Over 50% Upside In Liquidation No One Knows About
In the first edition of “Weird OTC Stocks” I wrote about a single luxury hotel that is trading at an 18% cap rate, significantly under liquidation value, an owned base of 5,500 acres of land, generating strong free cash flow and a recent hotel transaction in the same area with a valuation that implies at least 50% upside should a strategic acquirer make a bid. In addition, there is a publicly traded preferred stock tied to the common equity that has at least 25% upside — and it appears management is intent on taking the preferred stock out over the next 12-18 months. The opportunity to own this asset — which by the way no one has wrote about besides me — got me excited about the opportunity of value investments in OTC land.
Today I am writing about an idea that is even more exciting than this luxury hotel. In Edition #2 of Weird OTC stocks I am going to cover a hidden liquidation of a commercial real estate company that no one appears to even know of. The company is so off the radar that I have yet to see one person write an article on the common equity or even a single X.com post on the company besides some spam bots. In fact, the only individual who seems to know of the situation is a billionaire Israeli individual who is scooping up shares on the low through tender offers.
The situation is so unique and actionable that I had to take time over the weekend to write it up. Here is the high level thesis:
The company owns high quality commercial real estate in the United States primarily grocery-anchored properties with over 90% occupancy.
The company recently announced strategic alternatives with an intent on selling all of the properties and returning capital back to shareholders.
The real estate properties are trading significantly under replacement costs and management’s internal NAV. Using management’s internal NAV calculation there is over 50% upside.
A month after the announcement of the strategic alternatives, a billionaire Israeli individual filed a tender offer to acquire $15.7 million worth of the stock.
The billionaire Israeli was then able to acquire $1.8 million worth of the stock via tender offer and now collectively owns $9 million of the common equity.
If you dig deep enough into the financials, the billionaire Israeli individual has filed at least five different “tender offers” with the SEC, since 2022, to acquire shares in this company.
Given the high quality nature of these real estate assets, I expect an outright sale to occur anytime for a substantial premium to the current equity valuation.
In addition, the Company recently filed an update with the SEC to amend their “Real Estate Management Agreement” to give the company a right to terminate the “Real Estate Management Agreement” if the company closes or completes a “Liquidity Event”.
Given the announcement of the strategic alternatives, the tender offers and the recent amendment to terminate the “Real Estate Management Agreement” should a liquidity even occur, I think an outright sale of the company is imminent.
The best part about this stock is that the price has not moved since all of these developments — meaning no one knows about this idea at all. Even better, the company pays a 4.5% dividend yield, meaning you get paid to wait for the transaction to occur.
Let’s dig in!