On November 1, 2011, we acquired 100% of the membership interest in Bridgeview Plaza, LLC. On September 21, 2010, we sold our investment in EQK Bridgeview Plaza, Inc. to Warren Road Farm, Inc. (“WRF”), a related party under common control, for a sales price of $8.3 million to be paid via an assumption of debt of $6.2 million and seller-financing of $2.1 million. On October 4, 2010, WRF filed a voluntary petition seeking relief under Chapter 11 of the bankruptcy code. The approved bankruptcy plan was effective November 1, 2011, whereby TCI, for its contribution to the plan, was given 100% equity ownership in the entity. During the period of time that WRF owned the equity interest, it had also acquired 2900 acres of land known as Windmill Farms land located in Kaufman, TX, previously held by ARL, for a sales price of $64.5 million. ARL provided $33.8 million in seller-financing with a five-year note receivable. The note accrues interest at 6.0% and is payable at maturity on September 21, 2015. WRF assumed the existing mortgage of $30.7 million, secured by the property.
During the nine months ended September 30, 2021, we sold a total of 134.7 acres of land from our holdings in Windmill Farms for $19.0 million, in aggregate, resulting in gains on sale of $9.2 million.
During the year ended December 31, 2020, we sold a total of 58.8 acres of land from our holdings in Windmill Farms for a total of $12.9 million, resulting in a total gain on sale of $11.1 million.
I don't want to get all HHC/JOE math on people, but the carrying value for all their development land is $42MM, and the average price they've transacted with homebuilders the last two years is $165k/acre, now we don't know how much development capex or time it would take the sell the remaining 1,420 acres, but the value is certainly more than $42MM.
And then there's the 81% stake in IOR, IOR's loan book is full of related party transactions (similar to BRG's loan book) used to fund TCI's apartments and development activity, it was probably intended to be a true mortgage REIT, but now is just a nano cap that is unlevered and houses most of the loan book on TCI/ARL's balance sheet. Again, no dividend, only exists to generate fees. But the book value is $107MM, so 81% of that is $87MM (IOR trades for less than half book value, could be interesting on its own if the complex does fold up?).
On the right side of the balance sheet there's $185MM of Israeli bonds (they do report on IFRS there, others have translated the filings to come up with similar findings) and $178MM in direct mortgage debt, for a total of $363MM in long term debt at the TCI level. There are other assets, cash, loans that aren't in IOR, related party deals, but they're hard to untangle and I'd probably get it wrong, so very high level swag:
- $350MM for the VAA JV after fees and taxes (some of this is the retained value of the 7 properties)
- $280MM in owned properties
- $150MM in land
- $87MM in IOR
- ($363MM) of long term debt
- TCI did receive a $44/share buyout offer, but the proposal hasn't gone anywhere and was probably just for publicity anyway.
- TCI's book value is ~$41/share, given how mis-marked the VAA JV is on the balance sheet, and that GAAP accounting often understates real estate value (historical cost minus depreciation), its rare that a multi-family company would trade at a discount. Both highlights the undervaluation and the markets skeptical view that it ever gets resolved. Similarly, ARL book value is $21/price versus a $11.50/share price.
- Buying back the 7 properties is kind of a "bad fact" to a full sale/liquidation thesis, but with the cash, might end up getting a low-ball going private offer that still results in a satisfactory result. If that's the case, probably best to own TCI directly (talking myself out of ARL right now). My best guess is these are some of original development properties that might not be fully stabilized and won't fetch full value in a competitive auction.
- Macquarie is the adult in the room, will want to maximize value and reduces any related party risks to the actual sale of the JV, but the management grift factor remains elsewhere in the complex.
- Brad Phillips, Gene's son, is the president of a life insurance firm. There are 58 people according to LinkedIn that work at Pillar Income Asset Management, it appears they don't manage considerable assets outside of ARL/TCI/IOR. One article I found lists Gene Phillips' estate at $3.5B, so there might be other assets outside of this mess, presumably they could take out minority shareholders and run this as a family office, not that they will of course.