UHAL Black Book: We will be holding a Black Book presentation on Long Bias Amerco (UHAL) tomorrow Thursday, September 9th at 10am ET. Amerco is the leading DIY moving and storage brand in North America, and increasingly is an important competitor to the dedicated public self-storage REITs (CUBE, EXR, LSI, NSA, PSA) with over 500 wholly-owned storage locations as of the June 2021 quarter. We couldn't get there in terms of putting UHAL on our Best Ideas list for a number of reasons, but the company is nonetheless a long candidate for now. UHAL is essentially uncovered by the sell-side, yet carries over ~$16 billion in total market including debt and definitely is on clients' radars. At some point (but not yet), the macro as well as UHAL's peak earnings/trough multiple, sets up an interesting ROC deceleration that will make UHAL a very interesting short candidate. More to come tomorrow, and a link to the event can be found HERE.
Office Fireside Chat w/ Jon Geanakos and JLL: Just a reminder that we will be hosting a Fireside Chat in the Hedgeye studio next Wednesday, September 15th at 12:30pm ET with Jon Geanakos, Executive Managing Director of JLL Capital Markets, and Julia Georgules, Senior Director of JLL Research, to discuss the current state of and JLL's view for the future of the U.S. office market. Subscribers can click HERE for a link to the event. Please contact Rob Simone or your Hedgeye salesperson for access as needed.
PGRE Gets Some Leasing Done at 1301 AoA: Yesterday PGRE announced that it had backfilled about ~190ksf of existing vacancy on the lower floors of 1301 Avenue of the Americas, a nearly ~1.8msf office asset that is the key component of the PGRE story right now and a major barometer for the depressed Manhattan office leasing market. Based on the press release it looks like Credit Agricole took 167ksf and SVB Leerink took just over 20ksf of expansion space across floors six, eight and nine. Lease terms and rates were not disclosed, and it will be key to watch concession levels reported with 3Q21 results to better understand any "buying up of rents" and roughly where net effective rents shake out relative to the just over ~$67psf Barclays had been paying. Recall that Barclays' vacated roughly ~500ksf on 12/31/20 with no replacement tenant in place, so PGRE immediately lost over ~$33 million of is just under ~$400 million in run rate annual cash NOI. The perils of chunky office! On the positive side there is less of a "hole" at the bottom of the building, which all else the same should make the remaining ~270ksf more marketable and scarce in addition to improving the building's cash flow. On the negative side Credit Agricole has ~312ksf expiring higher up in the stack in February 2023 at ~$88psf, which means that PGRE (1) clearly pulled forward at least a portion of a future lease maturity, and (2) could be left with more space to lease if Credit Agricole decides to downsize. It would have been better to backfill some of that space with a new tenant in the market such as IBM, which had been rumored to be looking for a larger block of space in Manhattan but put its plans on hold. The asset and company remains over-leveraged and structurally deficient in a public format, and the only reason to own PGRE would be on the possibility of a take-private transaction. We will be doing in-depth work later this year.
Please call or e-mail with any questions.
Rob Simone, CFA
Managing Director
Twitter: @HedgeyeREITs
Cell:
