Why Every Screen in the Market Missed This One

A 98 year-old company owns a building in Brooklyn. The building is roughly 200,000 square feet. Comparable mixed-use property in that area has been trading around $500 per square foot.

Run that math and you get a number larger than the entire company’s market cap. This company has already hired a national brokerage to sell it.

Here’s why nobody has noticed. The stock screens as garbage. It just reported a nine-month net loss. Run a DCF on the trailing earnings and you’d value the equity at less than half the current quote. Every quantitative filter in the market flags this as a value trap and moves on.

When you take a closer look however, the loss is an accounting artifact of two things that are already scheduled to end. Rent concessions that burn off by late this year and a build-out cycle that’s suppressing NOI right now while the offsetting rent hasn’t started flowing. Buried in the MD&A is $2.5 million of annual rent already under contract — signed, dated, and completely absent from the trailing income statement. The largest piece commences this September.

Meanwhile the buildings sit on the balance sheet at cost less 48.7% accumulated depreciation. Ink the New York commercial real estate scene, economic value does not decay on a straight-line schedule.

No analyst coverage. No dividend. Roughly two million shares outstanding, family-controlled, trading by appointment. Exactly the kind of neglected corner where a reported loss gets taken at face value and nobody checks what the assets are actually worth. I thought that the set up looked so good that I picked up some shares myself.