Filing
Year End: Sept. 30.
May. 19, 2015
2015 Q2 Data
Current Price: $2.45
1.Major Business.
Real estate investment company. It has been active for a while, since 2007, it scaled down by selling the properties it have and paid distribution to share holder. Now it only owns 50% of 2 rental properties at Keele&HWY 7 area.
2.Balance sheet.
Share outstanding 20.6m. Market Cap: $50m. Equity: $52m. Cash: $41.5m + $3.5m marketable security. Debt $3.5m. Restate value: $10.5m.
3.Credit facility.
Not important.
5.Insider holding, options, Insider trading info, share buy back.
Insiders own over 70%(15m shares) of all shares.
6.Management compensation.
7.Employee numbers. Revenue/Employee. Compensation/Employee.
8.Industry comparison.
9.Auditor
10.Major events.
11.Comments.
(1) This is a typical cigar butt type of investment. The company will pay $1.5/share dividend at June 18th. After that, the company will have around $10.5 cash + $10.5 real estate in equity. If using current price $2.45, it would have $19.5m in market cap after dividend payment which isn't like a deal.
(2) The two properties include one 212k sqft industry/commercial building which was originally purchased at 2005 at around $9.2m. Later it has been renovated to use part as commercial property. Total cost increased to $12.8m. The building is 42% (90k) use for commercial and 58% used as industrial. At 2012, the company leased 30k sqft to Goodlife fitness ??? and spend $1.2 in renovation. Currently it use a DCF method to value it with $1.6m/year rental and a 8% discount rate. Current value on book is $19.2m. Currently the rental ratio is 71% which give is around $12.5/sqft rental rate.
(3) Based on TREB(Toronto Real Estate Board) data, currently average rental for industrial building is around $5/sqft, rental for commercial building is around $20/sqft. The company's rental rate is $12.5/sqft which is quite reasonable as it is mix of industrial and commercial.
(4) Based on TREB data, current industrial building market price is around $100/sqft. commercial building market price is around $200-$300/sqft. Use 58% industrial+42% commercial to value the building, it would be worth around $30m. The company's share is $15m. Which is $5m over the book value. Thus make its fair book value around $26m after dividend payment.
(5) The another building is located besides the first building and it is on a 1.25 acres land it purchased for $1.6m at 2010. Currently it has been rented by A&W. The company spend $0.3m for land improvement. Currently the land is booked as $1.8m with 5.75% discount rate of rental income of $120k/year.
(6) The major risk is that the TRSB's data is pretty inaccurate because of very limited number of transaction disclosed. Also the real estate bubble may pop any time. However, the value on book does seems significantly lower than market value.
(7) Although it had paid dividend for several times since 2007, it is uncertain what the management intent to do after this dividend. It might take years for it do sell the last two properties and distribute the cash. The $800k rental revenue/year which is just about to cover the operating cost.
(8) Assuming after 4 years we can get the fair value of $26m. Using 20% discount rate, currently price would be $12.5m which is $0.60/share. Before dividend, it should be $2.10/share. Current market price is not cheap enough.
12.Links
Feb. 27, 2017
Current Price $1.04
(1) The company will sell the last building by end of 2017.
(2) Currently there are $14.3m in cash and alike which is $0.69/share. The rental assets are booked as $13.5m in assets and $4.9m in liability including $1.5m tax payable. Totally close to $10m net asset booked for the rental assets. Total equity is $24m which is $1.16/share.
(3) Currently the plaza is valued at $12.3x2=$24.6m which is $116/sqft. The current estimate rental for the plaza is $1.8m/year. Using 200k sqft, it comes $9/sqft.
At 2014, the unit 8A which is next to the Goodlife fitness was listed for rent as $14/sqft. This is located in the industrial part. Half of it was later rented at 2015 by limelight and the rest was rented at 2016 as daycare place.
https://spacelist.ca/p/on/vaughan/7700_keele_st/8a
The unit 4 was also listed for rent at 2014 for $17/sqft with base rate of $13/sqft. This unit was rented by Daniel Leather at Nov. 2016.
https://spacelist.ca/p/on/vaughan/7700_keele_st/4
(4) Currently A&W place is valued at $1.2x2=$2.4m which is $960/sqft. The current rental for A&W is $125k/year. using 2500 sqft, it comes $50/sqft.
(5) The A&W is quite fairly valued while the plaze might be undervalued. If in case the plaza can be sold at $150/sqft, then the fair value would be $32m that is $7.5m above current estimation, if using 25% tax rate, it could be around $5.5m net gain which will be $25c/share. So book value would be $1.40/share.
10.Major events.
11.Comments.
(1) This is a typical cigar butt type of investment. The company will pay $1.5/share dividend at June 18th. After that, the company will have around $10.5 cash + $10.5 real estate in equity. If using current price $2.45, it would have $19.5m in market cap after dividend payment which isn't like a deal.
(2) The two properties include one 212k sqft industry/commercial building which was originally purchased at 2005 at around $9.2m. Later it has been renovated to use part as commercial property. Total cost increased to $12.8m. The building is 42% (90k) use for commercial and 58% used as industrial. At 2012, the company leased 30k sqft to Goodlife fitness ??? and spend $1.2 in renovation. Currently it use a DCF method to value it with $1.6m/year rental and a 8% discount rate. Current value on book is $19.2m. Currently the rental ratio is 71% which give is around $12.5/sqft rental rate.
(3) Based on TREB(Toronto Real Estate Board) data, currently average rental for industrial building is around $5/sqft, rental for commercial building is around $20/sqft. The company's rental rate is $12.5/sqft which is quite reasonable as it is mix of industrial and commercial.
(4) Based on TREB data, current industrial building market price is around $100/sqft. commercial building market price is around $200-$300/sqft. Use 58% industrial+42% commercial to value the building, it would be worth around $30m. The company's share is $15m. Which is $5m over the book value. Thus make its fair book value around $26m after dividend payment.
(5) The another building is located besides the first building and it is on a 1.25 acres land it purchased for $1.6m at 2010. Currently it has been rented by A&W. The company spend $0.3m for land improvement. Currently the land is booked as $1.8m with 5.75% discount rate of rental income of $120k/year.
(6) The major risk is that the TRSB's data is pretty inaccurate because of very limited number of transaction disclosed. Also the real estate bubble may pop any time. However, the value on book does seems significantly lower than market value.
(7) Although it had paid dividend for several times since 2007, it is uncertain what the management intent to do after this dividend. It might take years for it do sell the last two properties and distribute the cash. The $800k rental revenue/year which is just about to cover the operating cost.
(8) Assuming after 4 years we can get the fair value of $26m. Using 20% discount rate, currently price would be $12.5m which is $0.60/share. Before dividend, it should be $2.10/share. Current market price is not cheap enough.
12.Links
Feb. 27, 2017
Current Price $1.04
(1) The company will sell the last building by end of 2017.
(2) Currently there are $14.3m in cash and alike which is $0.69/share. The rental assets are booked as $13.5m in assets and $4.9m in liability including $1.5m tax payable. Totally close to $10m net asset booked for the rental assets. Total equity is $24m which is $1.16/share.
(3) Currently the plaza is valued at $12.3x2=$24.6m which is $116/sqft. The current estimate rental for the plaza is $1.8m/year. Using 200k sqft, it comes $9/sqft.
At 2014, the unit 8A which is next to the Goodlife fitness was listed for rent as $14/sqft. This is located in the industrial part. Half of it was later rented at 2015 by limelight and the rest was rented at 2016 as daycare place.
https://spacelist.ca/p/on/vaughan/7700_keele_st/8a
The unit 4 was also listed for rent at 2014 for $17/sqft with base rate of $13/sqft. This unit was rented by Daniel Leather at Nov. 2016.
https://spacelist.ca/p/on/vaughan/7700_keele_st/4
(4) Currently A&W place is valued at $1.2x2=$2.4m which is $960/sqft. The current rental for A&W is $125k/year. using 2500 sqft, it comes $50/sqft.
(5) The A&W is quite fairly valued while the plaze might be undervalued. If in case the plaza can be sold at $150/sqft, then the fair value would be $32m that is $7.5m above current estimation, if using 25% tax rate, it could be around $5.5m net gain which will be $25c/share. So book value would be $1.40/share.
