Portfolio Manager Thomas Eidelman of Eidelman Virant Capital says Federal Agricultural Mortgage Corp. (AGM) is in a dominant position with its niche business, yet is trading at a discount to the market.
“Our latest buy was a company called Agricultural Mortgage, otherwise known as Farmer Mac. Farmer Mac provides a secondary market for qualified agricultural mortgage loans for rural housing, utilities and development loans guaranteed by the U.S. Department of Agriculture,” Eidelman said.
FOR MORE INFORMATION ON THIS INTERVIEW CLICK HERE.
Eidelman says Farmer Mac is similar to Fannie Mae and Freddie Mac in that it is a government-sponsored entity, except it provides a lower-cost financing to farmers. Eidelman believes the company is trading at a discount because of comparisons to Fannie and Freddie.
“It trades just above book value and eight times earnings, whereas a company with a dominant position like theirs should trade at a significant premium to those multiples that I just listed. I think at $4 a share in EPS and $28 in book value, it should be $45 stock instead of a $30 stock,” Eidelman said.
Paul Adoranto, Senior Analyst at BMO Capital Markets, says Acadia Realty Trust (AKR) is a good play on the street-level retail trend.
“Street retail is not located in a regional mall or in a shopping center; these are the stores that you see on West Broadway in Manhattan or Fulton Street in Brooklyn or Lincoln Road in South Beach Miami. National and global retailers are very excited about locating in these places, because it allows them to create flagship stores that establish their brand concepts,” Adornato said.
FOR MORE INFORMATION ON THIS INTERVIEW CLICK HERE.
Adornato says this brand awareness is important for retailers in selling over the Internet, and that Acadia Realty Trust’s high level of concentration in street retail position it well for future growth.
“Acadia is well-positioned in the movement in favor of street retail, having 50% or more exposure to this property type that will have better growth prospects over the long term,” Adornato said.
Senior Analyst Paul Adornato of BMO Capital Markets is positive on the manufactured home space, and at the high end of the business is seeing solid fundamentals at Equity Lifestyle Properties, Inc. (ELS).
“We have the stock rated as a ‘market perform,’ but the fundamentals are very strong here,” Adornato said.”The company caters primarily to retirees, who tend to be cash-rich, upscale and very solid credits.”
FOR MORE INFORMATION ON THIS INTERVIEW CLICK HERE.
Adornato says that previously these retirees had been slow to sell their primary homes because of the overall slowdown in the single-family market, but now the sector is seeing more activity.
“As that market starts to pick up momentum, so too has the movement of retirees from their primary home into a retirement home in an ELS community,” Adornato said. “Today both manufactured home REITs have fundamental positives as far as we can see, and it’s certainly showing up in their operating results.”
Analyst Alexander D. Goldfarb of Sandler O’Neill + Partners says Vornado Realty Trust (VNO) announced this year a strategy to redirect its focus to the company’s core office and retail portfolio.
“Over two years ago we had advocated the company split up, sell off or spin off the shopping center portfolio and focus its attention on its core office and street retail portfolio, and in fact that’s what the company has done,” Goldfarb said.
FOR MORE INFORMATION ON THIS INTERVIEW CLICK HERE.
Goldfarb says for the past two years Vornado’s announcements have been about simplification, and looking at the company’s results and press releases this year, much has revolved around announcing leases that are adding NOI, which boosts NAV and grows FFO.
“We think that that continues as the company now becomes 100% focused on its core office and street retail portfolio in New York and D.C., and that investors will continue to benefit from improvements in NOI and the 100% focus of the management team on just this one business area, rather than being spread out across many different unrelated investments,” Goldfarb said.
Analyst Alexander D. Goldfarb of Sandler O’Neill + Partners says Boston Properties, Inc. (BXP) is his firm’s top pick this year. While the stock had a challenging last year, Goldfarb sees improvement in the company’s core leasing areas and other opportunities on the horizon.
“We saw a lot of the things that weighed on the stock last year, meaning management transitions and still-weak New York and D.C. markets as subsiding. Additionally, there was a lot of concern around the Transbay Tower in San Francisco — which they’ve since named Salesforce Tower with that tenant — and toward the end of last year it appeared that San Francisco was still very strong, and thus the prospects for signing an anchor tenant were far better,” Goldfarb said.
FOR MORE INFORMATION ON THIS INTERVIEW CLICK HERE.
Goldfarb adds that the leasing environment in New York has improved in Boston Properties’ core Midtown area. He is confident in the company’s management and the value it has created for Boston Properties.
“They’ve been delivering, as one would expect given a strong management team. Most recently they’re now taking a look at their street retail presence, which has never been a focus for them, but is growing in importance among other REITs,” Goldfarb said. “That’s another catalyst for the stock. So those are all reasons why we are favorable on Boston, and certainly it’s a management team that over time has created a lot of value.”
Jack A. Cuneo, CEO of Chambers Street Properties (CSG), says that while his company eyes future deals, it is being disciplined in making acquisitions.
“We’re seeing deals but we’re also being very prudent about our balance sheet, and we’re being very careful about keeping our debt metrics in line. We’re not going crazy chasing assets just for the sake of doing deals,” Cuneo said.
FOR MORE INFORMATION ON THIS INTERVIEW CLICK HERE.
Cuneo says Chambers Street is not just looking at numbers, but characteristics of the real estate: where is it located and if it will be viable for a number of potential tenants. Additionally, he sees Chambers Street benefiting from the growth of e-commerce.
“We are seeing a lot more interest in industrial in this current market cycle because of the growth of e-commerce. We’re lucky to have some major e-commerce ventures as tenants, and we feel we understand their needs as a tenant, but we can also appeal to traditional industrial and logistics tenants too. We like the way the trend line is developing in this sector, and we feel we are in a good position to prudently build our market share,” Cuneo said.
Gary M. Beasley, Co-CEO at Starwood Waypoint Residential Trust (SWAY), shares his company’s approach to building its portfolio. He says cloud and mobile computing, which has developed over the past few years, allows the business to be managed at scale profitably.
“We leverage a technology platform called Compass. It is our proprietary, cloud-based system, which serves as a single system of record for all of our data. We have over a thousand business processes automated in Compass; it’s really the nerve center of our operations,” Beasley said.
FOR MORE INFORMATION ON THIS INTERVIEW CLICK HERE.
Beasley notes that Starwood Waypoint is also vertically integrated, which provides the company with a sustainable competitive advantage.
“We have a team of about 600 people focused on all aspects of the business — from acquisitions to renovation and leasing to property management — which we think is critical to control our time, quality and cost,” Beasley said.
Steven P. Grimes, President & CEO of Retail Properties of America Inc (RPAI), says the key takeaway from the company’s recent quarterly results is that it is the ninth quarter since the company’s IPO in which it has had continual improvement in all areas.
“As we started 2014, effectively being the third full year as a public company, there was some speculation about our ability to deliver on all things leasing, given the fact that our leasing of our better than 20,000 square feet of space was roughly in the mid-90s from a leased-rate perspective last year. We continue to deliver on that front, and as a result, the traction on our small shop space has been quite tremendous,” Grimes said.
FOR MORE INFORMATION ON THIS INTERVIEW CLICK HERE.
Grimes says that Retail Properties of America also continues to improve operationally and from a disposition perspective.
“Operationally, we’ve continued to improve for nine quarters, and this quarter was nothing less than exceeding our own expectations. We effectively have met the low end of our acquisition guidance range at the early part of the year through the dissolution of our joint venture… which puts us in a bit of a tailwind situation taking us into the back half of the year, and looking pretty good to be more selective with opportunities for acquisitions as they come along,” Grimes said.
“From a disposition perspective, we seem to be well on track to deliver on the $300 million to $350 million in dispositions ratably over the course of the year,” Grimes added.
Craig Macnab, CEO & Chairman of National Retail Properties, Inc. (NNN), says that his company has a differentiated acquisition strategy, and in the last three years has purchased approximately $2 billion of net-lease retail properties, with $630 million of that acquired in 2013.
“At this time of the year for the last couple of years, we have generally said our goal is to purchase $300 million of carefully underwritten retail properties, and right now we’re well on track to accomplish that goal,” Macnab said.
FOR MORE INFORMATION ON THIS INTERVIEW CLICK HERE.
Macnab says National Retail Properties purchases the vast majority of its properties directly from retailers as opposed to purchasing through the brokerage channel. This strategy, he says, has two primary advantages.
“We tend to get higher yields and returns than purchasing in the broker channel, which is very competitive. Secondly, and perhaps more importantly, our tenants — which are the retailers — sell us properties that they feel comfortable they can pay rent on for the 15 to 20 years of our lease. As a result, there is self-selection, and our portfolio’s high level of occupancy reflects that,” Macnab said.
Liberum Research’s executive turnover data for May 2014 continued to show positive signs for the North American economies. CEO and CFO changes monitored by Liberum saw very high percentage increases from the previous month of April and C-level turnover showed a healthy increase over the same period. The numbers were not quite as positive when viewed from the same month of May a year earlier, but Liberum does not view the year to year by the one month as a real issue. The recovery continues to move in spurts, both up and down, but the overall trend remains positive. Wednesday, June 4, ADP released its Employment Report for May and while the totals were below most analysts expectations, the U.S. Labor Department’s Bureau of Labor Statistics (BLS) Employment Report, the far more important of the two, released Friday, June 6, was better than the ADP report and bodes well for the continued up and down recovery. This BLS report was far closer to results Liberum saw in May as it related to executive turnover.
Last Wednesday’s ADP’s Employment Report for May 2014, as stated above, was below analysts expectations but was not terrible. According to the ADP Employment Report:
“After a strong post-winter rebound in April, job growth in May slowed somewhat,” said Carlos Rodriguez, president and chief executive officer of ADP. “The 179,000 jobs added figure is higher than May of last year and in line with the average over the past twelve months.”
Mark Zandi, chief economist of Moody’s Analytics, said, “Job growth moderated in May. The slowing in growth was concentrated in Professional/Business Services and companies with 50-999 employees. The job market has yet to break out from the pace of growth that has prevailed over the last three years.”
Last Friday’s U.S. Labor Department’s BLS Report, while not terrific, was reaosnably good:
Total nonfarm payroll employment rose by 217,000 in May, and the unemployment rate was unchanged at 6.3 percent. Employment increased in professional and business services, health care and social assistance, food services and drinking places, and transportation and warehousing.
Liberum Comparison Breakdown of Key May Executive Turnover
Below is a breakdown of Liberum’s key executive category percentage changes for May 2014 compared with May a year earlier and the previous month of April 2014.
For May 2014 decreases took place in two key categories. CEO changes declined 5% from a year earlier, board of director changes declined 21%, whereas overall C-level (as defined by Liberum Research as board of directors, CEOs, CFOs down to corporate VPs) remained virtually the same and CFO changes increased 17%.
The month to month change in executive turnover (April 2014 to May 2014) showed a different picture with increases in three of the four key categories of 38% for CEOs, CFO changes increased a whopping 48%, C-level changes increased 8% while board of director changes declined 14%.
Below are the overall turnover totals for May. The information is just illustrative of how institutional investors could view executive turnover and its possible relationship with a company’s performance. Using Liberum’s database could offer a totally new perspective on investment and is a potential way to come up with unique special situation opportunities.
KEY CEO CHANGES – MAY 2014
58 COMPANIES WITH CEO CHANGES WORTH RE-EXAMINING
According to Liberum’s Management Change Database, a total of 211 CEO related changes occurred during May 2014. Here are 58 from the time period that caught my eye. By significant, I’m looking for situations where I think a particularly strong or weak choice has been made – given the apparent current state of the company – or where there is an interesting special situation.
COMPANY TICKER EXCHANGE MARKET CAP $ MILLIONS
Adcare Health Sys ADK NYSE
Aggreko AGK LONDON 45
Ambassadors Group EPAX NASDAQ 60
Ambit Biosciences AMBI NASDAQB 110
American Caresour ANCI NASDAQ 11
Assurant, Inc. AIZ NYSE 4793
California Gold M CGM CVE
Canadian Pacific Railway LTD (USA) CP NYSE 27698
Canamex Resources CSQ CVE
Corecomm Solution COCMF OBB 649
Covance Inc. CVD NYSE 4826
Crocs, Inc. CROX NASDAQ 1308
ENSCO International Inc ESV NYSE 11837
Enzymebiosystems ENZB OBB 19
Excel Corp EXCC OTN 9
Famous Dave’s of America, Inc. DAVE NASDAQ 227
Ford Motor Company F NYSE 61662
FTI Consulting, Inc. FCN NYSE 1236
Furmanite Corp FRM NYSE 412
Green Tech Soluti GTSO OBB 986
Greenplex Svcs In GRPX OTN 43
Hansen Medical, I HNSN NASDAQ 147
Hawaiian Electric Industries, Inc. HE NYSE 2436
Hyduke Energy Ser HYD TORONTO 13
Infoblox Inc. Com BLOX NYSE 690
International Flavors & Fragrances Inc. IFF NYSE 7982
Ja Energy JAEN OBB 9
Krispy Kreme Doughnuts KKD NYSE 1210
LGL Group Inc. LGL NYSE 11
Lihua Internation LIWA NASDAQ 62
Magnachip Semicon MX NYSE 439
Marin Software In MRIN NYSE 324
Maxwell Technologies Inc. MXWL NASDAQ 483
National Bank Hol NBHC NYSE 844
Navidea Biopharma NAVB NYSE 204
Nokian Tyres NRE FINLAND
Omnicare, Inc. OCR NYSE 6271
Orofino Gold Corp ORFG OTN 2
OXiGENE, Inc. OXGN NASDAQ 27
Parker Drilling Company PKD NYSE 803
PGT, Inc. PGTI NASDAQ 395
PolyOne Corporation POL NYSE 3533
Pope Resources POPE NASDAQ 304
Prospect Global R PGRX OTN 4
Radient Pharm Cp RXPC OTN
Sally Beauty Holdings, Inc. SBH NYSE 4135
Sierra Monitor Co SRMC OTN 16
SupportSoft, Inc. SPRT NASDAQ 124
Target Corporation TGT NYSE 36939
The Mosaic Company MOS NYSE 19133
Tier Technologies, Inc. TIER OTN 711
Vhgi Holdings Inc VHGI OTN 891
Viewtran Group, I VIEW NASDAQ 58
Virtus Oil and Ga VOIL OBB
Vulcan Materials Co VMC NYSE 7815
WesBanco, Inc. WSBC NASDAQ 847
Wpx Energy, Inc. WPX NYSE 4345
Yaterra Ventures YTRV OTN 635
MAY 2014 MANAGEMENT CHANGE STATISTICS
C-LEVEL MANAGEMENT CHANGE STATISTICS
GRAND TOTAL – 1513
TOP INDUSTRY SECTORS
> Drugs/Biotech – 137
> Business Services – 102
> Banking – 98
MAY 2014 CEO CHANGE STATISTICS
GRAND TOTAL – 211
TOP INDUSTRY SECTORS
> Energy – 19
> Drugs – 17
> Health Services – 11
MAY 2014 CFO CHANGE STATISTICS
GRAND TOTAL – 247
TOP INDUSTRY SECTORS
> Business Services – 23
> Drugs/Biotech – 20
> Energy – 18
MAY 2014 BOARD OF DIRECTOR CHANGE STATISTICS
GRAND TOTAL – 428
TOP INDUSTRY SECTORS
> Drugs/Biotech – 39
> Energy – 30
> Business Services – 29
