STORE Capital Corporation (STOR)

Situation

STORE Capital Corporation, an internally managed net-lease real estate investment trust (REIT) that invests in Single Tenant Operational Real Estate, announced that Berkshire Hathaway has invested $377 million in the company, representing 9.8% of total shares outstanding. In the transaction, STORE Capital issued 18.6 million shares of company stock in a private placement to a wholly owned subsidiary of Berkshire Hathaway at a price of $20.25 per share. Berkshire invested perhaps because they could not create the business themselves and they took 9.9% stake, the max allowed.

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Vistra Energy Corp. (VST)

Vistra Energy, a power producer and a retail marketing organisation to sell power, was spun from the bankruptcy of Energy Future Holdings earlier called Texas Utilities.

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Resource Capital Corp. (RSO)

Situation

Price to book value of ~0.6x following the dividend cut in Q4 2016.

  • Portfolio recycling,
  • Messy REIT planning to clean itself
  • You can monitor the clean up process
  • Bad stuff is MTM every quarter

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Liberty Expedia (LEXEA)

Business

Liberty Expedia owns 16% of Expedia, whose direct competitor is Priceline, and Bodybuilding.com. The stock has grown at ~35% in the last five years.  Here is the presentation after Librty Ventures split-off Liberty Expedia.  nov-2016_libertyexpedia

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Colony NorthStar, Inc. (CLNS)

Situation

Merger of Northstar Asset Management (NSAM), Northstar Realty Finance (NRF) and Colony Capital (CLNY) to create one company called Colony Northstar.

NSAM was spun off from NRF couple of years back. Around the same time Colony Capital internalized its asset manager. Later 2015 and early 2016, the market sold off asset managers and externally managed REITS including NSAM and NRF. NSAM, NRF and Colony capital merged to form one REIT called Colony Northstar (CLNS).

 

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Hilton Worldwide Holdings (HLT)

Situation

Hilton Worldwide (HLT) is spinning off two publicly traded companies by year end.  The remaining parent (HLT) will be a capital light franchise revenue model with over 4800 hotels worldwide and a strong pipeline.  The two spins will be a REIT, Park Hotels & Resorts (PK), and Hilton’s timeshare business, Hilton Grand Vacations (HGV).  Each of the three companies should be well positioned in their sectors and likely deserve premium valuations to peers.  Analysts believe there is ~25% upside on a sum of the parts basis, but bears fear we’re at the peak of the lodging cycle and increased competition from the sharing economy (AirBnB, HomeAway, etc).

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Donnelley Financial Solutions (DFIN)

Situation

RR Donnelley & Sons (NYSE: RRD-$23.81, market capitalization of $1.7 billion), the owner of the Edgar financial-statement wire service, split into three publicly traded companies after acquisitions led to separate strategies for its main business. The largest of the new companies (the parent) will comprise RR Donnelley’s corporate-communications operation. The book and periodical-publishing division (spin-off #1) will be called LSC Communications (NYSE: LKSD-$28.61, market cap $900 million). Edgar Online, Bowne Financial and financial-printing operations formed the second spin-off and is named Donnelley Financial Solutions (NYSE: DFIN-$22.97, market cap $745 million). RR Donnelley completed the tax-free distribution of 80.75% of both LSC Communications and Donnelley Financial on October 1, 2016. RR Donnelley retained 19.75% of both spin-offs that will be disposed within 12 months.

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iStar (STAR)

Situation

iStar (STAR) is an internally managed REIT that primarily made loans to commercial real estate projects prior to the financial crisis, during and after the downturn, iStar ended up foreclosing on a variety of land, development projects and operating assets (office, retail, hotel, condo projects). As a result, iStar cancelled their dividend and have since been investing their cash flow into their development portfolio in order to reposition each asset for an eventual sale. By piecing out their traditional REIT assets from their land and development assets, the market is attributing little value to the land and development segment. Meanwhile the company has retired a significant amount of debt and repurchased 19% of their shares in the last twelve months.

 

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Icahn Enterprises (IEP)

Situation

IEP is down more than 50% from its peak mostly because of energy and industrial slow down. We will review Icahn’s major capital allocation decisions and do a deep dive into its top holding CVR Energy and discuss how he has been able to generate returns of +20% for a long period. A good book on him is “King Icahn: The Biography of a Renegade Capitalist”

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Winthrop Realty Trust (FUR)

Situation

Winthrop Realty Trust (FUR) is a REIT that is being liquidated. It has investments in in real-estate properties and loans related to real-estate. The CEO owns ~9% of the company. FUR doesn’t have natural buyers because it is being liquidated and may be delisted from exchanges soon. It is trading at a discount of ~20% of its Net Asset Value.

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