tag:blogger.com,1999:blog-2080506270244832638.post1319450046939658874..comments2024-03-28T07:17:13.573-05:00Comments on Clark Street Value: NexPoint Strategic Opportunities: CEF to REIT conversion, Possible NXRT ReplayMDChttp://www.blogger.com/profile/10679835609782815537noreply@blogger.comBlogger24125tag:blogger.com,1999:blog-2080506270244832638.post-83149413875999860432022-01-25T10:45:43.889-06:002022-01-25T10:45:43.889-06:00Agreed, however, my concern is more on valuation. ...Agreed, however, my concern is more on valuation. 3.5% cap rates and >30x FFO in a rising rate environment strikes me as extremely expensive. You have to believe rates are going to remain extremely depressed...3.5% is below the historical fed funds rate. Of course fed funds haven't seen 3.5% since pre-crisis, but they were 2.5% just a couple years ago. Now, inflation is running hot, the fed is tightening and every cap rate chart I look at for almost every REIT sector (save office) and every geo shows a huge spike in valuations. The equity risk premium just seems very low, while at the same time the risk free rate is depressed and appears prone to move a lot higher. My two cents. Appreciate the dialogue MDC. Still long here and love the NAV discount but nervous on the underlying NAV. Supernovahttps://www.blogger.com/profile/01073461904758612665noreply@blogger.comtag:blogger.com,1999:blog-2080506270244832638.post-51805737390697763852022-01-25T08:53:55.820-06:002022-01-25T08:53:55.820-06:00Thanks for your thoughts, I'm sort of on the o...Thanks for your thoughts, I'm sort of on the opposite end, I view their resi exposure as a positive. They're in the middle of the country, sun belt type markets, not the gateway markets that might be more exposed. NXRT in particular is more workforce type housing, I would expect lower rents to be less pressured. I also have a big bet on sunbelt multi-family, every week it seems like BX/BREIT is buying up another large portfolio.MDChttps://www.blogger.com/profile/10679835609782815537noreply@blogger.comtag:blogger.com,1999:blog-2080506270244832638.post-92006582396200446662022-01-24T13:02:17.618-06:002022-01-24T13:02:17.618-06:00Hey MDC - Happy New Year and congrats on a great 2...Hey MDC - Happy New Year and congrats on a great 2021. I'm on board here in NXDT as well...the discount the NAV is just to big to ignore. I am a bit concerned though about overall real estate prices and associated cap rates. I see NXDT as a fund trading at a big discount to a somewhat over-inflated NAV. Residential R/E is particularly concerning to me. It's around 42% of their NAV and I expect they are comping the NAV to public resi REIT peers for this portion of the fund. Valuations look silly to me in resi REITs. AMH is trading at 32x FFO and with a 1% yield. NXRT is trading at 35x FFO, 5x book, and a 2% yield. They are buying & selling homes at 3.5% cap rates! That's a bit frightening to me. R/E values are much more sensitive to rates when rates are low. With high inflation and rates on the move I would expect cap rates to move higher, obv pressuring NAV. I've thought about hedging out the resi R/E within NXDT by shorting NXRT. Doing so you also hedge out any Nexpoint taint and better isolate the NXDT NAV discount. This might be a little too cute but am noodling on it. Just wanted to share my thoughts.Supernovahttps://www.blogger.com/profile/01073461904758612665noreply@blogger.comtag:blogger.com,1999:blog-2080506270244832638.post-73846859868182561372022-01-09T12:38:10.743-06:002022-01-09T12:38:10.743-06:00I don't really know, there's a lot of wood...I don't really know, there's a lot of wood to chop here, not saying its going to be a quick re-rate, but once it starts reporting as a REIT/operating company and not a 40 Act Fund, I think the accounting will look cleaner.MDChttps://www.blogger.com/profile/10679835609782815537noreply@blogger.comtag:blogger.com,1999:blog-2080506270244832638.post-55856326309640990942022-01-08T15:46:07.660-06:002022-01-08T15:46:07.660-06:00Hey MDC. Any opinion on what happens to the LLC in...Hey MDC. Any opinion on what happens to the LLC interests in the portfolio?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2080506270244832638.post-453471843728168452021-11-24T07:58:49.243-06:002021-11-24T07:58:49.243-06:00It's a good question, I'm not sure, my sen...It's a good question, I'm not sure, my sense is they won't liquidate their affiliate stakes for now. I hope they do a quarterly conference call soon, I might try to sneak on before this has analyst coverage to ask some of these questions.MDChttps://www.blogger.com/profile/10679835609782815537noreply@blogger.comtag:blogger.com,1999:blog-2080506270244832638.post-82692777126986884192021-11-23T09:49:57.091-06:002021-11-23T09:49:57.091-06:00Hey MDC - do you know if NXDT plans on liquidating...Hey MDC - do you know if NXDT plans on liquidating their affiliate stakes? I know they plan on liquidating their securities but I haven't found anything regarding their large stakes in the other Nexpoint funds/strategies. I ask because I'm wondering if there are there any tax consequences for shareholders if they sell these positions? They may have large capital gains in these positions that could be passed to REIT shareholders upon a sale. If they sold these the double dipping would go away, which would be nice, but I'm concerned about the tax angle.Supernovahttps://www.blogger.com/profile/01073461904758612665noreply@blogger.comtag:blogger.com,1999:blog-2080506270244832638.post-31001609697264113682021-11-03T13:13:10.944-05:002021-11-03T13:13:10.944-05:00Thanks for sharing your thoughts.Thanks for sharing your thoughts.Supernovahttps://www.blogger.com/profile/01073461904758612665noreply@blogger.comtag:blogger.com,1999:blog-2080506270244832638.post-76141206610588678162021-11-03T13:09:08.691-05:002021-11-03T13:09:08.691-05:00It is a lot to untangle and Dondero is back in the...It is a lot to untangle and Dondero is back in the news again as Highland (the creditors) is suing him for these "lifeboats" like NexPoint. But I think slowly over time it'll untangle, he's been hands off with the other NexPoint vehicles, maybe he will be here too. They also got significant pushback on the conversion of the sister fund, HFRO, I like this better as its a REIT versus a HoldCo, but could be some added motivation to get this vehicle to work so they could go back to HFRO with a success story.MDChttps://www.blogger.com/profile/10679835609782815537noreply@blogger.comtag:blogger.com,1999:blog-2080506270244832638.post-44425891838579403942021-11-03T12:31:36.528-05:002021-11-03T12:31:36.528-05:00I really want to like this but it's hard to ge...I really want to like this but it's hard to get passed the double dipping...and even triple dipping. Just a bad marker, although their history shows can still make money with bad people, just not a good feeling. It reminds of when Merrill sold hedge funds of funds of funds with a 5.75% load!Supernovahttps://www.blogger.com/profile/01073461904758612665noreply@blogger.comtag:blogger.com,1999:blog-2080506270244832638.post-67738117806053341792021-09-22T12:43:07.196-05:002021-09-22T12:43:07.196-05:00Love it. They've officially filed to de-regis...Love it. They've officially filed to de-register as a 40 act fund, should get the REIT announcement soon and hopefully some investor relations push after that, explaining the story, regular conference calls, index inclusion, etc.MDChttps://www.blogger.com/profile/10679835609782815537noreply@blogger.comtag:blogger.com,1999:blog-2080506270244832638.post-280419615699794412021-09-22T12:09:46.207-05:002021-09-22T12:09:46.207-05:00MDC, do you still like NHF at around $14?MDC, do you still like NHF at around $14?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2080506270244832638.post-73461241143578707252020-11-01T21:25:37.322-06:002020-11-01T21:25:37.322-06:005.5% feels aggressive to me, from NHF's perspe...5.5% feels aggressive to me, from NHF's perspective, but they must have took the temperature of investors or have an idea where they think enough shareholders will tender to get it done? I'd be surprised if it traded at par/nominal value, but I'm hoping it does.<br /><br />I don't plan on tendering any shares at this point unless we get an election selloff or something else happens.MDChttps://www.blogger.com/profile/10679835609782815537noreply@blogger.comtag:blogger.com,1999:blog-2080506270244832638.post-74328143154426181412020-11-01T13:10:32.636-06:002020-11-01T13:10:32.636-06:00Any idea where the preferreds will start trading? ...Any idea where the preferreds will start trading? Close to par-value? In the tender offer, the preferreds will be valued at their nominal value, I understand, so the gain from participating in the offer will really also depend on the market value of the preferreds.Lupo Lupusnoreply@blogger.comtag:blogger.com,1999:blog-2080506270244832638.post-71011211982377996682020-10-30T13:52:49.896-05:002020-10-30T13:52:49.896-05:005.5%! Let's see if they get enough takers, I ...5.5%! Let's see if they get enough takers, I sure hope they do.MDChttps://www.blogger.com/profile/10679835609782815537noreply@blogger.comtag:blogger.com,1999:blog-2080506270244832638.post-64428631847283235752020-10-29T09:06:34.723-05:002020-10-29T09:06:34.723-05:00I think that's more boilerplate language when ...I think that's more boilerplate language when you take out a public companies shareholders for cash and NHF hadn't received the shareholder vote to become a REIT yet. I get the concern about potential double dipping, like would Nexpoint earn fees on NHF and then operate separate REITs like JCAP and NREO within NHF, earn fees at both levels, it is something to watch for, but that's not what they've done at their other REITs. Dondero has an earn reputation as slimy, something to watch for.<br /><br />Self storage seems to make sense for the direction they're headed, WSJ had a article yesterday about BX's buying another self storage platform and the general covid thesis around self storage:<br /><br />https://www.wsj.com/articles/blackstone-to-buy-simply-self-storage-for-about-1-2-billion-11603656073MDChttps://www.blogger.com/profile/10679835609782815537noreply@blogger.comtag:blogger.com,1999:blog-2080506270244832638.post-60422743756555704912020-10-28T21:44:36.075-05:002020-10-28T21:44:36.075-05:00I assume you've seen the related transaction w...I assume you've seen the related transaction where NexPoint Advisors is buying Jernigan Capital for $900 million. When I saw this, I thought to myself "Interesting, they are going to buy this, and drop it into the new NHF REIT, which already has a self-storage business via NexPoint Real Estate Opportunities. Maybe the focus of NHF will shift to self-storage." <br /><br />Then I saw the comment from Dondero: "We plan to build on this vision as a private company, maintaining unparalleled asset quality and continuing the current growth trajectory."<br /><br />Why would they buy a self-storage business (Jernigan) and operate it privately, while they already have a self-storage business wrapped in their existing public REIT? Unless they plan to combine Jernigan with their self-storage REIT held inside of NHF, they end up in a situation where their private company is competing with the publicly-held self-storage operation. This seems both slimy and inefficient. You have any thoughts on this? Stephenhttps://www.blogger.com/profile/05551829169517890230noreply@blogger.comtag:blogger.com,1999:blog-2080506270244832638.post-1539283196401007502020-10-17T11:10:25.729-05:002020-10-17T11:10:25.729-05:00I would think it would be sub-8? 7.5%? Otherwise...I would think it would be sub-8? 7.5%? Otherwise I don't think it would make a ton of sense for NHF.<br /><br />But it does lever up the common even further, in the proxy they said 3x equity, the preferred would be equity, so this really tightens the spring.MDChttps://www.blogger.com/profile/10679835609782815537noreply@blogger.comtag:blogger.com,1999:blog-2080506270244832638.post-23223652918809331752020-10-16T18:14:55.817-05:002020-10-16T18:14:55.817-05:00you think the preferred might be worth it if they ...you think the preferred might be worth it if they give you $12? what would the yield be 8? 9? 10?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2080506270244832638.post-278054999807542582020-10-15T09:16:19.647-05:002020-10-15T09:16:19.647-05:00Good question *shrug*
I do think this is pretty b...Good question *shrug*<br /><br />I do think this is pretty bullish if you believe in the thesis/management team, essentially loads the spring even more to the common stock.MDChttps://www.blogger.com/profile/10679835609782815537noreply@blogger.comtag:blogger.com,1999:blog-2080506270244832638.post-63366299568403821302020-10-15T08:47:54.774-05:002020-10-15T08:47:54.774-05:00A tender offer is out
https://markets.ft.com/data...A tender offer is out<br /><br />https://markets.ft.com/data/announce/detail?dockey=600-202010150925PR_NEWS_USPRX____NY59558-1<br /><br />Interestingly, they say that the tender offer will only be made to "current" shareholders. How does this work administratively? And on which date on has to be a current shareholder? Today, or when the tender offer commences? Any ideas?Lupo Lupushttps://www.blogger.com/profile/07020610093579681897noreply@blogger.comtag:blogger.com,1999:blog-2080506270244832638.post-35010929582945434452020-09-08T16:11:13.399-05:002020-09-08T16:11:13.399-05:00Very interesting, Self storage is an area of real ...Very interesting, Self storage is an area of real estate I'm interested in owning and the special situation catalyst with the conversion makes this very interesting to me. Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2080506270244832638.post-50970484222630847912020-09-04T13:34:52.764-05:002020-09-04T13:34:52.764-05:00It's a fair question, NexPoint Real Estate Opp...It's a fair question, NexPoint Real Estate Opportunities was marked at $292MM prior to covid, hard to know the puts and takes to that valuation. Also hard to tell what percentage of NREO is the office/hotel and how much is the self storage/SRF, the latter has certainly held up pretty well through the crisis. I figure we'll know more in the coming months.MDChttps://www.blogger.com/profile/10679835609782815537noreply@blogger.comtag:blogger.com,1999:blog-2080506270244832638.post-43196763418339467802020-09-03T00:24:00.499-05:002020-09-03T00:24:00.499-05:00I like the idea since NREF is already trading back...I like the idea since NREF is already trading back to a discount of ~15% vs 45% for NHF. When they mark NAV for NHF, are they also using NREF at 100% NAV vs the discount at 15%? From your linked holdings, it looks like 30MM in value at 3/31. <br /><br />The big question for me is the 230MM holding in NexPoint Real Estate Opportunities, LLC. Is that marked correctly? The market is saying no, due to the high discount to NAV. Perhaps a chunk of that is due to the Marriot new build in Dallas? Any idea how much the hotel is valued at?Joshhttps://www.blogger.com/profile/12028228587020987588noreply@blogger.com