GYRODYNE CO OF AMERICA INC GYRO
July 01, 2010 - 8:52pm EST by
sag301
2010 2011
Price: 71.00 EPS nm nm
Shares Out. (in M): 1 P/E nm nm
Market Cap (in $M): 92 P/FCF nm nm
Net Debt (in $M): 18 EBIT 3 3
TEV ($): 110 TEV/EBIT nm nm

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Description

 

This is an Update to previous posts on GYRO.  GYRO won!  Yet the stock remains at a significant discount to its readily ascertainable liquidation value. GYRO is a better investment at $75 than it was at $35 because now the company has certainty of low case liquidation at $129 per share and upside potential to $195.  The company has a large shareholder (Bulldog) that should ensure wise use of the company's new found cash or relatively quick liquidation.

 

On 6/30/10, a judge gave GYRO a complete victory in its condemnation hearing against the state of NY.  GYRO was awarded $98.7mm, plus $40.4mm of interest. Interest will continue to grow (at 9% simple) until payment is received.

 

GYRO has been posted 3 times on VIC, so please see earlier posts for description of assets.

 

So, what is it worth?  

 

(Based on 1.3mm shares outstanding):

 

Current value of judgment:

 

$98.7+$40.4 = $139.14/1.3  = $107 per share

 

Company is also likely to receive repayment of $5+mm in attorney fees/exp (but no credit given).

 

68 acres in Long Island (Smithtown):

 

Low                                                                             High

68 x $107 = $7.3/1.3 =$5.6 per share                       68*$382 =$26 = $20 per share

 

 

Low is based on SUNY price, High based on judgment value.

 

9.99% LP interest in Calley-Judge Grove development in Palm Beach:

 

Low                                                                             High

$10/1.3 = $7.7 per share                                           $25/1.3 = $19 per share

 

Low is discount to 2009 appraisal. High is $100k per acre.

 

Medical Facilities:

$3mm NOI (from properties with excess land), $18mm debt

 

Low                                                                             High

$30-18=$12/1.3 = $9 per share                                 $43-18=$25/1.3 = $19 per share

 

Low is 10% cap-rate, high is 7% cap-rate.

 

LIQUIDATION SUM OF THE PARTS

 

                                                 LOW                            HIGH

Judgment                                $107                            $107

Long Island Land                     $5.6                            $20

Calley-Judge Grove               $7.7                             $19

Medical Facilities                    $9                                $19     

VALUE PER SHARE                        $129                            $165

 

 

GYRO is worth $129 to $165 per share in a hard liquidation.

 

But, GYRO might reinvest the money.  Recently the company has shown an ability to make highly accretive acquisitions (9 &10% cap rates) in the medical facility real estate market.  If GYRO can use the money from the judgment to acquire properties at 9/10% cap rates, the market is likely to reward the company with a significant premium.  REITS currently trade at less than 7% cap rates.  So, if we assume GYRO takes its $139mm from the judgment and invests it at 9% ( conservative low end of the company's recent transactions), the company will produce $12.5mm incremental NOI, at a 7% cap-rate (conservative high end of publicly traded REITS), the new facilities would be valued at $178mm or $39mm ($30 per share) more than the cash received from the judgment. 

 

 

Low Case Hard liquidation -- $129 per share (+72% from current stock price)

High Case Hard liquidation -- $165 per share (+120% from current stock price)

High Case, Redeploy Cash -- $195 per share (+160%from current stock price)

Catalyst

Understanding of $107 per share in cash awarded by Judge
Understanding of potential to make value enhancing acquisitions
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