저자: DavidHong · 외국인
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빌 밀러가 상위 보유 종목으로 담은 소형 리츠 CTO Realty Growth를 분석. 텍사스·조지아·플로리다 등 인구 성장 지역에 약 10억 달러 부동산 보유, 임대율 90~93%, 부채 약 5억5천만 달러로 부채비율 적정. 2011년 이후 경영진이 사모펀드처럼 자산 매각·개발로 10여 년간 15~20% IRR 달성. 자산 대비 저평가(AFO 9.7배, NAV 대비 약 35% 상승 여력)와 내부자·경영진 매수, 자사주 매입을 긍정 요인으로 꼽음. 반면 주요 임차인 WeWork 파산으로 2024년 4월까지 현금흐름 타격, 자사주 매입 규모 제한, 거래량 적은 소형주 리스크를 부정 요인으로 제시.
다듬은 글
Bill Miller is a value investor well known for his record-breaking 15 consecutive years of outperforming the S&P 500 that's right for over a decade he consistently beat the market year after year turning a$1 billion into 21 billion for his investors if we divide the value investing Camp into the old band Grahams dirt chip net net stocks versus Charlie mongers growth oriented highquality Compounders bill Miller first into the lad camp for example his most prominent investment cases are Amazon and Valiant given this facts I was surprised to see that currently Mr Miller's top 10 Holdings include CTO realy a retail REITs with market cap less than $400 million so today I'm going to share my research on the pros and cons of these reads and see if we can figure out why Bill Miller bought it as a major position let's start with c's business model it has about $1 billion worth of real estate assets across the Southern United States with a focus on Texas Georgia and Florida these states are experiencing higher population growth and generally more business-friendly red States so this can be considered the first bullish deis on CTO although I have to admit this is a weak one in these states CTO owns about 23 retail properties that look like this so nothing really special here and looking at its occupancy rates which is between 90 to 93% these spaces are rented out well so this is also good but again nothing very special as we can see in the next graph C's lease rollovers are well spread out and it's comforting to see that for the next 2 years only 14% of leases roll over so even if we are worried about an immediate recession CTO somewhat protected moving on to balance sheet C's total dep is $550 million which is about 50% of total Enterprise Value and less than eight times dep to Eid ratio this seems to be at or a bit below industry average but there are two additional positives here first dep schedule is well spread out for instance there is no maturity at all in 2024 and the major maturity comes only in 20128 so CTO will have flexibility for the next few years in addition 9 27% of these deps are fixed and the management utilized a four hatch up to 2033 to minimize interest rate volatility so this well-positioned depth structure can be considered the second bullish Point although again this is a weak positive moving on to the dividend this DPS growth might imply tremendous growth but this is due to the fact the CTO transitioned into a r in 2020 so if we just look at the dividends starting the full year 2021 1 its dividend per share grew 12% in 2022 but just 2% in 2023 and its afo payout ratio is about 80% so here again CTO is at a decent position but nothing eye popping here so far we've checked the most common factors of a reach analysis but cannot find a clear reason why Bill Miller invested in C realy but digging other details of this reads I found a trace in its m&a activ ities this graph shows all the buying and selling of assets since 2012 not only are there so many buying and selling of assets but the aggregate deal volume was close to $2 billion which is about 500% of C's common Equity needless to say this is very high level of activity and as a natural next step I calculated how much return these Investments created for shareholders and it turns out that the management generated about 15 to 20% irr for shareholders for for over a decade which is obviously a very good track record so I dug deeper into current management team and found out that they took over CTO in 2011 and they essentially ran CTO like a real estate private Equity Fund rather than a typical public reads in fact the management States this strategy clearly in its presentation by saying that c has a strong long-term track record of monetizing assets at favorable investment spreads to drive a creative earnings growth and attractive risk adjusted returns including outperforming the risk Equity index and pure group average in each of the past three years for example this property is a recently acquired real estate in Atlanta the blue areas are already developed but the green area is an extra parcel of land that can be developed by CTO for Value creation so what CTO does is buy this type of assets that can create extra value and after several years it sells the whole asset at a higher price which is exactly what real estate private Equity Farms do but it doesn't end here CTO also invests in other RS through both public and private transactions for instance CTO is currently the largest owner of Alpine income property trust through pipe which is a private investment method and also through additional investments in public Equity as a result of these Investments and negotiations CTO not only benefits from the outline growth and dividends but also manages its asss for a management fee such investment activities are also happening through CTO investments into commercial loans and other private Equity Investments and if CTO is more like a private agree rather than just buy and hold entities like most other public RS it is more important than ever to check the management team's caliber and here is the resume of John P Albright the president and CEO of CTO since 2011 he was the executive director of Morgan stell's Merchant becking arm and the director of real estate investment banking Department of UBS in New York and in the bide word he served as co-head and managing director of archan capital and served as principal with real estate hch fund manager of Trilogy Capital Advisors so basically he is probably in his 50s with Decades of experience in not just in real estate but also in real estate m&a and investing through hedge funds and private Equity firms on Wall Street of course a good resume doesn't just correlate with investing skill but as we discussed before he has already proven his skill as CTO by generating very high return for overall decade so the fact that CTO is being run like a real estate private Equity Firm led by a competent and proven investor is a third bullish point now let's move on to the valuation as we can see in this graph CTO is currently training at about 15 times a multiple this can be considered high in general but considering that CTO is a reach it is lower than where its peers are being traded at about 18 to 19 times at their mean and median multiples and if you look at the afo per share of CTO which is about $1.75 per share this R is currently being traded at 9.7 times afo and again this is quite good considering that CTO is Rich lastly I also ran some numbers based on the company provided nav calculation and it looks like even if we assume 88.5% cap rate for its current cash flow CTO has about 35% upside to its intrinsic value to put this in the context realy income a very popular R among retail investors its cap rate for new Investments are between 6 to 7.5% and it is fully priced so it looks like CTO is undervalued based on several metrics and this is the fourth bullish point but if CTO is so undervalued what are the Insiders doing about it first of all Mr Albright the president and CEO is increasing his ownership of the firm this graph also includes stock options but in addition to that he also purchased shares in the public market with his own money not only that but the company itself is purchasing its own shares through buyback program as we can see below with the red bars CTO continues to buy back its own shares so when we invest in this RS it's not just the 9 to 10% dividend yield in the green bars but also the BuyBacks that's beneficial to us shareholders in terms of other major investors Bill Miller who led us to CTO in the first place is obviously bullish on this rits another major investor of CTO is Lawrence Ryman his ties to this firm is not very clear but the fact that he is the founder and CEO of ldr Capital Management another real estate asset management firm is a good sign Mr Ryman is the largest individual shareholder of CTO and also has experiences at Wall Street like serving as the managing director of credit swis running the firm's Global real estate Securities business managing $2.6 billion and also being a top-rated Rich Analyst at DJ in the past so the fact that insiders and several smart investors are buying and holding on to CTO are the fifth bullish case so far we focus on the basics and the positives of CTO but there are some negatives as well first of all wew work which file for bankruptcy is the second largest t of CTO although wework only took up to 1.4% of least square footage its cash flow contribution was about 3.4% and since wework's lease is valid until April 2024 this bad news and negative impact will damage C's fundamentals and also push down its stock price until that space is fully emptied and replaced by new tenant hopefully by mid 2024 secondly perhaps such negative impact from wework limit C's ability ability to take advantage of its currently low share price because although CTO is buying back shares the size is actually pretty small at less than 2% of total shares and third the fact that CTO is so small might make some investors hesitant to invest in it its trading volume is quite small and as we can see in the wework example problem with some large tenants can have a larger impact to CTO compared to other larger retail reads okay so that's about my analysis on CTO realy hope this content was helpful to you guys and please feel free to share your thoughts on CTO in the comment section below and subscribe to this channel see you guys in the next video and here are the five bullish and three bearish points on CTO realy yeah
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