Yet Another Value Podcast - Rhizome Partners' Bill Chen updates his publicly traded real estate thesis+ $AIV pitch

Episode Date: August 20, 2024

Bill Chen, a real estate investor and Managing Director at Rhizome Partners, returns to the podcast to discuss the performance of publicly-traded real estate market and why it's done so well since his last podcast appearance in October 2023 + pitch on Apartment Investment & Management Co. "AIMCO" (NYSE: AIV). For more information about Rhizome Partners, please visit: http://rhizomepartners.com/ AIV pitch deck: https://docsend.com/view/4n5xq5mc58xwhx64 Chapters: [0:00] Introduction + Episode sponsor: Ycharts [2:18] Capital cycle for publicly traded real estate vs. privately traded [8:53] Five cap rate: how does it interplay with the Treasury rate? [13:02] Publicly traded real estate company performance: have these REITs done well because of management or in spite of management [20:11] Due diligence trips for REITs [30:06] AIMCO $AIV - what is it and why so interesting to Bill [36:26] What is Bill seeing that the market is missing the generates alpha in $AIV [39:38] $AIV report card / management team [48:02] Capital allocation / corporate governance [53:08] Valuation [57:31] Additional $AIV assets (besides Miami assets [1:04:15] $AIV final thoughts Today's sponsor: Ycharts This episode is sponsored by our friends at YCharts, the ultimate platform you need in your toolkit for turning your financial insights into captivating client conversations. With YCharts, each output is a powerful visual that brings your analyses to life and intuitively explains the “why” behind your strategy. Don’t get bogged down in the nitty-gritty of data and report creation — with features like PDF Reports, proposal generation, fundamental charts, and free content resources, YCharts gives you the visual edge you need to make a lasting impression and seal the deal. Click here to start your free YCharts trial and level up your game with YCharts: https://go.ycharts.com/yet-another-value

This episode is sponsored by our friends at Ycharts. With all the various job functions that advisors are tasked with, your time is extremely valuable and often scarce. Ycharts is a platform centered around efficiency and built with speed in mind. With an intuitive and user-friendly interface, Ycharts helped save advisors 29 hours per month while uncovering better and new investment ideas. Need a way to help clients visualize their financial future, reinforce the importance of consistent investing, and guide them towards informed decision.

Ycharts is tools for scenario building, portfolio construction, and proposal generation, That can be the missing piece to your service. So you can act on an idea right when the light bulb flex on. Again, I mentioned this last week, but there's a reason, almost every post I do, at the start of most of these YouTube, at the start of most of these podcasts, if you watch on YouTube, there's a reason I use Y charts graphs for them. And it's because they're really simple, they're really easy, and they look great. You know, I can't spend, if I'm using some other service, I can't spend 30 minutes,

an hour, an hour and a half trying to get four different charts ready for a post, right? Like, that would take almost as much time as the post of the podcast I'm actually taping. Whitechurch is simple. It's easy. The charts look great. So if you're interested, click the link in the show notes to start your Y charts free trial and see how Y charts is a one-stop shop for growing your business with few hours respect. All right.

Hello. And welcome to yet another value podcast. I'm your host, Andrew Walker. If you like this podcast, would mean a lot of you could rate, subscribe, review wherever you're watching or listening to it with me today. I'm not sure if it's the fourth or fifth time, but I'm happy to have him back on my friend Bill Chen. Bill, how's it going? Yeah, hey, man.

I think this is a fifth time, but you know, glad to be back on a podcast. And, you know, everyone's going for a Jeremy Raper's record, right? Yeah. Well, number one, you're not wearing the hat. And I thought we sent you the shirt. Early, I can't remember. If not, we'll get it sent to you. But not wearing the hat or the shirt.

That's upsetting. But we've got a lot to talk about today. Before we get there, just want to start this podcast off with a reminder to everyone. Nothing on this podcast is financial advice. that's always true. I'll say particularly true today. I say that on half the podcast, but Bill and I are going to start with an overview

of a little bit of publicly traded real estate, and then we're going to dive specifically into one name, but because we're starting with an overview of just the general overall sector, you know, that might apply extra. So please consults financial advisor, do your own work. By the way, Bill, we have a specific single stock name that we want to talk about.

That's the reason you kind of reached out and wanted to come on the podcast. But before we go there, I wanted to follow up. You came on, I believe, last October-ish, you came on this podcast, you went on a few other podcasts, and you said, hey, now is the time. Publicly traded real estate is trading at huge discounts to privately traded real estate. It's trading at a huge discount to replacement costs. Like, however you want to do it, this is a once-in-a-generation opportunity. And you haven't shared some slides and everything. And look, you know, hindsight is 2020, but in this case, you kind of were right, right?

Like, you can go look at it publicly traded real estate. It's done really well over the past, let's just call it 12 months. to make the time for it easy. So first, kudos to you. I've sent you some clips of draft that I've never quite said, but I've said like it's just so cool to see you, my friend Hawkins, a few others who were just so publicly saying, like, this cannot last.

These are too cheap. But now that I've thrown the flowers on you, I want to just pull back and ask, hey, we're 12 months into this call. Where do you, if they've had a good run, where do you think we are now kind of in the capital cycle of publicly traded real estate versus privately traded the opportunity set and everything.

Sure, and I think the, you know, we have, we're still holding on to a lot of large-cap multifamily reads. And I think a lot of it is that if you look at a few of the big transactions that got done this year, if you look at what Loxone pay, what KKR pay, what, an EQR, a poetry actually bought some about multi-families, if you look at all the cap rates that are, that they paid they were consistently caught like you know all in the five handle right and um you know like low five mostly low low to mid fives right is is what they've been paid and then the black zone deal is a little bit unique because um you can kind of have like tax tax and insurance adjust it uh so like

i've seen estimates from anywhere in five two to five six and that was a deal that was probably done a little bit earlier when there was more uncertainty around multi-family and now we're starting to see deal the kkr deal everyone thought that that was done at a 5% cap rate but then on their calls they said that on a day one year with a forehand though like people are kind of trying to figure out like are you really saying you bought these assets from lenar at you know in a 4% cap rate range like what there's so a lot of chatterers like you know like there's there they're They haven't come out, outright said, you know, it's a 4% cap rate. It's a 4% yield, right?

So I think that if you look at a lot of the big, the public reeds in our portfolio, they're still kind of trading in that high 5% cap rate. They got great balance sheets. You know, they got the best access to capital out there. Earlier this year, Mid-America and Camden issue 10-year-on-secure bonds at 4-9. and 5% interest rate and they probably get access to that at even lower rates today. So I think that we could, like our, in our model, like we probably don't want to be sellers until these, these large cap multifamily reads reached to at least like a 5%.

I mean, like we've been very consistent in saying that, right? We've been very consistent in saying, even though we got a lot of pushback from people, people were saying, well, you know, the 10 year yield is is 4.7, you should. should put like, you know, blah, blah, blah, like cap rate, you know, a spread on it. But like, I think based on replacement costs, based on the fact that a lot of supply has fallen off in the market, you know, there's just no new construction starts that the market is now starting to kind of buy into what we've been saying for a really long time, which is this environment is not conducive to new starts. So the market, I'm starting to hear the narrative

that, oh, you know, guess what? Like 20, late 25, late 25 to, 28 is got to be a great period where you're not going to have a lot of competing supply, right? You probably raise rents by, you know, four or five percent a year. And that's, you know, in a potentially low rate environment, that's a great setup, right? So we probably don't want to be sellers until, you know, the cap rates trade down to a 5% cap rate. And I, you know, there is a scenario. And in recent years, like, the publics tend to trade at a discount to private. But, you know, with everything that's going on, people are kind of starting to see,

hey, you know, if you're in the private, you get, you get potentially lockup with, you know, the B read, the S reads, you know, you get limited liquidity, right? And the implied cap rate is still in the fours. So, and then you got the public, it's liquid, it's at a higher cap rate. Like, like, it may actually, there's a scenario where the public's could, potentially trade a premium to private like it's happened in the past. I know like when we were when we last at the podcast, no one thought like everyone thought like you know like you'd be crazy to suggest something like that. But you said it. Hawkins is the other one who he came and he was

pounding the table on Vernado and he was like, look, everybody says, oh, public trade for a discount to privates. Go back 20 years and public's traded for a huge premium to privates. And you and him saying that are the two that kind of like reshifted like, hey, we might be a little bit victims to the moment here because public probably should trade it a premium to private, to be honest with you. Yeah. And we kind of spent a lot of time like writing this to you in one of our letters that's about to come out. And we wrote a lot about the REIT mafia dynamic, right? Like there's this dynamic where, hey, if you got head when at the moment, you know, the REIT mafia investors don't want to own these companies, right? And that's how you wind up

with an opportunity to buy large cap multifamily. We had a 7% cap rate. You know, it was like roughly that type of valuation when you and I were talking and I'm like these are actually some of the most sound the most you know got the best most percane balance sheet and yet you could buy them at a seven percent cap rate like like it was the most obvious it is one of the most obvious investments in my career and and we're not you know we're not looking to sell like we're not looking like if we have to trim some of it it's probably because we found something that that's a three bagger over three years and and like we'll like begrudently like trim some of those positions to fund something else.

Can I quickly ask you? So a few times I said we're not looking to sell, we're waiting until these hit. I'm just going to choose five, a five cap rate. It's kind of a target. Obviously, a lot more goes into that, right? Like a five cap rate on office versus the best apartment building in a great market, right? A lot goes into, but let's just use your five cap rate, you ask. I just want to, you know, how does that five cap rate interplay with the treasury rate, right?

right? Is that a five cap rate kind of assuming the treasure, the 10, let's use the 10 year treasury kind of fourish. It's kind of around here. Like, if the 10 year treasury dropped to a two, should all of us, you know, kind of bet like what everyone did in 2021, should all of us pull that five cap rate down to a three cap rate? Or does the 10 rate drop to a two? Because, you know, inflation, there's no inflation expectation. So that five cap rate, like, should say a five cap rate because you're not really protecting inflation. Or conversely, if the 10 rea goes up to a 10, should we take that five cap rate and change it to a 12 cap rate or should we keep it at a 5 cap rate because it's out of 10 because inflation is going crazy and we're going to get

a pass through all that and our replacement cost goes way out so how do you think about the interval of like just the 10 year versus that cap rate you're assigned you know i mean i think i think the 10 year 10 year is very very important right and and i would say i mean let's let's assign the most obvious thing the gravitation is finance right yeah i mean the most support benchmark in the all finance, right? You know, I would say that if the 10 year is stuck at 4, say like a year from now, the 10 year is at 4%, you know, in that scenario, a 5% cap rate probably like we may be sellers if we could find other things that are more interesting, right? If we, if the 10 year does go down to 2.5%, you add a 5, that's a really nice,

250 basis point, right? And, and then, like, you kind of got this also keep in mind, like, a lot of the reason why the opposite was possible in the Sunbelt multi-family was because there was this very large delivery, which, like, has been absorbed very, very well by the market, right? Everyone thought that rent was going to collapse, and then both Camden, Mid-America have come out and guided. Mid-America, I think, is guiding to, like, down 1% NOI for 24. And then Camden, I believe I'm more correct, was actually like, up, a half a percent or one percent it's like if you take a seven cap and to get to a five cap like you need no i to collapse by over 20 percent right and clearly that's not happening so but then like uh i bring

this up because in in 25 like now you have a five cap but like you can look out two three years and you know you're probably got to come same store and oi by i don't know pull numbers out of my you know in there like three to six percent like depending on you know each each each local geography supply demand dynamic, right? Like, I would say that if you have very little supply delivery and we're not in a bad recession, like you could probably count on, you know, at least like 3% same store, NOI growth. And I think that sets us up really, really well at a 5% cap rate with that kind of growth. I think what it will do is make it very attractive to a very large pool of capital where

the alternative is 2.5% in the 10% of a treasury, right? And then you could buy, you know, this kind of pristine, diversified, large cap, super liquid, multifamily reads that you could, like, you could do the simple map, right? Do I get 2 and a half percent in the 10-year treasury with no inflation protection? Or like, you know, at a five cap, you're still getting like a 3% dividend yield. But you know you're getting like somewhere between 3% and 6% rent growth because of that very unique supply dynamic, right? Like, it kind of, in that scenario, it becomes like a bit of a no-brainer to go choose the multifamily reads.

So, so we'll, you know, we'll course adjust depending on interest rates. And, you know, the 10 year is the biggest input to every asset pricing, which is why we track it very, very closely. So that's kind of how we're thinking, yeah, completely makes sense. Let me, one more question. Look, last October, you were really banging the drum. These stocks have done really well since last October, you know, pick here. I just pulled up on Y charts, Mid-America, MAA, because that's like a giant apartment and super, super liquid. Of about, since we did the podcast, I think it's up total return is over 25%.

So, you know, there aren't too many people who looked over 25% total return inside of a year. You know, that's a really nice thing. I want to ask you, look, don't forget the dividends. This was total return. So it did include the dividends. And it very much depends on the day because last October, people were getting, it was down 5% up, six, it was really crazy. But it's a bit of, you know, there are a lot of these guys, right? Some of them sold to Blackstone, as you mentioned.

There was a big KKR deal. But I just want to, on the whole, when you look at a lot of the stocks we talked about, how much of their performance or how would you grade them as managers, right? Like the stocks have done well, but do you think they've done well almost? I'm not calling any specific one out, but do you think they've done well in spite of the management? teams do you think a lot of these management teams like kind of they don't have to cover themselves in glory but do you think a lot of the management teams enhance value because i i'm just curious like how you you've got a big position you've taken a big stake and management matters for that unless you're trading it as like cart kind of a starting so how do you think these management teams have

dealt in this environment so i think i think i think like particularly the two sum bill which is middermarker and camden i think i think they essentially have kind of stay within the box mandated by reed mafia right like they they have very specific this is what we're going to do in terms of leverage this is how we're kind of ladder our debt maturity this is how you know they just kind of like it's almost like sometimes i hear people talk about like the democratization of like real estate ownership and i'm like that solution is solved like 50 years ago right like especially those two large cap reeds like they they have played very specifically within this like unwritten protocol, they kind of have an unwritten agreement with a shareholder base that

the loan to value is going to be around 20%. You know, they could take that up to maybe 30, right? The latter maturity, like, you know, how do you allocate capital? Is it, okay, like, you can go buy something at a 5.5% cap rate. Well, we could buy back shares at 7, which is what Camden did in the first quarter, right? So like, there's this like very kind of, and we understood that going in right we understood that this is like not some sort of um family control with with with like their own agenda this is this has a very robust very widely distributed shareholder base and and the reed mafia is like basically instill this is what you're going to do you're going to stay within this leverage ratio you got this is how you're going to allocate capital if you're if you if you think

you're trading at a premium what issue shares go do deals right you're trading at a discount like go buy back shares or go do some distress acquisitions, right? And I think that those few reeds that I mentioned have like followed those instructions like kind of to a T, right, which is why like we size them to be the biggest because when the sentiments change, we found in our experience that you kind of don't want to be allocated to like a smaller cap that's like under the radar because the capital, the flow is going to go back to the larger guys. And those are like the subtle little nuances that we pick up from being a public equity investor for like over a decade.

No, I'm just laughing because last year I got really into banks for a while. And, you know, I go find these banks that were super illiquid. And the stock was that, you know, the bank's index was down 50% and their stock was down 70%. And I was like, oh, this opportunity is like better balance sheet. I think the management seems great. And guess what? A year later, the bank index is like kind of back to where it was. And these stocks are still down like 40% or something.

It's like, gosh, darn it. I could have got more liquidity, easier, less, just, um, so I'm laughing there. And I just wanted to add to your point on follow the box. Like, yes, it's keeping it simple and you're not going to generate like you generate this generated 25% off off the bottom, but the company as a whole is not going to compound capital at 20, 25% for five, 10 years following this box. But look, you know, five years ago, I would have looked at them saying like, this is our model. We keep leverage low.

We keep it simple. If we're out of premium, we issue shares. If we're at a discount, we'll buy back a little bit of shares. But like, we kind of keep some, 10 years ago, I looked at that as it's silly. But today I'm like, look, these guys can raise unlimited sums of capital over the long term. Like investors can sleep at night. They're going to be here. Like, yeah, okay, cool.

They're not going to be the next Berkshire Hathaway. But guess what? They probably deliver over the long run index like, maybe a little bit better than index returns. And the management team's going to get paid really well. Shareholder's going to sleep at night. like it's not a bad strategy so i mean like like if you like there's there's there's there's narrative of you know passive income right like people talk a lot about passive income and and you want to truly just outsource it you want a stream of cash flow that you know is coming in like

what's better than having 100,000 units own my mid-America diversified across a dozen sunbelt cities right And you have hundreds of buildings. So like no tornado, no Cinco, like, like, you know, if you, if you allocate to a single deal, right, literally like the Greenblatt, Greenblatt, Joe Greenblah has a famous story where a building little fell into a sinkhole in Florida. And then like all his equity in that deal is wiped out, right? Like when you think about these, you know, those reads with Hawaii, that kind of market diversification, building diversification, unit diversification, you start to really get like blend, you know, you. you really start to blend the exposure and yet no you're exactly right like they're paying out two-third of the cash that's available for distribution you you're clipping that and there's a third of it being reinvested into the business either by like value add projects internally acquisitions

buybacks and so whatever it may be it's it's like the ultimate just kind of hey like you buy it you you you're not going to you know have one of those jeremy rape you're like crazy multi-backer, you know. But like, I think you also chop off a lot of left tail, right? Like, you chop off a lot of the left tail. You kind of shrink your right tail and your left tail. And then you're kind of in this box. And also, also mid-America, we looked at their long-term track record. I mean, they've done better, like if you use S&P as like 10%, you know, since going back to 1920s, you know, Mid-American actually has Kagar, I believe, like depending on when the time period is, the past 20 years is actually 12%. I mean, so like higher than what, you know, what, what a typical S&P is. So it's,

it's more like, it's pretty impressive. And then if you have a company that Kegar caught 12% over 20 years and then you're able to buy it when the stock falls off 45%. I mean, that was, that was kind of a pretty, you know, obvious signal that, that, hey, it's worth taking, take, take, take and look into you. I had one more question for you. So over the weekend, I know you listen to some of the podcasts, probably not all of them, so no problem if you didn't listen to, but I did one of my rambling podcasts. And one of the things I talked about was due diligence trip, because I went on this great due diligence trip and, you know, I was doing the boots on the ground. And as I was doing it, and I was thinking about some other investments that other people made that I don't want to talk about. But as I was doing, I was like, look, as I was like, look, as I was doing. It's been a huge success. But, you know, it's lovely. The whole place is lovely. This is great. But I am worried. Like, look, they put, Monarchasino was one of the ones I was in. It's been a huge success. But, you know, if I had visited when they built, I would have said, hey, they put $500 million dollars into a casino, like an hour outside of Denver, like way out in the mountains. It's literally a one lane road driving in there.

The town, like it was like a 50-person town, old mining town, you know, I would have really worried, yes, I love it here. It's beautiful, but $500 million is a lot of money. Can they get that return? Yeah. Every time you and I talk about investment, you send me a photo of you, you know, in a hard hat. I just wanted to ask you, you know, when you're looking at, when you're doing it, when you're doing these due diligence projects.

And we've talked about a lot of them. Yeah. How do you separate, hey, this is great, but they might have spent Ritz-Carlton money, as I like to say, when it deserved, you know, kind of Motel 6-Sty style of returns. Or they spent Ritz-Carlton and they built it, you know, out in the middle of nowhere, no one's ever going to come. So it's great. It's fun to diligence, but it's never, how do you kind of think about that when you're

putting boots on the ground? I just want to ask you that. Yeah, I mean, I think so. um you know so so if we break down the nature of my due diligence trips a lot of times um it is i want to make sure i don't take my new york city it kind of mindset and and look at something and say oh like like that really nice apartment only costs two thousand dollars in rent right like that that's super affordable right and then like you go to new york city you visit anyone else and you're like oh my god like i pay i have a shoebox and i pay twice your mortgage it can be

really wild no exactly and that's where i think um so like the monarch example is kind of one extreme but like one analogy to that would be like the seaport by Howard Hughes right so maybe we'll get into that that's actually one i was very much thinking of when i was thinking about but you know you go read about people talking about the team building and it how much money they put, but let's not have that specific one. That could be a separate conversation on its own. But, like, I think on the due diligence trips, a lot of times what we're trying to do is we're trying to,

when you look at real estate, there's the actual building, the asset itself, and then there's a land and area component, a neighborhood component, right? And the neighborhood component is almost, I would say, if not more important, the building itself because, you know, Miami was a market where I kept hearing about, hey, it's great, like all these finance firms, all these tech firms are moving down there. And I, in my head,

I'm thinking Miami from 20 years ago when I went on a cruise with, you know, three of my best friends, and it was just kind of a party town back then, right? Like, so like, obviously my views on Miami are dated. It's no longer relevant. So we made it. conscious decision to spend a week, you know, I was there for maybe like three, four days, my analysts stay around for the whole week. And we're very kind of dogmatic and proud of the fact that we use a lot of data. We look at a lot of data, but at the same time, like nothing beats putting boots on the ground. And I'm the kind of guy, if I'm putting boots on the ground, I'm paying attention to you, okay, you know, are there young people here? Are there

Yeah, and attractive people. Like, we place a really big premium on, I'd say, you work in finance, you work in tech, you work in some sort of a highly compensated feel, right? What is your dating prospect, right? Like, that is one of the most important question that you have to ask, right? Because if it's hard to date for a young single quote 22 to 35, right, like the area just naturally is going to have difficult attracting talent, right? attracting really good employees. So there's a lot of little qualitative subtleties.

And, you know, J.BG Smith is a company in Crystal City, right? We've been down there four different times. And I, you know, you could make an argument that that, that, you know, Amazon headquarters, we put boots on the ground with just like this kind of felt like John McCain used to live here and never left. Right. Now, it's slowly transforming, but we could kind of, it's, it's, it's, There are areas and neighborhoods in Brooklyn, right, that are just so vibey that we feel really, really comfortable.

And there are other areas that I've been to where I'm like, I get it. I get why the youngsters want to be here. And I get why if you're Citadel or if you are Goldman Sachs, why you want an office here. And those are really, really key criteria that we pay a lot of attention to you. This episode is sponsored by our friends at YChart. With all the various job functions that advisors are tasked with, your time is extremely valuable and often scarce. Y-charts is a platform centered around efficiency and built with speed in mind. With an intuitive and user-friendly interface, Y-charts helped save advisors 29 hours per month while uncovering better and new investment ideas.

Need a way to help clients visualize their financial future, reinforce the importance of consistent investing, and guide them towards informed decision? Y-charts is tools for scenario building, portfolio construction, and proposal generation that can be the missing piece to your service so you can act on an idea right when the light bulb flex on. Again, I mentioned this last week, but there's a reason, almost every post I do, at the start of most of these YouTube, at the start of most of these podcasts, if you watch on YouTube, there's a reason I use why charts graphs for them. And it's because they're really simple, they're really easy, and they look great. You know, I can't spend, if I'm using some other service, I can't spend 30 minutes, an hour, an hour and a half trying to get four different charts ready for a post, right? Like, that would take almost as much time as the

post for the podcast I'm actually taping. Whitechurch is simple. It's easy. The charts look great. So if you're interested, click the link in the show notes to start your Y charts free trial and see how Y charts is a one-stop shop for growing your business with few hours spec. You might push back on one piece of that.

And then I want to hop into the thing we're talking about. And this actually will transition well because the company we're going to talk about has a lot of Miami assets. But a lot of what you're describing is going to market. And it sounds to me like going to market and feeling like this is class A pristine market, right? You mentioned young people have a dating pool. One of the projects with Crystal City is it felt like John McCain was still kind of in control. I absolutely hear that. That's great for the long-term trends, the demographics and everything. But you can have a

pristine real estate property or make a lot of money in real estate, you know, going and buying in the worst neighborhood and sprucing it up or a lot of like, you know, I think we did a podcast on Howard Hughes, which spun off seaport. I've got a little position in both. Like I think those are kind of interesting just with lots of different dynamics. But one of the things they always said with Howard Hughes was they were trying to follow the Domobreen model of, hey, Irving, California, we just built it over over 50 years and had that vision. Or, you know, there are plenty of people who bought it right outside of Nashville.

And then Nashville really gentrified and got better. And then all of a sudden, they've got the best return of their life. So I understand what you're saying there. But what about when you're visiting a place that, you know, maybe isn't that pristine, but the prices are so low or you're trying to see the ball three years from now where, hey, right now maybe it's not great, but in three years, this is where the activity is going to be or something. No, I mean, I think that is definitely a factor in our analysis, right? And this is why we like spending time on the, we like, when we put boots on the ground, what we definitely

want to do is, okay, how would you grade this location today? All right? And then is there a very obvious trend of developments, what gentrification, whatever you want to call it, that are trending in your direction. Are you in the path or are you like on the opposite side of that, right? Because that can happen as well. Like you can have a great asset, great location, but because of, you know, crime or whatever the trend may be, people are leaving. And you're actually like on the other side, the negative side of the trend. And so we definitely pay a ton of. of that tension. Like, putting boots on the ground is about forming an opinion, forming a shrunner of opinion on where it is today. And then also, like, having, being able to spot

the trend that, hey, five years from now, this could look very, very different. So going back to, you know, J.B. Smith, I think that four or five years ago, it was to John McCain. I think today, it is kind of, like, we're starting to see some promises there, right? It's not there. It's nothing like a Jersey City or Brooklyn. But like we're starting to see little, little signs of it, right? And hopefully we go back to two, three years later and it's super vibey, right? But these things take time. But sometimes you can kind of see the transformation.

And we've seen it with like FRP being on the waterfront in D.C. And that, oh, I mean, that 15, 20 years ago, that was all just industrial back borders. The joke was people buried that bodies like down there, right? And now you could show $3 for a two bedroom apartment there. yeah let's look that was great thank you for walking through that let's use and people can forget the last 30 seconds that and go back to what we're talking about with miami because that'll be agreed let's go to the company that is actually the reason we want to talk about today the company's aim co the ticker there is a iv uh you published a deck back in may i think you're

going to make it public so we can include a link to in the show notes so people can kind of see what we're talking about really see uh detailed i mean the deck is i'm looking at 38 pages and it's got with basically every asset they own and everything. But why don't you just go like in-co? Why is it too interesting? I'm calling it, it's apartment investment in management code. But what is it and why is it so interesting right now? So AIMCO is super interesting because you could still buy shares today at, I believe, you know, right now is about $8.70.

And yet, A-71 is we talk right now. And in our model, we believe that, you know, the base case, it's worth $13. and $167, and we have a range between $12 to $15.16, right? Now, what makes it super interesting is that one, there is a near-term catalyst. The company have come out and probably said that. They are selling two, really three assets in Miami. Now, mind you, today the market cap is called like, you know, I'll call it like $1.3 billion, but they're publicly marketing the development site next to Ken Griffin Citadel's future Miami headquarter for Citadel, which is literally like a stone throw away from there.

And there was a real deal article recently that says that there were over 10 bids ranging from $500 million to over $600 million for that asset. It was like kind of, it's super interesting because like, you texted in me and then I'm like, yeah, I saw that. And it's, it's hitting. It's this like article that was like kind of gibberish, but then like hidden like all the way down. And the article was this like super interesting like that, that there's more than 10 bidders who's come in with, you know, bids ranging from over $500 million, so over $600 million. So if you take that for that, this development site, which is highest and best use would be, like, like, think like luxury high-end waterfront Miami condo with Waterview right on the water there in Brickle, Miami, like near all the new finance hubs and tech hubs in Miami.

So that could be sold for anywhere from low end $500 million to call it like $650 million. Our base case is $590 million. And I think, you know, we're kind of like on par with what that real page article did. And then they also sell another recently developed asset called the Hamilton, which is a kind of an awesome trophy asset that was recently repositioned. It kind of looked like an apartment from Miami Vice. Like, I mean, and we've been inside. We took a tour of it. So we've taken a tour of all three assets that are being sold.

And, you know, the development side is really, that's land value, that's future value, that that's really on. what a developer think they could reposition that as over 3 million square foot of future condos, right? Super high and super, you know, waterfront. And then the Hamilton is probably a $240 million asset. Also, right under water and just recently renovated with some, some incredible amenities. And we've been in, so we've been taken tours of all three of them. And we felt really, really comfortable that you know so we have a price point on the development parcel somewhere in that you know six five to six over six hundred million dollars we're using a five hundred ninety million dollar base case the hamilton is 240 so if i'm doing my math right you know that's

eight hundred thirty million dollars of gross proceeds on a market cap that's called like one point three billion dollars and the company has specifically came out and said that they will you know use the proceeds to return it to shareholders. And if you understand REIT rules, there's going to be some gains on it where they have to pay you a special dividend. So, you know, initially we got involved at 700,

we call it like the mid-7s, call it like 750, some 60. It's 870. And, and, you know, like at today's price, there's a scenario where you get somewhere between like,

you know, something, in the 25 to 45% of your purchase price in special dividends, like if they closed all those sales this year, right? So this is what makes it like super interesting. Like every time like I talk to someone, I'm like, this is a great. Some part story. Everyone's like, well, what's a catalyst? It's like literally like this catalyst could happen in the next, it could happen next week, right? It could happen. It's Friday. It could happen the Monday. It could happen. And I think, you know, they started the process in February, you know, I'm sure like a process like this.

takes a long time, right? But like it, you know, this could literally happen in days or weeks, you know, but like I would say that by the end of this year, you definitely like, we'll know one way of another, right? So we're talking like mere month of like having some sort of like conclusion on whether, whether like this gets sold or not, right? And then so that's, that's a really, you know, awesome catalyst in the near term. Now, another thing that I did is Andrew always like, you know, like pound the table. He's like, Bill, why are they not buying back shares, right? And, and, you know, there's like one this.

We did a, we basically gave the company a report card, right? On page 11 of this, like, I really like this report card. Yeah. Okay. And, you know, we're literally looking at. We're like, okay, like, how did they execute it? How did they allocate capital? So, like, I'll go through some of this, right?

In Q2022, before we get to the report card, Because I love it. You're super passionate about it and I asked what they did and you jumped into the catalyst, the report card and everything. Before we get there, I do want to go through all that, the review, everything. I just, I try to start this every company pot off with this question now. Look, the market is a competitive place, right? And I love everything you're pitching, the catalyst, the sales, and everything.

But I will say, like, if I'm texting you real deal articles on, hey, this is their property, they're selling it. Like, that's very visible news, right? Yes, yes. I just want to ask, like, but the market's. competitive place. What are you seeing that you think the market is missing that kind of generates an alpha opportunity right here? Okay. So I think, I think, you know, this is kind of our bread and butter. Our bread butter is like these complex situation where you really got to roll up your

sleeve, right? So our underwriting took us like a month or two, right? And that includes like putting boots on the ground. So if you think about like, this is a collection of asset where there's over $100 million of net operating income on the on this like stabilized collection of multifamily assets right and then they have you know $521 million of construction progress which is not thrown off any cash flow right so you kind of can't screen for it it's on the balance sheet right at at book value and we're vowing at a one-time's book value I'll talk about that in a little bit and then you got some like unconsolidated that doesn't show up on the balance sheet either.

Like, if you're doing a NAV, a net asset build out, this is, this kind of, one, requires very, very specific real estate knowledge to, like, you can't just slap a cap rate on it. Like, you really got to, like, roll up your sleeve and, like, do all the work and, and kind of form of opinion on, like, what some of those parcels are worth, right? Like, here's a great example. The, the, the, all, that development parcel, right? if it gets sold at like cost six over six hundred million dollars you're in that sense like the the buyer is paying like a three percent cap rate on on that like for a office and a

multifamily that that are both going to be like that like in what world Andrew was someone like like if I told you oh you know they're got a certain public breed is going to sell an office and a multifamily at a three percent cap rate like everyone will probably like laugh at me right But, like, what you don't know, and until you put boots on the ground, like, you're like, Citadel is going to build their million plus square foot, like, global headquarter, not, you know, they got a headquarter in New York that they're building as well. But, like, this is the Citadel global headquarter where, like, I looked at the starting comps for their analysts, and I got a little depressed because, you know, I'm just like.

I'm sure people felt that way, you know, 10 or 15 years ago. But I started my career at McKinsey, and I look at the McKinsey salaries. Damn, that would have gone a lot farther now. I've even inflation adjusted and be like, yeah, they're a good deal more now. Yeah, yeah. And so like, I think, and also like they own development parcels, right? Like, like I'm looking at this Mab buildout. There's just like $50 million here, $40 million there.

Like, you know, $30 million dollars there. Another overarching question, right? Yeah. So one of your arguments, it sounds like to me is, and we'll get into management and everything a second, but one of your arguments is, like, This is a billion-ish-plus company, if I've got my kind of math, right? But it's not the biggest of companies. It is really complex, right?

And you're saying, hey, it requires specialized knowledge and a lot of time to underwrite this. And there are a few others that are like this. Like I think Bill Ackman with Howard Hughes, and again, we mentioned it earlier, but he would probably argue something similar, right? Howard Hughes is $3 billion. If you want to underwrite that and you want to visit all their properties, cool. You're going to have to do like 18 plane trips around the country. Like the accounting's complex. There's a lot of different assets.

There are several others that we can mention in this kind of sub-5 billion, really complex, you know, J-Bs. And do you think this is an enduring kind of area of alpha for real estate-ish investors where they've got these complicated pieces that are just really difficult to take a lot of time to value? Or is this more one-off and look, yeah, it's complicated. But again, the market is a competitive place. There are people willing to underwrite this, and you can go on value investors and get like 90% of the way there if there's a good opportunity, somebody rated up.

Just wanted to throw that thought out at you. I think that it, is this an enduring? There was like a time period in my career where I was concerned about, like, you know, highlighting these. And then what I find over time is that a lot of investors just don't have the patience for a lot of these situations. And sometimes, like, without a catalyst, like, nothing gets unlocked, right? Now, you know, I pitch a couple on this, on the podcast before, like, FRP, I think, I think you either, when you get involved in these, you really need to underwrite management quality and their incentives, right?

So in the case of like FRP and the baker is like, I just fullheartedly trust that family who runs it, you know, they're going to, they're going to do a good job reinvesting that capital and I know I'm buying it, you know, buying some of the best highest quality assets there, right? hearing aim code that's why like you know i was like so eager to get to the report car on page 11 because well let's go there that's a great segment let's go to the worker because i really liked it and i think it's really interesting yeah yeah so so the report car like i don't think i've ever seen a situation where i'm like okay like what have they done like how have they allocated capital right they they brought back and this report card is like as of year in 2020 because you know at time when we created like they haven't reported Q1 yet. So, so they like they've consistently brought back on an annualized basis between four to six percent of the shares outstanding. And, you know, if you look at

the math and they bought back shares in 2022 at an average of $7.33 in the nine month in $2.23 was $7.51. Year to date in 2024, they bought back on average, you know, just around $8, right? And we've told them at the Navy meeting, hey, just simply because your stop price has gone, it doesn't mean it's not undervalue because because of your development, because of your growth and rent, because of your share buyback, your nav is per share is actually higher now. So don't be afraid to keep buying back shares, right? Because those share buybacks could, like in a couple years, like that could be very, very meaningful, right?

So share by back, huge. Like, that's a question that you always ask. And I'm like, Andrew, like, you know, like this, they're already doing it, right? And this is. You tell me to. Well, let me give a little. I love that you knew. That's where I would go.

Let me give a little pushback, not a farm pushback, but, you know, I saw land and building was involved for a long time here. And they published, you know, as I was researching it, they published a few letters that were pretty harsh to the board talking about capital allocation, corporate governance that are there. Yeah. And I think a real skeptic. And I will caveat this by saying they've continued to buy back shares since land and

sold off. A real skeptic would say, hey, Bill, they were buying back shares to get an activist off their back. And, you know, while they might have been playing good while kind of the cops were out and watching them. Now that the cops are gone, get ready for some shenanigans. And I'd just love to hear how you response to that. Sure. About everything else they've done in the capital allocation. So we have a pretty good sense of like who the shareholder base is in this company.

And then you could kind of go pull it up. And I don't think land and building is in this name. right now but there's a 13D filer uh from texas there's uh you know another activist fund like we we know like a lot of the big players like and and we have a pretty good sense that a lot of conversations kind of goes like this right like do not put a big check into a new development deal you know close the discount and we met with the management team at neary and And that was kind of like, like, we had a very cordial conversation and we communicate to them that, hey, you know, like at the time, the buyback in Q1 was kind of low. So I asked him, I'm like, you would do a really good job with share buyback.

Like, why did you buy so little in Q1? And they kind of explained that there was some blackout periods that really prevented it from buying back. It was like nothing, nothing changed. So from our conversation, it's just, like, it is, like, it is. very apparent to me that they understand that they have to close this discount, right? And closing this discount, whether it is selling off these non-core assets, because this development, this office that has a tremendous amount of value, this company should not develop that, right? They shouldn't put a billion dollars of equity into that development project to build, you know,

high-end condos. They understand that these non-core asset should be sold and the capital should be returned to shareholders. And if you look at their, public press leases they very you know they very much with a preference to returning capital to shareholders right so this is one of those really now how did they get there i think you know like land and building has been very very public with their battle right there and then there's another you know westdale in uh you know i i believe i'm saying that name correctly westdale in texas file 13d right and then you know these other like ironic is is a shareholder with like two or three percent shares, you know, former Elliott, you know, managers, very, very smart, very sharp guys.

So I think, I think this company has a show. Ironic right now, they've run a few campaigns. They almost cannot miss. It's been incredible. If you were just fondly following an erratic, that's obviously not financial advice in debt. I know them a little bit, but if you were just on an ironic game, they are on a real leader right now. Yeah, yeah. No, they're great guys.

I, you know, I love both Adam and Andy over there. And, you know, so. I think that it is very obvious that, you know, the shareholder base, like, wants this sum of the part, this, this nap discount to close, you know, capital return to shareholders. And I think the management team would very much, like, understand, like, you know, what they need to do. One more on the management team. It is an interesting dichotomy because management owns a decent bit of stock. This is not Facebook where Zuckerberg owns 20 or 25 percent, but they own, like, enough to consider generational wealth, I would say. At the same time, they're also quite highly

paid, right? And one thing I was kind of flipping through the proxy when I prepped, and they got a short-term incentive award. And I was just looking at, like, of the triggers, I would say, you know, a short-term incentive award, it says trigger one is 20%. And then here's goal two, another 20%. Of the triggers, when I was kind of looking at it, I would say maybe one of the five for things where I'd be like, oh, that will actually drive shareholder value. So it's just to ask, like, when you look at this manager's team, I'm off two minds, right? On the one hand, decent share ownership. I think they've done a nice job over the past year on capital allocation and anything.

On the other hand, like the land and building letters probably do stick in my head a little bit. And I look at this. I'm like, hey, 30% of your, 30% of your KPI is development and redevelopment. Like, that sounds good, but that's pretty tough to measure over 12 months. And I don't hear anything about like return on that or, you know, 20% of, is balance sheet every time i hear balance sheet you know what i hear i hear we're going to raise some capital right so it's to get your thoughts on that yeah no i mean i think i think that uh i am very confident if this if this management team you know try to raise some capital especially on equity

like this house would probably i mean there's some really angry show that was going to come out of the what works like like that i that i'm very very confident about right and um you know i i would say don't anchor yourself too much to Lennon building. I think that I want to give Lennon building credit for their involvement. I think their involvement has really improved the court governance of this company. Like there's things that's done. Like they declassified the board. They opt out of the Maryland On Solisota Takeover Act, right?

Because a lot of reads have this, you know, where you can't, right? So they opt out of Muta. There's, there's, so there's, so there's, um, it, I think the corporate governance of this company is way better today, like, after all that. And that, like, to be totally candid, I, like, wasn't around. I wasn't a shareholder three, four years ago when all this was happening. I was kind of peripheral, like, I was kind of peripherally aware of what was going on, but I wasn't like in the weeds, right?

So I would say, I wouldn't anchor yourself too much to what land and building like. Like, you know, you know what they say, like, they say, you know, Don't pay attention to what Buffett says. Pay attention to what Buffett does. And I'm paying attention to what they do and what their actions are, continues to reflect that, hey, like, there's great capital allocation here. There's great, like, there's clearly an understanding that they need to unlock that discount and return value to shareholders.

And to add one more, you know, we spoke with them a couple days ago. And there's like very clear understanding that they're not just going to plow to 300 million dollars of equity into development projects because they do have a very large pipeline of land that they assemble over time in Fort Lauderdale and Miami and in Colorado where they could build thousands of units of multifamily where they could start the development on them. And really right now they probably come out and said that really like if they were going to do one, it's going to to be the Hamilton House, which is waterfront in Miami, right next to the Hamilton building, right? So there's clearly like a very, there's a very clear understanding of what the objectives here are. And we're going to be off that view until, you know, we see something different. Perfect. Just again, I'm going to remind people, if you want to see Bill's got a 38 slide deck that he's going to make public. We'll have a link to it in the show notes.

If you want to follow along, but we're talking about, dive into any of the different things here. Bill, we were kind of wrapping up on the report card you gave them on, this is slide 11 of the debt for those falling along. But anything else on the report card of capital allocation that you want to discuss or should we start hitting a couple of the different individual assets? I think that, let me see. You know, I think another thing is like, so I'll quickly go through the report card. Like if you look at like what they did in Q2 2020, they locked in debt with 9.1 year term with a four and a quarter like, like what what a trade, right? Like what a trade to like. And also.

And anytime you've got debt outstanding and you could take that cash and obviously this is in the future, but you could take that cash right now and put it in a money market fund and get more interest income than you're paying on this nine year debt like, oh, what a trade. Yeah. Yeah. And like, and they did that just before. And so also like, understand that who, uh, what makes that debt super interesting. I don't know what I forgot what the total balance on that is, is like seven or eight hundred million dollars in total. That is assumable in a sale.

So, so like, and they call that out as an asset, right? Because like the, the discount of cash flow, the net present value of that, of that, you know, locking the sumable debt has tremendous value, right? And, and that's how you see some deals get. done at high force cap rate in the last couple years because it came with the sumable debt where you're lock into like very low interest rates, right? A hundred percent. Is this kind of unique, though, because a lot of those that I've seen have been, you know,

we've got a mortgage, a property level mortgage and four percent, and that can go transfer to any buyer, but I haven't seen too many of kind of the hold co where the holdco, and this applies both to real estate and non-real estate. where the whole code has transfer walled out. There are one two special situations I'm aware of that have it, but it's pretty rare, especially with notes. So do you think that was, and the reason I can ask is, look, if they did this and they got this,

this is a unique term, they got this unique term that kind of suggests they might be setting themselves up more for a sale than maybe a punner like me thinks. Yeah, I mean, I, you know, that was something that we talked about specifically at Navy. Like, you know, we were talking to them about that. And they, they, like, pointed out, hey, that's actually a super bowl in a, you know, in a transaction. And we're like, okay, like that, that was something that we wasn't aware off.

Like, I mean, I just think it's interesting, like, you know, as we were going back and forth, like, are they going to do the right thing? And then in our meeting, they, like, volunteer that information, you know, like, behaviorally, right? Like, a lot of this business, a lot of this investing craft is, like, understanding, like, the behavioral aspect of an investment. and to have a management team to be like so open to like and volunteer a lot of that information and really like show kind of like showing their hands that hey like like like I think what was I think what's going to happen is the non-core one-off assets like you like your this waterfront development that kind of gets like sold but like you can make an argument that as a lot of these other assets stabilized because there's over half a billion dollars of construction

in progress, which they've said that it is, you know, the rent are, I think on average, 17% of both what they underwrote to, which is a really nice, you know, kicker. I think as those stabilized, now you have a portfolio that are largely cash flow and stabilized. And I think that portfolio could be sold as a portfolio deal, right? There's some of this development parcel, you know, maybe, like, what it makes sense is, is for, like, the, the management team to, like, you know, like, you know, take that, take that, you know, take private, like, sell everything else. And then, like, you know, I think, I think, you know, I think, you know, I think, you know, I think, West, the CEO is, is a pretty good developer based on that there are projects that they're

completing. I'm like, you know, someone else, like, that probably, the development process should probably be in like a private vehicle, right? So, so like I could kind of see, I can kind of see ahead that there's like certain pieces, like some of the chess pieces like fit like this one fits here, that one fits there. And so kind of, you know, I'm just really excited. And there's like some horse trading that they've done with some of the development parcel. Like they bought a development parcel down in, in joint venture with Kushner's in Fort Lauderdale. They bought three parcels for $49 million, and they sold two out of the three.

They kept the third one, which is like the biggest one, which is about half of the, like, you know, they got all their cost basis back, right? And now they got like this development parcel that they got for free. And you can build hundreds of, you know, units on it. Like, you know, there's just like, it's like you're like we're grading this management team. We're grading their capital allocation. And it seems like they're buying that shares, they're doing a good job with like locking in. you know, fixed rate debt, they're doing a good job with like some of the horse trading with like some of those parcels. And it seems like all the developments are doing really well.

And if anything from a valuation perspective, we're using one point one times book value for the development. And if you kind of do the typical multifamily development math, you usually try to develop to a 6% cap rate on liver yield. Market used to be 4.5% for like a brand new stabilize. But like, if rent is 17% above your underwriting for six percent, like they're probably closer to like a seven, seven, a half cap rate, right? Like even even in like an elevated cap rate, like there's probably a lot of value creation in that development pipeline, uh, that we're not baking into this, this nav number that like we're using conservative one times, uh, you know, book value. So, so I think there's like a lot.

be excited about. I guess like we could, we're kind of doing everything in reverse. Like we could probably go through some of the big buckets of value. The only issue is I can some of the stuff I've had you on my mind and I knew this podcast was coming up. Some of the stuff I want to talk to you about like the boots on and everything. So

I feel, but I am going to have to hop in a second because we're running well over an hour already. But maybe we could just like one or two, we've already talked pretty nicely about the Miami assets. Maybe one or two other assets you specifically want to call on and focus on you think, again, we'll include a link to the deck in the show notes, but investors might

really want to be thinking about or where you think the market's kind of underestimating the value or something like that. Yeah, I mean, let me just like, I'll do, so there's a one point, call $1.5, $1.6 billion of multifamily assets that are totally stabilized. It's over $100 million of net operating income. And we, you know, value them anywhere between five and a half to six and a half percent cap rate. Now, you know, going back to what we said about recent transaction costs. Now, some of these are kind of like older assets. So the older vintage assets, right? So they deserve to trade out at a higher cap rate. I'm just saying that generally if you're like value in assets outside of Boston where they're sitting on like very large

parcel land and you can't really build in those markets and there's some of the most more affordable, you know, units, housing units in those markets in, like, really nice neighborhoods, like to put a 6.5% cap rate on it, like, that's probably not, like, you know, we're probably being conservative there, right? We're probably being conservative there. So, you know, so there's, that's a billion, you know, that's the easiest part to value, right? And people could use their own cap rate assumption there. So you can kind of think, like, especially as rates drop if they do like some there there's probably room for cap rate compression there to like and and you know cap rate compression cap rate expansion you know in the five six like

like every every 50 bips like every quarter you know every quarter percent like is a really big deal right so yeah no so so so so i kind of want to point that out uh and and another another one is just kind of keep going back to that development pipeline. There's, there's, you know, there's $528 million of value. We're carrying that one-time book value. I would not be surprised if they, when they, you know, they kind of stabilize at different times. Some of it were like maybe two years out.

I would not be surprised if that five, you know, that 528 million, that could be worth $700 million or $750 million, right? So, so there's, because, you know, at like costs right now and based on the higher rent than expected like naturally you're developing to six cabs that are like that could be you know 700 750 million dollars like when it gets fully stabilized and gets sold right so i think those two are like the you know we talk about the miami we talk about the development sale those are probably the two biggest buckets where people may want to apply their own cap rate their own like book value multiple and then i kind of want to

bring the conversation back to you. There's like other like development parcels, like Scragler assets, like they got some investments in this like real estate tech fund. Like, you know, those are smaller line items, right? You know, if you take the development, the current construction on the progress, this condo development site and then the stabilized assets, like those are three big buckets. Now, one thing I want to highlight is one reason why at one point, this is, you know, this is still like one of our top three positions, right? At one point, I think it was officially our largest

position. And then we recently found something that may be like even more of it during even this, right? So, but one thing to think about is that if we get into an environment where they keep buying back shares and interest rate fall, you could kind of get a little bit of a la-la-a-palouza effect where all the share buyback that they're doing because like if you take the cap rate assumptions like down by 50, 100 bips like across the board, all of a sudden like you can have a net asset value where in the base case where we're in like the mid $13 range. Like you can start like getting them into the high teams and that's what makes this really interesting. I do hear you. And that's the beauty of buying back shares under NAV though. I would just point out like the

you're saying the Lollapalooza effect, but that's like a Lollapalooz effect where you buy shares in a discount and the macro really goes in your favor because you could also counter it by saying, hey, you know, if they buy back all their shares, but the 10 year goes to 27, well, then they bought back shares at 8. And Andrew, I will take the other side of trade of 10 years going to 27, right? No, I'm just because I'm too, but I think the most important point, just to me, the most important logical point is NAV is 1350, their buying back shares at 8. And yes, you would get an upside on that side.

But, you know, that's kind of betting on, though, as you and I were talking, like, one of the things that's happened is interest rates have come down a lot. And I think when you look at it, the market has started responding to it in some of these real estate stocks, but I would probably say, hey, you know, the 10 year was at 480. It's at 4, 380, whatever it is right now, like a lot of these stocks that are up 10 or 15 percent, if you really round the numbers, they should be up 30 percent. Now, the counter would be, hey, you know, in 2021, when the 10, 10 year was 2%, none of them were pricing in the 10 year at 2%.

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You know, the last, I'll give you the last word. the only thing I wanted to add to your due diligence is Bangloffs in Denver, which they own. I remember it well because it is like inside of a mecca of escape rooms. I don't know if you know this. Throw that into your numbers. There are five escape rooms all around there. And I haven't been to Denver in several years. But as of 2019, I owned the room record for two of the escape rooms.

And there's like five different escape room companies from there. So it is a mecca for escape room. I want you to put that into your numbers, all of that. Bill, just any last thought you want to hit before we wrap this up? Well, I think the last thought would be, like, going back to, going back to, like, you know, the sale to Miami development, right? Like, there's the buyback and then, like, don't forget, like, this kind of could potentially get into, like, Buffett style, like early Buffett partnership style, where you could be getting special dividends that are somewhere between, like, 25 to 40%. Like, you really dramatically reduce your cost bases, right? I mean, there's a reason.

You mentioned at the beginning, if they have a gain on these sales, they have to pay the gain out. And sometimes people will try to dodge that by paying the gain out in shares or something, but I think they pay it out in cash. And as you said, $8, you get $3 back. And then the stock is that, well, the IRA looks really good. Yeah. Yeah. And so, like, you know, there's like a second leg, like, if they pay that special dividend, like, there is a second leg where we'll look at what, the valuation is, what the leverage ratio is. And, like, that may give us another opportunity

to, like, take that special dividend and just be like, now we owe more or something that's, you know, even more undervalue, right? And you know what else? Give us the second opportunity to have a second podcast on this. Yeah, yeah. I mean, like, you know, there was one, you would love this story, Andrew. I know what's running over about it. I'd love to tell the story. Like 10 years ago, I did a trade where Anzine was spending off care trust. And in, like, that was like when, you know, prop codes could spend off opco, you know, op codes could spend off prop codes. The glory days. And then they like, I think, I think Adam's dad actually like putting a new regulation that outlaw that, right? So I'm like forever mad at him for that. And then,

so what happened was that the special dividend, because they have to purge all the previous profits and earnings, right? So they have to like pay this special 50% dividend. And, and you, like, only 20% was going to be cash, you know, 80% was going to be stock, right? And you could elect to get cash or stock and like it defaulted. But like, long story short, at that time, I knew that I knew that the stock was severely undervalue. So we elected to take 100% stock, right? And that stock, when we got those stock dividends, it was basically, but by default, a massive share buyback on something that was like already super undervalue right and i mean that was that was and we could like potentially uh you know get like another another bite of the uh you know that that's why we

have a detail model like you know we we're watching out for that i mean there is a part of me who's like man i kind of wish like like i don't talk about this because then they're just keep buying back shares and and and the keep buying that shares at 870 like lower the price they buy back but I think at a certain point, like, you do need the discount to close, right? So maybe by talking about the stock prices higher and the buyback is like not as accretive, right? So it's a perpetual value investor's struggle, right? It is, you know, and, you know, it's a struggle.

But it is always nice. And also, you know, I do think putting information out there begets information, like, okay, let's in a hypothetical world say you talk about one and that goes to fair value. A, you get the nice returns, but B, I think putting the information out there, you know, I certainly have it happen at all the time where so I say, Hey, Andrew, you were really into this investment. Doesn't this kind of rhyme? And I'll be like, oh my God, not only this rhyme, it's like 10 times better or, you know, start a new conversation. So Bill, I'm going to have, I might have an angry wife if I let this podcast go, but I have really enjoyed this.

Your five-timer shirt, if it's not already in the mail, we'll be in the mail soon. Looking forward to having you on the sixth time and looking forward. I think we're going to be seeing each other in person in their future. So looking forward to that, but Bill Chen will include link to the presentation in the show notes and looking forward to it, bud. Awesome. A quick disclaimer. Nothing on this podcast should be considered

an investment advice. Guests or the host may have positions in any of the stocks mentioned during this podcast. Please do your own work and consult a financial advisor. Thanks.