tag:blogger.com,1999:blog-2080506270244832638.post7722176879978472781..comments2024-03-28T07:17:13.573-05:00Comments on Clark Street Value: Radius Global Infrastructure: Tower Ground Leases, Rumored SaleMDChttp://www.blogger.com/profile/10679835609782815537noreply@blogger.comBlogger31125tag:blogger.com,1999:blog-2080506270244832638.post-28347780568947257702023-01-31T23:31:02.866-06:002023-01-31T23:31:02.866-06:00Looks like RADI buyout rumors are circling again p...Looks like RADI buyout rumors are circling again per Bloomberg. Unsure what the downside is here. Currently (still) trades at ~5% cap rate by my numbers. Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2080506270244832638.post-78561953980648668672022-11-30T11:05:51.868-06:002022-11-30T11:05:51.868-06:00Bloomberg reporting that EQT is in talks to acquir...Bloomberg reporting that EQT is in talks to acquire RADI. I still hold the stock, but I'll likely lose money here after my calls expired worthless in August.MDChttps://www.blogger.com/profile/10679835609782815537noreply@blogger.comtag:blogger.com,1999:blog-2080506270244832638.post-46400195059031374332022-07-14T09:05:13.784-05:002022-07-14T09:05:13.784-05:00I just hope they want RADI as well and it wasn'...I just hope they want RADI as well and it wasn't an either/or situation where they burned their dry powder on GD Towers.MDChttps://www.blogger.com/profile/10679835609782815537noreply@blogger.comtag:blogger.com,1999:blog-2080506270244832638.post-11418391912501913662022-07-14T03:40:53.968-05:002022-07-14T03:40:53.968-05:00DBRG is buying GD Towers at ~3.9% cap rate. You ar...DBRG is buying GD Towers at ~3.9% cap rate. You are totally right with your cap rates)Atonhttps://www.blogger.com/profile/16807818635170312966noreply@blogger.comtag:blogger.com,1999:blog-2080506270244832638.post-26652299846738603652022-06-04T03:47:39.347-05:002022-06-04T03:47:39.347-05:00I think it's more about risk premium, as cbre ...I think it's more about risk premium, as cbre and nar point, cap rate is a function of T-yield plus spread so in a rising interest rate environment spreads should compress in order to keep cap rates stable (which is hardly achievable). 5% cap rate may look good now but no so in the 70s<br />Here is a good piece from Cornerstone about cap rates in historical perspective: https://www.google.com/url?sa=t&source=web&rct=j&url=https://www.adventuresincre.com/wp-content/uploads/2017/09/Cap-rates-and-RE-Cycles.pdf&ved=2ahUKEwjxzYGFspP4AhW9BxAIHddLBVAQFnoECAQQAQ&usg=AOvVaw0WbVZgC_Zkz5Y65VnWRbjeAtonnoreply@blogger.comtag:blogger.com,1999:blog-2080506270244832638.post-50966370763446934562022-06-03T07:52:36.067-05:002022-06-03T07:52:36.067-05:00*rents aren't going to go up 20%*rents aren't going to go up 20%MDChttps://www.blogger.com/profile/10679835609782815537noreply@blogger.comtag:blogger.com,1999:blog-2080506270244832638.post-89935872386026449422022-06-03T07:51:15.124-05:002022-06-03T07:51:15.124-05:00Thanks, I struggle a bit with how to rethink about...Thanks, I struggle a bit with how to rethink about cap rates in the current environment. Some things like long term NNN leases should definitely be hit by higher interest rates, but things like multi-family where rents are increasing faster than inflation or rates moving up, that's less clear to me that their cap rates should move up significantly. Here with RADI, their rents are going to go up 20% in a year like multi-family, but they are largely inflation hedged.MDChttps://www.blogger.com/profile/10679835609782815537noreply@blogger.comtag:blogger.com,1999:blog-2080506270244832638.post-21858940376390417522022-06-03T07:49:17.373-05:002022-06-03T07:49:17.373-05:00https://www.lightreading.com/digital-infrastructur...https://www.lightreading.com/digital-infrastructure/insatiable-digitalbridge-kicking-tires-on-radius---report/d/d-id/777974<br /><br />Apparently DBRG is in talks with RADI.MDChttps://www.blogger.com/profile/10679835609782815537noreply@blogger.comtag:blogger.com,1999:blog-2080506270244832638.post-42302377263890921732022-05-28T03:49:02.684-05:002022-05-28T03:49:02.684-05:00Maybe 5% cap rate is not as low in a rising intere...Maybe 5% cap rate is not as low in a rising interest rate environment?<br /><br />https://www.nar.realtor/blogs/economists-outlook/commercial-cap-rates-likely-to-keep-compressing-in-2022-despite-higher-interest-rates<br /><br />https://www.cbre.com/insights/books/us-real-estate-market-outlook-2022/capital-markets#:~:text=Cap%20rates%20to%20hold%20steady&text=The%20all%2Dproperty%20average%20cap,250%20bps%20in%20H2%202022.Atonnoreply@blogger.comtag:blogger.com,1999:blog-2080506270244832638.post-35218997710758284542022-05-28T02:39:51.227-05:002022-05-28T02:39:51.227-05:00I bought some during the GFC and held it for a yea...I bought some during the GFC and held it for a year or two, and was amazed to see it was still around in 2020 when I bought again. Funny little company.<br /><br />Nothing too much to say on ADMA, though I'm keeping track of it too. I liked it very much up to $1.30 (my last buy), and obviously it's very cheap on 2024/5 guidance, but even with their seemingly good execution of late I just don't have the comfort level yet that'd be necessary to make it a medium-large position vs a smallish one. <br /><br />The growth, the expiration-extension inventory writeup, the strategic alternatives, the potentially accelerated timeline to profitability, the presence of Perceptive (well, that USED to be a good thing until 2021, and it's a rounding error for them anyway)...it all makes for a great story, but if there's any hiccup they could be a liquidity-challenged cash-consuming microcap in a possibly-unfriendly market, in which case I'm not smart enough to handicap their odds. Hope to have more confidence as the year progresses.<br /><br />Same story with SQFTW, a bizarre warrant with downside protection. I really want to like the management there (Cliff's Notes: subscale REIT, priced at ~60% of envelope-math NAV, mgmt seems shareholder-focused and very--too?--creative) enough to make it a large position, but am not there yet. ADLhttps://www.blogger.com/profile/11578314123744054067noreply@blogger.comtag:blogger.com,1999:blog-2080506270244832638.post-54729613968446809692022-05-27T19:25:04.394-05:002022-05-27T19:25:04.394-05:00Fun walk down memory lane, I looked at this one ma...Fun walk down memory lane, I looked at this one maybe 8-10 years ago. Any current thoughts on ADMA? I spent some time on that one after you mentioned it, still hovering my "interesting if some of my other ideas play out" list.MDChttps://www.blogger.com/profile/10679835609782815537noreply@blogger.comtag:blogger.com,1999:blog-2080506270244832638.post-33373498163731392002022-05-27T18:48:24.266-05:002022-05-27T18:48:24.266-05:00I think the likeliest path is that this will open ...I think the likeliest path is that this will open around $2 on Tuesday, making it not terribly attractive, but there is a chance that there's some to be found at the last ask (maybe I shouldn't have mentioned this at all until I saw if there was a fill!).<br /><br />Also--obviously--my estimates might be off. If, say, two million dollars are held back for contingencies and expenses with a stated holding period of a year or two, and/or closing is put off to Q4 (introducing further uncertainty), the prospective return drops to an unpalatable level.<br /><br />ADLhttps://www.blogger.com/profile/11578314123744054067noreply@blogger.comtag:blogger.com,1999:blog-2080506270244832638.post-63590748912859376642022-05-27T18:40:30.993-05:002022-05-27T18:40:30.993-05:00Just had a look back at my February list mentioned...Just had a look back at my February list mentioned here. Despite some stinkers there, up about 11% on an equal-weight basis (or 4% excluding the BDSI buyout) vs. approx -5% for SPY over that period. Not earth-shattering, but I'll take it.<br /><br />One quick hit on a name that's probably not actionable, but you never know...<br /><br />ACMC, a tiny provider of mortgages to churches, is being bought out after many years of failing to thrive. This afternoon's 8-K has details, but the broad strokes are that the buyer is making whole the note buyers who funded the operation, with about $2.50/share left over to be distributed to shareholders. Target date for completion is end of June; drop-dead date end of December. <br /><br />I assume there is a fairly high degree of confidence if they are naming a target date only a month out. The equity value above is about half of stated book, and twice the last trade price. They last paid a (small, increasingly so over the years) dividend a year ago, and I imagine holders, whoever they are (apart from me, a token amount), will be glad for the liquidity. <br /><br />My $2.50 assumes de minimis costs for windup and liquidation, which may or may not be realistic. This is a very thinly traded Pink Sheets stock (though fully SEC reporting) and any hiccup with expenses or timing would likely deplete the residual value. ADLhttps://www.blogger.com/profile/11578314123744054067noreply@blogger.comtag:blogger.com,1999:blog-2080506270244832638.post-65000461183394920822022-05-27T14:33:40.075-05:002022-05-27T14:33:40.075-05:00Thanks for the idea, I'm very interested, ther...Thanks for the idea, I'm very interested, there was a pretty candid interview the CEO gave earlier this week at the JPM conference.MDChttps://www.blogger.com/profile/10679835609782815537noreply@blogger.comtag:blogger.com,1999:blog-2080506270244832638.post-56581814960613438142022-05-25T15:06:45.041-05:002022-05-25T15:06:45.041-05:00That's good right? Ha, got thrown off by the ...That's good right? Ha, got thrown off by the house of cards piece.MDChttps://www.blogger.com/profile/10679835609782815537noreply@blogger.comtag:blogger.com,1999:blog-2080506270244832638.post-49325084305212244492022-05-21T20:09:31.906-05:002022-05-21T20:09:31.906-05:00So the reason they have low churn is the legacy or...So the reason they have low churn is the legacy or "Piggyback " type of design you have in a cellular network. It's a bit of a house of cards . Over the years the carriers have added antennas to towers to improve and expand coverage. It's engineered based on previous work. They can't just pull the plug on a tower in their network without creating wider problems. Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2080506270244832638.post-72788174554856364502022-05-20T12:16:52.233-05:002022-05-20T12:16:52.233-05:00I did a little digging into SAFE, since I wasn'...I did a little digging into SAFE, since I wasn't super familiar (I've usually avoided Sugerman vehicles). Although their disclosures aren't super clear, it appears that SAFE generally acquires a fee interest in land, either (1) following up by originating a ground lease with a developer who constructs improvements (multifamily residential, office, etc.) on the land or (2) already subject to an existing ground lease with an operator of the improvements (apartment building, office building, etc.). I like this business model. Valuation is difficult because it's idiosyncratic but if the business is structured properly there is good downside protection combined with long term upside optionality. That, however, is not RADI's model. If RADI followed SAFE's model, they would be the owners of the buildings on which the towers were located and they would lease them to, e.g., AMT (that would be the "ground lease") who in turn would lease them to, e.g., VZ. But RADI is instead in the middle, leasing from the underlying property owner and then leasing on to VZ (or, in some cases, AMT). In other words, SAFE is the landlord under the ground lease while RADI is the tenant. So my concerns regarding RADI remain - I don't like the "tenant under a ground lease" business model. Apologies for the ramble, but you helped me clarify my thinking.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2080506270244832638.post-42825866358936579532022-05-20T08:29:41.143-05:002022-05-20T08:29:41.143-05:00Appreciate the pushback, gives me something to noo...Appreciate the pushback, gives me something to noodle on.MDChttps://www.blogger.com/profile/10679835609782815537noreply@blogger.comtag:blogger.com,1999:blog-2080506270244832638.post-21633655569016083552022-05-19T20:43:38.349-05:002022-05-19T20:43:38.349-05:00Thanks for the reply. My problem is with the busi...Thanks for the reply. My problem is with the business model. My background is in commercial real estate and I've always had an aversion to ground lease deals. So to me it's not whether or not towers should have a similar cap rate to Class A apartments, but whether (1) a hypothetical pure play Class A apartment SAFE should have the same cap rate as EQR and (2) whether RADI should trade at the same cap rate as AMT. For me it's no, not even close. Thanks again for the post.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2080506270244832638.post-9614129956783756162022-05-19T12:05:07.259-05:002022-05-19T12:05:07.259-05:00Maybe someone more knowledgeable on RADI's lea...Maybe someone more knowledgeable on RADI's lease structures can comment. <br /><br />My concern around their leases was more the number and nature of them, they don't have a master lease with one of the tower companies or MNOs, these are individual leases that could be cancelled without much disruption to their operations (I could be wrong), but apparently they don't get cancelled often. The company reports a 1% churn rate. So while the business model might resemble SAFE in someway, I don't think it deserves the same cap rate because a tower isn't an a Class A apartment complex.MDChttps://www.blogger.com/profile/10679835609782815537noreply@blogger.comtag:blogger.com,1999:blog-2080506270244832638.post-32836971445844082282022-05-19T12:02:27.124-05:002022-05-19T12:02:27.124-05:00I think the rumor that they're gauging interes...I think the rumor that they're gauging interest is likely true, whether it results in a transaction, who knows.MDChttps://www.blogger.com/profile/10679835609782815537noreply@blogger.comtag:blogger.com,1999:blog-2080506270244832638.post-72837528178054239492022-05-18T20:48:33.248-05:002022-05-18T20:48:33.248-05:00Intriguing idea, as is usually the case with your ...Intriguing idea, as is usually the case with your posts. However, depending on the contractual terms, my immediate reaction is that the "ground lease" structure may add significant risk. The underlying towers are infrastructure assets probably deserving of a low cap rate. But, correct me if I'm wrong, but RADI doesn't own the towers, they just lease them from the owners and then sublease them on to tower companies or MNOs. Ground leased building generally take price haircuts when compared to fee-owned buildings (except in frothy markets and also except in the case of super-long ground leases with favorable economics). I'd want to know more about the terms of the "ground leases" and the terms of the "subleases" before geting too excited.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2080506270244832638.post-62439269059399874262022-05-18T19:36:14.977-05:002022-05-18T19:36:14.977-05:00My gut says so too. The company went public throu...My gut says so too. The company went public through a SPAC in Oct 2020 and is now considering leaving the public markets? How credible do you think the rumors are? If it falls through this stock doesn't screen well. Thanks!Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2080506270244832638.post-9927145299575091272022-05-18T08:56:40.982-05:002022-05-18T08:56:40.982-05:00Thanks, I sort of intentionally left out comps, th...Thanks, I sort of intentionally left out comps, there aren't perfect ones. But I would probably blend SAFE, the tower REITs, the debt of the tower REITs and wireless carriers all together in some fashion. Or just in an absolute sense, 5.1% seems too high to me for senior secured inflation adjusted cash flows on digital infrastructure assets.MDChttps://www.blogger.com/profile/10679835609782815537noreply@blogger.comtag:blogger.com,1999:blog-2080506270244832638.post-71991934472628858112022-05-17T20:30:25.210-05:002022-05-17T20:30:25.210-05:00Thanks for the writeup! Why do you think the cap ...Thanks for the writeup! Why do you think the cap rate of 5.1% is too high? Do you have any previous comps to refer to?Anonymousnoreply@blogger.com