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):
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:
$10/1.3 = $7.7 per share $25/1.3 = $19 per share
Low is discount to 2009 appraisal. High is $100k per acre.
$3mm NOI (from properties with excess land), $18mm debt
$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
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)
Understanding of $107 per share in cash awarded by Judge
Understanding of potential to make value enhancing acquisitions