Select REIT Notes; Bought AEC

I purchased AEC coporation for $15.43 a share today. 

The company has many aspects about it I like, starting with a management that defeased their properties from CMBS agreements before the housing crisis hit, following to their operations expanding by 20% through the end of last year, and roundly finishing with solid cash flow from full occupancy rates and expanding rental operations, and strong revenue before amortization and depreciation.  The company is playing it aggresively, yet has the air of self control about it.  That being said, it’s small, at only half a billion in assets under management, with a large amount of leverage.  This is a position that could easily get smacked around, derailed, or worse.  Be aware of that, if you want to establish a position.

My next favorite REIT company is CLP, mainly because at less than 2x book value, they’re pretty damn cheap.  Also, they’ve been working hard over the last two years to cut out bad partnerships, and have had stunning success, freeing up their own revenue by 7.5%.  It’s amazing what severing dead weight will do for you.  I expect this company, using its new found revenue, coupled with decreased liabilities from stagnant obligations to conglomerate entities, and expanded credit lines, to start making acquisitions similar to (although predictably less aggressively than) AEC.  I will be moving to establish a slightly smaller position in this company in the near future.

I will be looking over the books of some of the companies which were brought up in the comments section of my last post later this week.

Here are some of my notes on four of the companies I looked at, which may help you get a feel for how a dig into company information and the considerations I usually have:

AEC: worth $5.46 dropped $154,000 million on acquisitions.  Repaying mortgage notes and credit facilities in huge sums.  .  Interest expense down over 13%.  Rental revenue up 6.5%.  Construction up over 1400% in last three months reported and up over 1050% in last 9 months reported.  During the reported period, acquired two properties, both in Virginia, and expanded a third operation, also in Virginia.  Entered a 90% owned partnership in September 2010 to construct an apartment community in Tenessee.  In October, acquired a property in Texas.  The company hasn’t had to sell any of their positions since early 2009 and appear to have their liabilities under a firm hand.  Management was quick and defeased 21 of their CMBS contracts going into the housing crisis; still holding most of their assets and barring minor sales, are in a good position to go forward.  Net Operating Income before expenses and charges up over previous reporting period.  Again, largest losses to the company represented by Depreciation and Amortization.  Property occupancy rates at over 95% for existing and acquired properties; over 78% for developing properties.

AIV: worth $12.50 almost doubled cash since the end of 2009.  Rental revenue up 2.7% over three month period from last report and up 2.2% over nine month period reported.  Selling real estate.  Most money being eaten up in tending to financial debt.  Based in Maryland.  Goal to provide above average returns in a non-volatile way.  So far has managed to fuck that goal up pretty thoroughly.  Lots of VIE styled layers here; make it confusing to follow and puts the rights of the corporation to their properties in question.  I’m on about page 10 and this company is just looking like a huge pile of shit.  They’re selling big time during the greatest buying opportunity of the century.  I’m cutting this analysis short.

BRE: Couldn’t find jack shit in the way of filings by this company.

CLP:  worth $14.71.  Revenues up 7.5% over three months same time since last report and 5.4% over nine months same time since last report.  Again, most losses came from depreciation and amortization, all of which skyrocketed over the past two years.  Managed to acquired and develop properties by over $80 million.  Not nearly as much as AEC, especially since CLP is a much larger company.  Nearly doubled cash and still made substantial payments to debt.  Selling some for-sale held properties (no associated mortgage debt, and they were always going to be sold); not selling any operating properties.  Lot of developments in the hotspots of the country, likely won’t be experiencing growth anytime soon.  Exiting joint ventures to save value.  Most developments occurring with unconsolidated partial ownership ventures (see page 21).  Acquired on Class A property on October 22, 2010.  Basically, CLP has been exiting partnership which have proven unfavorable by selling out or taking control of the entire joint operation.  Doing this, they have managed so far to free up additional revenue of about 7.5%, over the last three and nine months.  With that additional revenue, coupled with the purchase made in October and new credit lines they’ve secured, I wouldn’t be surprised of this company started picking up acquisitions.  (Did this company repeat pages of their filing multiple times?  Sure fucking looks like it.)

If you enjoy the content at iBankCoin, please follow us on Twitter