengths (two busiest ports in the country, lack of land to build in the in-fill markets) will combine with cyclical factors (rebound in economy finally perks up the office/industrial leasing space). Add the special sauce from seasoned management and finance (long-time real estate investors, with a new pot of money to invest). More alpha, Ray
Sentiment: Strong Buy
Well, if you get really curious about the investment portfolio of an insurance company--like I was five years ago--you retrieve it from the National Association of Insurance Commissioners (NAIC). Every quarter, insurance companies are required to itemize their investment holdings in statutory statements (regulatory blanks) on Schedule D. Once you sign up, the NAIC used to offer five free statements before charging, which covered the two companies I wanted.
By the way, this was not an original idea. I was inspired by a June 1, 2007 post on PICO on Jonathan Heller's website Cheap Stocks, which has probably proved to be the single most meaningful post that I have ever seen regarding pink sheet stocks, as it provided specific names held by PICO, as well as the initiative to pull the Sch. D schedules.
After many hours of research and considerable due diligence, I have purchased almost every stock in PICO's portfolio. Some, like Bank of Utica and Hanover Foods, I tracked for years without knowing enough to become comfortable buying them. Then, I finally saw a write-up from Dave Waters or Nate Tobik--who also belong in the esteemed pantheon of crackerjack closely-held stock analysts--that helped characterize the risks and rewards.
You're right, the insurance companies owned by PICO were sold, but if I was trolling for new names, I might use the NAIC Schedule D technique to spy on the portfolio of several well-regarded Chief Investment Officers, for example, Tom Gayner over at Markel.
The prospectuses of many small cap value funds are also full of potential candidates, and I regularly review them. For example, I believe that Hanover Foods is in the Heartland Small Cap Value Fund. Tweedy Browne also has lots of prospects. Hope that this helps!
Nate Tobik at Oddball Stocks has written about Hanover Foods several times. His most recent post about a week ago has some information from statements for the most recent fiscal year that ended June 2, 2013. Regards, Ray
Sentiment: Strong Buy